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Labor Force Participation Rate in Japan

December 2010
Hiroshi Kawata, Saori Naganuma
Research and Statistics Department

Although Japan's labor force participation rate has declined in recent years, the rates of participation among different age and gender groups show various patterns. We overview some of those developments and examine the determinant factors of labor supply from cyclical as well as structural perspectives. From the cyclical perspective, we find that younger and elderly males gave up looking for work due to the recession after the collapse of Lehman Brothers (a phenomenon known as the"discouraged worker effect") and therefore the labor force participation rates of those categories declined. On the contrary, the labor force participation rate of females around 30 years old was firm, since spouses entered job markets to support households' income following the decline in the husbands' income (known as the"household assistance effect"). From the structural perspective, our empirical analysis suggests that population aging puts downward pressure on the aggregate labor force participation rate in the long run. Female labor force participation rates, however, were relatively stable, since carrier opportunities for females have expanded and because more females have wanted to work.

Notice

Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2010-E-7, is a translation of the original Japanese issue, Bank of Japan Review 2010-J-18, published in October 2010. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

If you have comments or questions, please contact Economic Assessment and Projection Group, Economic Research Division, Research and Statistics Department (takashi.nagahata@boj.or.jp).