(Corrects name of Organization for Economic Cooperation and Development in third to last paragraph in column published Oct. 21. Commentary. William Pesek Jr. is a columnist for Bloomberg News. The opinions expressed are his own.)

Oct. 21 (Bloomberg) -- In August 1999, Kathy Matsui raised many a male eyebrow in Japan with a report on how the future of the No.2 economy was in women's hands. Goldman Sachs (Japan) Ltd.'s chief strategist called the phenomenon ``womenomics.''

Part of Matsui's analysis was that tapping just the male half of Japan's population lowered the quality of the national labor pool and, ultimately, gross domestic product. Discrimination also exacerbates Japan's biggest long-term challenge: a low birthrate.

It came out at a time when politicians were increasingly deriding career women who don't bear children as selfish and overeducated. Young women refusing to marry and have kids -- many of whom live with their parents -- were labeled ``parasite singles.''

Yet six years on, Matsui senses some promising cracks in Japan's glass ceiling, especially now with the economy on the mend.

``While much more progress still needs to be made at both the public and private sector levels to foster greater female labor participation, we believe Japan is finally moving in the right direction,'' Matsui says.

Moreover, investors should begin looking at industries poised to benefit from her view that ``womenomics is likely to become a secular investment theme.'' Notice Matui's use of the word ``secular,'' not ``cyclical.''

Women Power

In a new report, Matsui recommends a basket of 115 companies that may get a boost from increased female purchasing power. They include industries related to daycare, nursing care, real estate, financial services, online and mail-order retailing, beauty, prepared foods, apparel and accessories, furniture, entertainment and placement agencies. (The list of companies is attached to this column).

Women are still an under-utilized asset in this nation of 127 million people and they are paid a fraction of what men get. Japan's glass ceiling still keeps many well-educated, experienced and ambitious women out of corporate boardrooms, unless they're serving tea to the men running sitting around the table.

Also, the lack of an affordable infrastructure for women who want to work and raise children means motherhood is often a career-ending prospect. Until more mothers can have careers too, the birthrate won't increase, leaving Japan with a long-term labor shortage. What politicians don't realize is that the low birthrate is a form of rebellion.

Investors Get Ready

Quietly, though, things may be improving, a trend personified by Fumiko Hayashi and Tomoyo Nonaka. Earlier this year, Hayashi, 59, was named chief executive of retailer Daiei Inc. and Nonaka, 51, became chief executive of Sanyo Electric Co. They're the first women to run major Japanese companies.

Prime Minister Junichiro Koizumi also has realized women deserve better. In late 2004, he announced the government would ``provide assistance so that women can exert their talents and take on challenges in various areas, including business.'' In last month's elections, Koizumi encouraged a number of female candidates to run for office.

Anecdotal data also tell the story. ``Out of economic necessity or as a result of lifestyle choices, an increasing portion of Japanese women are actively participating in the workforce and becoming a very important source of income and consumption growth,'' Matsui points out.

Gender and GDP

Women have been a powerful economic force for some time. Since many single females live with their parents, they pay little rent and have a disproportionate amount of disposable income. Take away their spending at department stores, travel agencies and fancy eateries and some of the men standing in the way of gender equality probably wouldn't have jobs.

That dynamic will only grow as companies warm to entrusting key jobs to women, especially now that Japan's recovery is encouraging employers to hire again. That's an important development in a nation that's reluctant to ease immigration laws to import labor.

As of 2004, the ratio of women in the labor force was still low by developing-nation standards at 55 percent. That compares with 62 percent in the U.S. and 61 percent in the U.K. If the female labor participation rose toward U.S. levels, Matsui says, Japan would add between 1.2 percent and 1.5 percent to GDP.

Further to Go

All this has more to do with Japan's debt woes than many economists acknowledge.

During the 1990s, Japan built roads, bridges and dams to create jobs -- all of it financed with public borrowing. Politicians used untold amounts of taxpayer funds bailing out deadbeat companies and supporting the banks propping them up. The result wasn't rapid growth or surging stocks, but deflation and a debt load of roughly 150 percent of GDP.

Things might have turned out differently if Tokyo had tried a solution many international economists -- including those at the Organization for Economic Cooperation and Development -- said might help: empowering women.

Politicians and business leaders need to get more serious about tapping the female workforce. If not, growth may underperform and Japan's debt may be harder to reduce. It comes down to a simple choice: more babies or more bonds?

Were Japanese female labor participation rates to hit U.S. levels, per capita income would be 5.8 percent higher, Matsui says. Such girl power would provide a nice boost to Asia's biggest economy.

To contact the writer of this column: William Pesek Jr. in Tokyo at wpesek@bloomberg.net

Last Updated: October 26, 2005 16:14 EDT