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Japanese women face a future of poverty

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A confluence of factors that include an ageing population, falling birth rates and anachronistic gender dynamics are conspiring to damage the prospects of Japanese women for a comfortable retirement.

Tokyo

AT first glance, things seem to be getting better for Japanese women.

In an economy that's historically lagged other developed nations when it comes to female workforce participation, a record 71 per cent are now employed, an 11 point leap over a decade ago.

The Japanese government boasts one of the most generous parental leave laws in the world and recently created a "limited full-time worker" category aimed primarily at mothers looking to balance job and family.

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And one of the most important needs for working families - child daycare - is slowly being expanded.

But even with these advantages, Japanese women - whether single or married, full-time or part-time - face a difficult financial future. A confluence of factors that include an ageing population, falling birth rates and anachronistic gender dynamics are conspiring to damage their prospects for a comfortable retirement.

According to Seiichi Inagaki, a professor at the International University of Health and Welfare, the poverty rate for older Japanese women will more than double over the next 40 years, to 25 per cent. For single, elderly women, he estimated, the poverty rate could reach 50 per cent.

In Japan, people live longer than almost anywhere else and birth rates are at their lowest since records began. As a result, the nation's working-age population is projected to have declined by 40 per cent come 2055.

With entitlement costs skyrocketing, the government has responded by scaling back benefits while proposing to raise the retirement age. Some Japanese responded by moving money out of low-interest bank accounts and into 401(k)-style retirement plans, hoping investment gains might soften the blow.

But such a strategy requires savings, and women in Japan are less likely to have any.

Japan's gender pay gap is one of the widest among advanced economies. According to the Organisation for Economic Cooperation and Development (OECD), Japanese women make only 73 per cent as much as men. Japan's demographic crisis is making matters worse: retired couples who are living longer need an additional US$185,000 to survive projected shortfalls in the public pension system, according to a recent government report.

A separate study did the math for Japanese women: they will run out of money 20 years before they die. Dire pension calculations published by Japan's Financial Services Agency in June 2019 caused such an outcry that the government quickly rejected the paper, saying it needlessly worried people. But observers said the report was dead-on: Japan's pension system is ranked 31st out of 37 nations due in part to underfunding, according to the Melbourne Mercer Global Pension Index.

Takashi Oshio, a professor at the Institute of Economic Research at Hitotsubashi University in Tokyo, said private pensions and market-based retirement investments are now much more important than they once were.

Machiko Osawa, a professor at Japan Women's University, was more blunt: the days of being "totally dependent on a public pension" are over.

But there are additional obstacles for Japanese women. Although 3.5 million of them have entered the workforce since Prime Minister Shinzo Abe took office in 2012, two-thirds are working only part-time. Japanese men generally see their compensation rise until they reach 60. For women, average compensation stays largely the same from their late twenties to their sixties, a fact attributable to pauses in employment tied to having children or part-time, rather than full-time, work. Since the mid-2000s, part-time employment rates have fallen for women in more than half the countries that make up the OECD. But in Japan, the trend is reversed, with part-time work among women rising over the past 15 years.

One of Mr Abe's stated goals is to encourage more women to keep working after giving birth, part of his so-called Womenomics initiative. But according to a recent government study, almost 40 per cent of women who had full-time jobs when they became pregnant subsequently switched to part-time work or left the workforce.

According to government data, the monthly cost of living for a Japanese household with more than two people is 287,315 yen (S$3,523). Some 15.7 per cent of Japanese households live below the poverty line, which is about US$937 per month. More than 40 per cent of part-time working women earn one million yen or less a year, according to Japan's Internal Affairs and Communications Ministry. The lack of benefits, job security and opportunity for advancement - hallmarks of full-time employment in Japan - make such women financially vulnerable, particularly if they don't have a partner to share expenses with.

Yanfei Zhou, a researcher at the Japan Institute for Labor Policy & Training and author of a book on the subject, Japan's Married Stay-at-Home Mothers in Poverty, contends there's a gap of 200 million yen in lifetime income between women who work full-time and women who switch from full-time to part-time at the age of 40.

"It's not easy to save for retirement as a part-time worker," she explained. Single mothers need to make at least three million yen annually, or about US$27,600 - numbers you can't hit "if you work part-time."

One "reason why women's retirement savings is lower than men's is that the lifetime salary is low," said Yoshiko Nakamura, a financial planner and president of Alpha and Associates Inc. "Traditionally, many women chose to limit their workload in order to take advantage of social security spousal benefits, and that created many 'women's jobs' that pay less than one million yen." BLOOMBERG