Japanese Lessons

If you had to take a stab at where Japan might rank in the world gender equality table, where would you place it? Not being an expert on Japan, I would have guessed the country might be in the top 10; top 20, at least. How naïve of me: the World Economic Forum said in 2014 that “Japan has one of the worst levels of gender equality in the developed world, below that of Tajikistan and Indonesia, coming in 104th out of 142 assessed countries.” For the same job, Japanese women on average earn 70% of a man’s wage.

Sadly, it’s no news that it’s (still) a ‘man’s world’. But for such a creative, inventive country – it’s given the world so many wonderful artistic and technical innovations, everything from the CD player to theEsophagogastroduodenoscope – Japan remains a paradox. Such a world leader on so many fronts, yet inward-looking and deeply conservative. And prejudice against women in work and business has surely played its role in Japan’s continuing economic woes.

This long-standing conservatism plays out in the gap between policy and practice. Japan has an astonishingly good paternity leave provision: working new fathers are entitled to 12 months paternity leave and almost 60% of their salary. But in 2015 less than 3% of those entitled to it actually took paternity leave. Raising children is still seen as exclusively a woman’s task; about 70% of Japanese women leave permanent employment after having children, compared to 30% in the US. This is a huge loss of human and economic value to the Japanese economy.

Shinzo Abe, the Japanese prime minister, wants women to “shine” in the country’s economy. Increasing female participation in the country’s workforce could increase Japan’s GDP by as much as 15%. But driving that policy aspiration into reality seems difficult: a government scheme offering substantial cash bonuses to small companies that promote women into senior executive roles has received just one application, after more than a year. And Japan’s financial industry is deeply conservative, too: although bankruptcy laws that once obliged female entrepreneurs to have their businesses guaranteed by men have been reformed, the pace of change is snail-like.

Here’s where crowdfunding – as a solution both the Japan’s sluggish economic state and the country’s gender inequality in finance – is stepping in. In February 2014 the Japanese Financial Instruments and Exchange Act (JFIEA) was revised to promote the use of crowdfunding. Crowdfunding in Japan is still in its infancy, estimated at around ¥8.2 billion (about $80 million) but with more than half of Japanese household assets (Y1.6 quadrillion/$15.7 trillion) held in cash or at banks, and just 11% in stocks and bonds, crowdfunding is surely poised for explosive growth. Mobilising dormant cash isn’t just a nice idea for Japan; it’s vital to get the economy moving again.

Crowdfunding is also, according to a recent Financial Times report, becoming the preferred way in which Japanese women are raising finance to put their business ideas into practice, by-passing banks and thus disrupting both the gender divide and the financial landscape. The report says that ReadyFor?, an online crowdfunding site, has seen the proportion of Japanese women seeking to raise money for entrepreneurial or non-profit projects rise by 50% in the past year, with the “bulk of the most successful projects” being small-scale childcare operations, but also including cafés, medical devices and solar-powered dairy farms: “Half the donations made to the projects also come from women, who describe themselves…as ‘sympathetic’, both to exploring new business ideas and the obstruction faced by women trying to raise money via traditional channels.” According to the FT piece ReadyFor? raised money for 40 projects in 2011; in 2014 the total was more than 1,750.

While crowdfunding projects may not have any direct impact investment implications, the fact that the crowdfunding movement is spreading like wildfire (thanks in part to such abysmal returns available from conventional outlets such as banks, trapped in a lengthy period of zero interest rates) is having a massively disruptive impact on the finance universe. Where might all this lead? Indirectly, the example of Japan teaches us that it is helping break down conservative thinking and attitudes, unlocking the entrepreneurial spirit in a thousand unthought-of ways. Not least by helping women to make a difference – perhaps the biggest impact investment imaginable.



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