Financial Planning for Women in Japan

Historically financial planning has been seen as a man’s job. As a result, most women are no strangers to experiencing sexism when it comes to money. Fortunately, times are changing. Now more than ever, women in Japan are making their own plans for the future. As women take control of their personal finances, it has become more clear that financial advice has a bias toward men. For women, financial planning comes with unique challenges that must be accounted for.

Women taking control of their finances

Why is Financial Planning for Women Different?

There are a number of reasons why financial planning is different for women. Because the financial services industry has traditionally been a male-dominated space, many financial planning products and services are created with men’s needs in mind. Because this bias exists it is important to be aware of some of the ways in which women are unique and how conventional financial advice may not be appropriate.

Gender Pay Gaps

The gender pay gap is an ugly truth that women need to account for when making financial plans. Of the seven most economically advanced countries in the world, Japan has the largest gender pay gap. The gender pay gap is when women get paid less than men for the same job. Fortunately, in recent years, more attention has been brought to income inequality in Japan.

Despite rising advocacy for wage equality, foreign women in Japan should still prepare to make less than their male counterparts. For now, women may need to set aside a greater portion of their earnings when working towards financial goals. Fortunately, progress is being made and there is a silver lining. 

Salaries in Japan

Prime Minister Fumio Kishida is taking action to reduce payroll sexism. Starting in 2022, companies with greater than 300 employees are required to publish gender earning discrepancies. This is the first step in a broader plan to eliminate sexism in the Japanese workplace. As a consequence, women can expect their earnings growth to outpace men in the coming years.

Women should plan accordingly. Rising earnings growth rates can complicate financial planning. Combining high wage growth with lower wages in the present creates volatility. Volatile earnings, even in the upward trajectory can create financial stress.

The anticipation of higher wages can raise many questions. Some may be unsure of how much they should save now if they expect to earn more in the future. There are also psychological implications of having a higher earnings growth rate. People whose earnings grow rapidly sometimes spend a greater portion of their income, also known as lifestyle inflation. Those who expect rapid growth in their earnings should make plans to minimize lifestyle inflation.

Employment Differences

While times are indeed changing, there is still no denying that gender has an influence on one’s occupation. Consider the field of psychology and the field of law enforcement. Approximately 75 percent of psychologists are female. On the other hand, 90 percent of police officers in Japan are men.

Jobs are critical to financial plans. In most cases, one’s career is the heart of a financial plan. With financial planning centered largely on what career someone has, understanding the implications of different careers is important. Unfortunately for women, traditional financial advice has a bias toward the implications of traditionally male careers.

The example of a psychologist and a police officer is pertinent for a number of reasons. When it comes to financial planning, different careers carry variables that are unique and should be accounted for. As an example, police officers have generous pensions, that serve them well into retirement. In contrast, psychologists, especially those with private practices, may have no pension.

Every profession is unique and has different financial implications. As one’s occupation is typically the keystone of a financial plan, it is important that women factor in occupation differences when making decisions. As mentioned earlier, traditional financial advice may have a bias towards men. Women should be careful to seek financial advice that is not biased toward traditionally male occupations.

Time Frame

When creating a financial plan, time is critical. In Japan, the average woman lives 87 years. In contrast, the average Japanese man lives just 81 years. Six years may not seem like a long time. However, these six years, especially in retirement, can have significant financial implications.

Consider the stereotypical save and spend framework. In this simple framework, which is almost like the standard of financial planning, people work (save) for 40 years, then retire (spend) for 20 years. Obviously, this framework is based upon an 80-year lifespan. 

Financial planning factors can differ for women.

When building a financial plan, estimating the length of retirement is critical. The length of retirement determines how much to save while working. Since women live longer than men, women are usually required to draw down their retirement accounts for longer. Failing to take more years of withdrawal into account can cause problems. 

If somebody underestimates retirement length by even a few years, there could be severe implications. In the worst-case scenario, someone could be left with no more money to draw from retirement accounts and be forced to rely on the charity of family and friends. For women, it is very important to recognise that traditional financial advice may have a bias toward a shorter life expectancy. Plan accordingly.

Finding a Trusted, Unbiased Financial Advisor

While sexism in Japan’s financial sector is being addressed, it still exists. For this reason, navigating the financial services industry can be daunting for women- especially for non-Japanese ladies.

Some financial services companies can be dismissive of women. Some may not have an understanding of the unique challenges women face. Thus, finding a good financial advisor may take time.

Everyone should do their due diligence when deciding on a financial advisor. Fortunately, many financial advisors now offer free initial consultations, whether via video chat or in-person. 

Typically, professional relationships with financial advisors are the most valuable when they run for the long-term. Thus, it is good practice to be patient and shop around until you find an advisor that suits your unique needs.

Sources and Further Reading

- “Life Expectancy for Japanese Men and Women at New Record High.” Nippon.com. 2019. 

- “Japan to Make Companies Disclose Gender Pay Gap this Year.” Yuko Takeo. Bloomberg. 2022.

- “Women in Financial Planning.” Alexandra Kurlowicz. Journal of Financial Services Professionals. 2014.