Abenomics

Japan's tech startup solution? Women.

September 11, 2013: 12:37 PM ET

Japan has rolled out a new government program to boost the number of female entrepreneurs working in the tech sector.

By Michael Fitzpatrick

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Reina Otsuka, 33, founded Eco+Waza, a sort of a curated Amazon and magazine for sustainable lifestyle ideas and products from Japan.

FORTUNE -- After two decades of stagnation, Japan has developed a plan to reverse its spectacular failure to respond to the Internet age. Its secret weapon? Women.

Tokyo thinks that Japan's women -- who are, on average, better educated than their male counterparts -- should lead the charge in building new Japanese tech startups. The Japanese government plans to help Japanese women launch new companies as part of the country's economic revitalization measures, known interchangeably as the "Japan is Back" campaign or Abenomics, named after Japan's Prime Minister Shinzo Abe.

As part of this program, Japan's government has allocated 20 billlion yen (around $200 million USD) for a fund to support young female entrepreneurs . Startup founders also can apply for special low-interest loans from banks.

Prime Minister Abe aims to kickstart economic growth through a combination of what he has dubbed "arrows" of action, including quantitative easing, public infrastructure spending, and the devaluation of the yen. Encouraging women's business aspirations is considered Abe's fourth arrow.

"Women are Japan's great underused asset," says Hitoshi Masuda, former director of the governmental startups and technology agency in Tokyo, who is leader in the "Japan is Back" campaign. "They will be a driving force in building a stronger economy based on entrepreneurship."

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To help women who want to work and raise a family, Abe is suggesting women have three years paternity leave, which is comparable to what many workers receive in Europe. New legislation will be presented to the Japanese parliament this year to allow full-time workers to take parental leave for three years.

Policymakers also need to showcase the advantages of entrepreneurship and put in place financial incentives that reduce risk for would-be entrepreneurs, says Masuda. They will also need to increase day-care funding.

Such moves are an absolute must, says Tobias Harris, a blogger and political commentator in Japan. "There should be an enabling of more women to participate in the workforce, which means equalizing pay and status and providing better support for families."

Japan has its work cut out for itself. The nation ranks 101st out of 135 countries in the latest Global Gender Gap Report by the World Economic Forum (WEF). It has a dearth of women entrepreneurs -- only 4% of the nation's total. Indeed, it has a noticeable lack of entrepreneurs altogether. Overall, Japan has the lowest number of entrepreneurs per capita in the industrialized world -- just 1.9% in Japan, compared to 4.9% in the U.S.

Japan's female employment rate stands at around 60%, compared to about 80% for men. In executive roles, women fare even worse, accounting for only 2.8% of all managers in the country, up from 1% 20 years ago.

Tech startups launched by women, however, are on the rise, despite the so-called "titanium ceiling" obstructing them, says William Saito, a renowned entrepreneur, venture capitalist, and public policy consultant. As a mentor and financier, he has a penchant for backing Japanese women-run startups over their male counterparts.

Saito is betting on Reina Otsuka, 33, founder of Eco+Waza, a sort of a curated Amazon and magazine for sustainable lifestyle ideas and products from Japan. Otsuka left her previous employer Recruit, a publishing company, knowing that if she did want a child or more flexible hours, it would be better to do so on her own terms. Japanese working practices simply don't cater to women (or men) with families. "The hours are long with too much time wasted commuting, and we are plagued with endless, useless meetings," says Otsuka, who lived in the U.S. until she was 10 years old.

The new government deal offered to women and would-be startups is helpful, she says, but she thinks the bureaucratic efforts required for each grant make them hardly worth the effort.

As for the promise of three years of maternity leave, she feels this will be self-defeating. "It's too hard to come back to work after all that time. The policy could backfire," she says.

Shuku Tanizaki, 35, started out in finance, but she found the industry's strict hierarchy stifling and left her high-flying but demanding job as an analyst at Mizuho Securities to launch her own company four years ago. She now runs two web-based outfits, one offering project management services to the financial services industry, the other a social lending venture company called AQUSH ExchangeCorporation.

"When I worked for a securities firm, I was pushed way beyond my capacity because as a woman I was assigned back-office tasks -- even making tea! -- and at the same time working in a front-end role equally as hard as men," Tanizaki says, adding that Japan's Mad Men days of a decade ago are fading fast, in Tokyo at least. "It was more for political issues, not sexist reasons, I quit," she says.

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Tanizaki agrees with Otsuka, arguing that additional support for women entrepreneurs is good, but says that the individual business grants, at around $20,000, are inadequate for tech startups. "Developers and web engineers are expensive in Japan. The grants could be useful for very small ventures such as cafes, not so much for tech entrepreneurs."

Private venture capitalists, she says, are a better bet for funding and open to women entrepreneurs. However, Tanizaki warns, women in Japan could be their own worst enemy. There are equal opportunities in Japan, she explains, "but in my experience, women don't want to take risks, they don't want, on the whole, to take responsibility, they are less ambitious, less willing to sacrifice. Basically, most Japanese women lack courage."

Pointing out the shame that, even in the startup world, she scarcely meets female executives, Tanizaki wonders how far women in Japan are willing to stick their necks out. "I'm afraid I agree with Facebook (FB) COO Sheryl Sandberg that women don't want to sit at the table. It's as simple as that."

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