With the labor ministry revisiting relevant legislation this month, large companies in Japan will soon be required to disclose gender pay gaps among their employees, making it the first country in Asia Pacific to do so. As the new change could take place as early as this year, our colleagues from Jones Day Tokyo will give an overview of the new rule and discuss if the new requirement can solve Japan’s stubborn gender inequality problem.
The new disclosure requirement, covering any company over 300 employees, aims to encourage businesses to reduce the gap and to promote female participation in the workforce to solve the nation’s chronic labor shortage.
Companies are required to compare the average pay of female employees to male employees and must separately disclose the gender pay gap among permanent workers and non-permanent workers.
Employers can choose to provide such information on their websites or through other means, within about three months before the end of their business year, meaning some companies might need to make the disclosures as early as October.
Significant disparities are expected, however, without specific repercussions.
Gender inequality is a stubbornly entrenched problem for Japan. It ranked 120 out of 156 countries in the World Economic Forum’s Global Gender Gap Index Report 2021. This not only puts Japan at the bottom of the ladder among its developed country peers, but also lags its neighboring developing country, China, which was ranked 107.
More significantly, Japan’s gender pay gap has not improved but worsened over time. The situation is attributed to women traditionally holding low status positions in the workforce and more than half of them are employed in non-permanent roles which offer limited security, few benefits, low wages and less opportunity for promotion.
The new requirement, however, hasn’t provided any specific repercussions to employers who fail to disclose such information, nor any steps employers should take to narrow the gaps.
Outlook: The surprising move reflects Japan’s determination to encourage women’s participation in the workforce among other initiatives. However, a cultural and societal shift will be needed to change the fundamental gender inequality in Japan.