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Is Womenomics Working?

Across the developed world, Japan stands out as the country facing the highest risk that demographic trends will cut into future growth. To prevent a disastrous decline in living standards, the country must double down on its efforts to achieve gender parity and inclusion in all economic sectors.

TOKYO – When I first introduced the concept of “Womenomics” in a Goldman Sachs report 20 years ago, I argued that Japan’s need for greater gender diversity and inclusion was as much an economic as a cultural or social issue. After all, labor, capital, and productivity are the three determinants of growth, and Japan had a shrinking population and finite capital. Without radical measures to shore up the supply of labor, the country could end up with declining productivity and potential growth rates, and eventually falling living standards.

Two decades later, Japan still faces challenging demographic headwinds. After peaking at 128 million in 2008, its population in 2018 had shrunk by 1.5% to 126 million; by 2065, it is projected to fall by another 30%, to just 88 million. More important, Japan’s working-age population is expected to contract from 75 million today to 45 million in 2055 – a decline of 40%.

Japan holds the dubious honor of being one of the only major developed countries where pets (registered dogs and cats) outnumber children under 15. So severe is its demographic decline that, according to the International Monetary Fund, real (inflation-adjusted) GDP could shrink by over 25% in the next 40 years. To prevent that, Japan will have to pursue far-reaching structural reforms – and soon. Whatever strategy it settles on will contain valuable lessons for the many other developed countries confronting the problem of societal aging.