After a long period of malaise, the Japanese economy is stirring back to life.
One reason is that women are entering the workforce in larger numbers. Similar to the United States when baby boom-era women entered the workforce, the economic dynamics inside Japan are about to change.
Even as its population ages, Japan’s labor force is expanding its reach, thanks to the entry of women. This trend should be good news for an economy that has long been trapped in the doldrums and for the financial markets that have suffered through near-zero rates of return.
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Today, Japan’s women are working at record levels, with their labor force participation rate reaching 56% in 2025 from 48% n 2012.
As reported by the Organization for Economic Co-operation and Development, the increase in the number of women working results not only from higher wage growth and government programs to encourage women’s participation, but also from the evolving nature of work as Japan relies less on manufacturing.
The increase in women in the labor force comes at a time of tightness in the Japan’s labor market, beginning before the pandemic.
The recent Tankan survey conducted by the Bank of Japan reports that companies are having difficulty finding employees, with the diffusion index now as low as negative 35.
The OECD also points to Japan’s widening gender pay gap, which government programs are attempting to address.
The transformation of the U.S. labor force did not happen overnight. The labor force participation rate for women in the U.S. peaked at 70% in 2000 only to drift lower to 57% in 2025.
For Japan, the numbers suggest that the changes in the workplace and society are already in motion. These changes are necessary to overcome the challenges of an aging population and limited immigration.
