2025.7.25
Gender Reform as a Catalyst: What Sustainable Investors Should Watch in Japan
On June 11, the World Economic Forum released its Global Gender Gap Report 2025 (*1), in which Japan ranked 118th out of 148 countries.
According to IMF estimates (*2), countries with large gender gaps (i.e., those in the bottom half of the sample) could see their GDP increase by an average of 35% if gender inequality were eliminated. This is not only due to a rise in labor force participation but also because greater diversity contributes to higher productivity.
Japan has been stepping up efforts to address its relatively large gender gap. One milestone was the enactment of the Act on Promotion of Women’s Participation and Advancement in the Workplace in 2016. While some countries have recently begun to reassess their diversity promotion policies, Japan continues to advance efforts to correct gender disparities.
According to the Global Gender Gap Report 2025, Japan’s gender gap index stands at 66.6%. While this is still low by international standards, it represents a 0.3-point improvement from the previous year. In the category of "Economic Participation and Opportunity," Japan’s score rose significantly from 56.8% to 61.3%, driven by factors such as an increase in the percentage of women in managerial positions (from 14.6% to 16.1%) and progress in wage equality (from 58.3% to 59.2%).
However, in the category of "Political Empowerment," Japan’s score remains extremely low at 8.5%, dragging down the overall ranking. Although the score had risen to a record-high 11.8% in 2024, the proportion of female cabinet ministers dropped from 25% to 10% in October of the same year, bringing the score back down. Looking at the percentage of female members of parliament by political party, the ruling Liberal Democratic Party has the lowest ratio among major parties (*3). For Japan’s gender gap index to improve, either opposition parties with higher female representation must gain more seats, or the LDP must undergo structural reform.
One reason Japan continues to lag other countries in terms of gender equality lies in its legal and institutional framework. However, a historical review reveals potential for improvement.
The Equal Employment Opportunity Law was enacted in 1985 (effective from 1986), introducing gender equality in employment as a "target for effort." In 1997 (effective from 1999), the law was amended to explicitly prohibit gender discrimination, moving beyond the previous non-binding target. At the same time, Japan’s social security system began shifting toward a dual-income household model. Twenty-five years have since passed—someone who graduated from university at age 22 back then is now 50 years old.
In 2015, the Act on Promotion of Women’s Participation and Advancement in the Workplace was enacted (effective from 2016), requiring companies to formulate and disclose action plans to promote women’s advancement within organizations. Previously, it was common for women to resign after childbirth, but since the law’s implementation, it has become more common for women to return to work after giving birth. Given that the average age of childbirth in Japan is around 31, many individuals currently under 40 have pursued continuous careers regardless of childbirth.
Historically, the percentage of women working as full-time employees in the age group typically responsible for management and executive positions has been low. However, thanks to legal reforms over the past 25 years, female labor force participation has increased. This trend is expected to lead to more women advancing into senior leadership roles in the coming years.
In summary, although gender inequality remains a challenge in Japan, the legal and institutional foundation supporting women’s participation in society has been steadily improving through years of policy development and corporate action plans. This progress is expected to contribute not only to productivity gains from gender parity but also to increased investor interest in Japanese equities among those who prioritize gender equality.
(1) https://reports.weforum.org/docs/WEF_GGGR_2025.pdf
(3) https://www.gender.go.jp/policy/seijibunya/pdf/hiritsu.pdf
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