Reviewing the cultural, economic and legal state of Diversity & Inclusion in Japan

This is the first article of a 2-part series about Diversity in Japan. In this article we will explore:

1. What does Diversity & Inclusion mean?
2. Japan’s approach to Diversity & Inclusion
3. Measures taken by the Japanese Government
4. Legal aspects of Diversity & Inclusion in Japan

In the second part we will be talking with business leaders who are implementing Diversity & Inclusion measures on the ground in Japan and who will share their experiences and best practices.

The beginning of ‘Diversity’ as a social and economic concept goes back to the 60s when the US introduced the Civil Rights Act to tackle discrimination against minorities. While the concept has been widely adopted in many countries and businesses around the globe since then, the majority of Japanese organizations have been lacking behind in understanding the full meaning of Diversity and in implementing measures to foster it. It has also been only in recent years that the term itself – translated into Japanese-English as ‘daibashiti’ (ダイバーシティ) – has started to find its way into the media as well as other areas of Japan’s society. 

The first time ‘Diversity’ was put on the economic agenda in Japan was in 2004 by the Keizai Doyukai, the Japan Association of Corporate Executives, as part of their Human Resources Strategy. Since 2012, the Ministry of Economy, Trade and Industry (METI) has published lists such as the Nadeshiko (Dianthus flower) Brand and the New Diversity Management Selection 100 highlighting organizations that invest in empowering women as well as ‘Diversity Management’.

Recently, Japanese companies have also adopted the idea of ‘Inclusion’ which is a concept in itself but is frequently used in tandem together with Diversity.

Diversity Management

Management that aims at creating value and innovation by offering opportunities to a diverse group of talent so that they can leverage their capabilities to the fullest. In this definition, talent diversity does not only include gender, age, nationality or ability, but also different careers and workstyles.

First things first: What is Diversity & Inclusion?

Diversity generally refers to the “collective mixture of differences and similarities that include, for example, individual and organizational characteristics, values, beliefs, experiences, backgrounds, preferences, and behaviors” (Talent Intelligence). In the “workplace it means an organization employing a diverse team of people that’s reflective of the society in which it exists and operates.” (Culturecamp)

Inclusion, on the other hand describes “the achievement of a work environment in which all individuals are treated fairly and respectfully, have equal access to opportunities and resources and can contribute fully to the organization’s success.” (Builtin)

Here’s a quick food analogy to understand the concepts even better. Before cooking a meal, we have a diverse group of ingredients for example carrots, chicken meat, potatoes and onions. While those individual components have their own taste and texture, the magic happens only when those aromas are mixed together into one single dish providing an even more delicious sensation than the individual components on their own.

This means that simply putting diverse individuals together is not sufficient. Businesses need to go one step further and create an environment in which those individuals feel welcomed and can interact with each other in a way that enables them to realize their full potential.

Japan’s Approach: Diversity = Women’s Participation

Japan adopted the western concept of Diversity in the 1990s. The idea was mainly introduced by foreign companies that had entered the Japanese market during the Bubble Economy as well as Japanese companies that had expanded overseas. And, it was of course the feminist movement in the 80s that had already worked hard to create more awareness around issues concerning equal rights and participation.

One reason for why Japanese companies fail to embrace the concept of Diversity is Japan’s (outdated) ideal of life-long employment. For decades, Japanese men would join a company and – as long as they were healthy – stay with this company until retirement. To make this system work, companies relied heavily on homogeneity to ensure efficiency – a setup that works particularly well in a high-context culture such as Japan where individuals avoid conflicts by being highly sensitive to nuances and cultural norms. However, it’s needless to say that this kind of efficiency does not always produce the most effective outcomes.   

If Japanese companies (and society as a whole) do approach issues around Diversity the sole focus always lies on “advancing women”. Data show that the number of companies that have expanded their understanding of Diversity beyond just gender to nationality, ability or the LGBTQ+ community for example is still very small.

There are two reasons for Japan’s heavily gendered take on Diversity.

1. In international comparisons Japan has ranked consistently low regarding women’s participation in the workplace and society in general.
2. Due to its shrinking and rapidly aging population, Japan has been facing a dramatic shortage of workers in recent years – a trend that will only accelerate going forward. To sustain economic growth, companies and government alike recognized that they need to engage traditionally marginalized talent pools such as women.

Above table shows the wide gap between men and women in Japan. The nation places 121st out of 152 countries putting it at the bottom of all industrial companies. This is a steep fall compared to only 14 years prior when Japan occupied rank 80. Japan scores especially low (rank 141) when it comes to women’s participation in the political sphere.

Measures taken by the Japanese Government and their outcomes

In June 2003 the Gender Equality Bureau Cabinet Office released a plan to increase the ratio of women in leadership roles in Japan to 30% by 2020. However, in 2015 the Office revised this goal admitting that 30% were not achievable. The new version of the plan aimed for 7% women in Head of Ministry positions in the government as well as 15% in Manager and 10% in Director level positions and above in private businesses.

Despite lowering the initial target significantly, the “Basic Survey of Gender Equality in Employment Management 2019” (published July 2020) shows that women occupy only 11.9% of managerial positions in Japanese enterprises – a number far lower than the goal set by the government. It looks even bleaker in the Japanese government where the participation of women in top positions has not even reached 6% (5.9%, source: Cabinet Human Resources Report November 20, 2020).

In July 2020, the Japanese government announced that it would extend the deadline for reaching their initial target of 30% of women in leadership positions to the “soonest date possible before 2030” – a rather disappointing outcome more than 17 years after the project’s kick-off.

Two of the initiatives taken by the Japanese government to enhance women’s participation in the workplace and society overall, are the “Diversity Management Selection 100” and the “Nadeshiko Brand” (Nadeshiko Meigara).

Diversity Management Selection 100

In the hopes of inspiring businesses to take action, the METI showcases companies that have been able to drive business success through investing in Diversity. Every year, the ministry recognizes the 100 most innovative companies by featuring them on the “New Diversity Management Selection 100” including organizations such as Tokyu and Chiba Bank.

Nadeshiko Brand – Recognizing publicly listed companies that advance women

Since 2012, the METI and the Tokyo Stock Exchange have annually published the “Nadeshiko Brand” recognizing companies that have helped women advance in their organizations. The idea behind this initiative is to accelerate the Diversity efforts of publicly listed companies by creating a brand that attracts shareholders who are interested in investing in the mid- and long-term growth of public businesses that empower women. In 2019 companies such as Calbi, Asahi Group Holdings and Japan Tobacco were featured on the list.

Legal aspects of Diversity in Japan

The following is a short summary of the legislation around Diversity & Inclusion Japan has introduced broken down by the most common issues:

1. Gender (women)
2. Disabilities
3. Sexual orientation & gender identity
4. Age
5. Nationality

Legislation related to the advancement of women

The Securing of Equal Opportunity and Treatment between Men and Women in Employment Act (often referred as Equal Opportunity Act) marked the beginning of introducing legislation that targets women’s equality in the workplace. It was followed by the Act on Childcare Leave (1991), the Part-time Employment Act (1993), the Act on Advancement of Measures to Support Raising Next-Generation Children (2003) and the Act on Promotion of Women’s Participation and Advancement in the Workplace (2015).

The latest legislation to protect women’s rights in the workplace is the Act on Special Measures Concerning Fixed-term and Part-Time Employees (2020) which aims to enforce the idea of “Equal Pay for Equal Work”. One of the main reasons for Japan’s enormous wage gap between women and men is the unequal distribution of non-permanent jobs. According to the Labor Force Survey released by the Ministry of Internal Affairs and Communications in 2018, 70% of Japan’s part-time and contract jobs are occupied by women.

Disabilities

1. Act for Eliminating Discrimination against Persons with Disabilities (April 2016)

Until very recently it was common to believe that the reason for the limited opportunities for people with disabilities was their handicap – a belief that is also often described as the “medical model”. The “social model” on the contrary puts responsibility not on the individual but rather the society, a system which is not designed to welcome and empower people with disabilities. Aiming to tear down systemic hurdles to enable people with disabilities to reach their full potential in day-to-day life as well participate equally in society, the Japanese government introduced the Act for Eliminating Discrimination against Persons with Disabilities in 2016 – a clear departure from the previously dominant “medical model”.

2. Act on Employment Promotion of Persons with Disabilities (2019)

With the introduction of the Act on Employment Promotion of Persons with Disabilities in March 2019, Japanese companies need to ensure that 2.3% of their jobs are filled by people with disabilities (Employment Rate System for Persons with Disabilities). This means that an employer with more than 44 employees has to employ at least one person with disabilities.

If the employer doesn’t fulfill the legal requirements, they are obliged to make a contribution to the Employment Levy System for Persons with Disabilities which determines that employers with more than 101 employees that do not have the legally required ratio of persons with disabilities need to pay 50,000 JPY per month for each person with disabilities that is missing according to the system.

A study published by the Ministry of Health, Labor and Welfare (MHLW) in January 2021 shows that 48.6% of companies have complied with the Employment Rate System for Persons with Disabilities compared to 48% in the previous year demonstrating the slow pace in which companies adjust to the requirements.

Ranking of companies who employ people with handicaps (Top 10)

1. General Partners (Services, 20.53%)
2. FP Corporation (Chemical, 13.6%)
3. Avex (Communications, 11.25%)
4. MRK Holdings (Retail, 7.75%)
5. Kito (Machinery, 7.1%)
6. Fast Retailing (5.28%)
7. LITALICO (Services, 4.64%)
8. Furukawa (Non-Ferrous Metal, 4.56%)
9. Ryohin Kikaku (Retail, 4.36%)
10. MAXVALUE Hokkaido (Retail, 4.36%)

(Percentages reflect % of people with handicaps employed in 2018. Source: Toyo Keizai “CSR Company Whitepaper” published in 2020)

Encouraging companies to hire people with handicaps and thereby increasing touchpoints and interactions between people with and without handicaps is certainly one step in the right direction towards more Diversity in the workplace. However, when it comes to Inclusion meaning providing opportunities for people with disabilities to do meaningful work and persue a career as well as realize their full potential, Japanese companies still have a long way to go.

Sexual orientation & gender identity

Japan doesn’t have any anti-discrimination laws protecting the LGBTQ+ community. Japan is also the only country in the G7 group of developed nations that does not allow same-sex marriage – a fact that might get challenged soon after a district court in March 2021 made a landmark decision ruling that the country’s failure to recognize same-sex marriage is “unconstitutional”.

There are some municipalities that have decided to recognize same-sex partnerships. The districts Shibuya and Setagaya in Tokyo were the front runners in 2015. Four years later the number has increased to over 50 municipalities.

Globally, same-sex couples face very different treatment depending on where they live. While 24 countries including the Netherlands, Belgium, Canada, Spain and South Africa have either fully legalized same-sex marriage or at least provided same-sex partners with similar rights as heterosexual married couples. There are other countries such as Russia that has introduced laws that strictly prohibits the distribution of content featuring “non-traditional sexual relationships” to underage youths or Nigeria and Uganda that have gone even one step further introducing laws that criminalize homosexual relationships.

In Japan, some companies have started to show their support of LGBTQ+ communities as part of their Diversity efforts. ANA for example has expanded its family mileage program to same-sex families in July 2016. And, Nomura Holdings has created LTBTA (“I am an LGBT Ally”) stickers and encouraged their employees to put it on their desk or computers.

Age

Facing the rapid decline and aging of its overall population, Japan has understood that it needs to leverage new talent pools in order to sustain its economic output. Besides increasing the participation of women, with the introduction of the Amended Act on Stabilization of Employment of Elderly Persons going into effect in April 2021 Japan’s government also hopes to keep the elderly employed beyond the official retirement age. The amendment aims to encourage companies to create a flexible work environment including a variety of workstyle choices that enable employees to continue working until they’re 70 years old. However, this amendment does not require companies to employ workers until they reach that age. 

Traditionally, Japan has been a culture which taught the respect for the elderly but in recent years this has started to change. Especially due to car accidents caused by elderly people, being old has become somehow equated with being senile.

In addition, the retirement system itself can been seen as discriminatory since it enables or prohibits individuals from seeking employment only based on age. A better non-discriminatory system would provide employment opportunities according to each individual’s capabilities – a shift that requires significant rethinking from companies and society as a whole.

Nationality

In April 2019 the Japanese government made an Amendment to the Immigration Control and Refugee Recognition Act. Before this amendment only highly skilled workers such as University Professors, Engineers and Managers were able to seek work permission in Japan. By adding two new qualification categories (Qualification 1 and 2) including professions such as fishing, woodwork and construction Japan opened itself up to the immigration of blue-color workers.

According to the State of Employment of Foreigners Report published by the Government in September 2019, 1.5 million foreign workers were registered in Japan in 2018 (2.2% of the overall workforce) – 3 times more than only 10 years earlier (2008: 0.5 million).

According to a study by My Navi Global, Japanese companies assess foreign candidates mainly based on Japanese skills (68.2%), passion for the job (57.8%) and communication skills (48%). To retain foreign employees, some companies have added Japanese language courses, business manner and cultural workshops to their onboarding curriculum. To capture younger talent, larger cities have also started to hold bigger scale job fairs for foreign university graduates.

Summary

After reviewing what Diversity & Inclusion means as well Japan’s legal efforts to encourage it in this article, we will be talking with practitioners who are driving Diversity in their own organizations and share their experiences with us in the second part of this series.