Year 2020: The Diversification of Japanese MNE Management

For many Japanese, year 2020 means Tokyo Olympics. Quite a few firms are eager to capitalize on the opportunity to grow their business. More than a dozen Japanese multinational enterprises (MNEs) are determined to showcase their products and project their images worldwide through multi-year, multi-million dollar Olympics sponsorships. Not widely known, 2020 also represents the target year under Abenomics that major Japanese MNEs must fill 30% of their management positions with female employees.

This is an ambitious goal. The current rate of females occupying management positions is roughly 11%, which pales against the US (44%), France (40%), Singapore (34%), and Germany (30%). To meet the target, Japanese MNEs need to appoint female managers aggressively, increasing the number of appointments by 20% per annum. Why does Abenomics include this target? What significant changes may the goal bring to Japanese MNEs? The obvious reason is demographic. A declining population means a shrinking labor market. It is critical for the Japanese economy to mobilize female labor as underutilized resources. But equally, if not more importantly, the change will facilitate internationalization and innovation. Major Japanese MNEs are run by Japanese male managers who spend their entire careers slowly and carefully moving up the ladder within the same companies. As such, many have a poor record of capitalizing on competent women and foreigners. If firms want to globalize more effectively, they need to diversify their talent pool by including women and foreigners. Furthermore, there is a growing understanding, at least among senior management, that diversity may spur innovation. Struggling with intense global competition, Japanese MNEs finally have started to embrace diversity. The remaining challenge is whether they can successfully meet Abenomics’ diversity target. In this respect, year 2020 also represents the managerial Olympics for Japanese MNEs pressured to cope with changing landscape of global business.