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Shinji Ayuha, Senior Stewardship Officer

Shinji Ayuha is a Senior Stewardship Officer at Sumitomo Mitsui Trust Asset Management (SuMi TRUST AM) 

Before joining SuMi TRUST AM in March 2023, Shinji supported climate-related disclosures by government bodies and financial institutions at the Mitsubishi Research Institute. He is currently a researcher in the field of sustainable finance at the University of Tokyo Graduate School of Frontier Science (GSFS), where he lectures on sustainable finance and disclosure. Shinji previously worked at the World Bank as a Financial Sector Specialist for the climate-related risk assessment framework. He also has experience in the credit analysis of emerging markets in Africa, the Middle East, South America, and Asia at the Japan Bank for International Cooperation.

Shinji received a Ph.D. in international studies from the University of Tokyo, Department of International Studies. He holds an MBA from Sloan School of Management of the Massachusetts Institute of Technology.

Written by Yasushi Mukohata and Shinji Ayuha

Introduction

The transformation in Japanese work styles has become significantly more noticeable over the past decade. Traditional practices and systems have been re-evaluated, and new work styles have been increasingly adopted, marking a substantial shift in many workplaces. Particularly, individuals in their 30s and older have likely experienced these changes first hand over their careers. As asset management professionals, we too feel these changes daily. Here, we will explore the challenges related to work styles in Japan and the initiatives undertaken by Japanese corporations, with a special focus on the case of Itochu Corporation.

Challenges in Japan

Japan's population decline has garnered domestic and international attention for years. According to the Ministry of Health, Labour and Welfare's June 2024 announcement, the total fertility rate for the previous year reached a historic low of 1.20. This demographic challenge is often attributed to economic uncertainties and the difficulty of balancing work and childcare. On female workforce participation, Japan also faces significant challenges. In the World Economic Forum's Gender Gap Index, Japan ranked 118th out of 146 countries as of June, a slight improvement from its previous lowest rank of 125th but still a concerning position. These metrics highlight the severity of the issues Japan is struggling with.

Introducing Itochu Corporation's Initiatives

Itochu Corporation has been actively addressing the serious issue of population decline. In 2010, the company embarked on work style reforms aimed at improving labour productivity. As part of its "human resources strategy," a key management initiative, Itochu introduced flexible working hours and began to fundamentally re-evaluate work styles within the company. Some major initiatives, as illustrated in Figure 1, included the rapid implementation of several innovative measures like the "Early Morning Work System". This initiative, which received significant media attention, prohibited overtime work after 8 PM and encouraged early morning work from 5 AM to 8 AM for those needing to work late. Employees who started work before 8 AM received incentives such as premium wages and complimentary light meals, promoting behaviour changes among staff. Consequently, the adoption of early morning work not only transformed employees' attitudes towards time but also supported employees with constraints on their working hours due to childcare, elderly care, or health issues. This initiative contributed to enhancing work engagement by allowing more family time and self-development.

Graph 1: Concepts supporting workstyle reforms

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Finally, let’s look at how labour productivity has changed due to such initiatives. Figures 2, 3 and 4 show charts on the company's birth-rate, gender pay gap, employee numbers, and consolidated net profit over more than 10 years since the inception of its work style reforms in­­ 2010. Although the comparison base is different (the number of employees is on a non-consolidated basis and the net profit is on a consolidated basis), it is evident that the company's consolidated net profit has been on an upward trajectory even as employee numbers remained nearly flat, confirming the improvement in labour productivity envisioned by the company.

Graph 2: Trends in birth rates

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Graph 3: Gender pay gap, Graph 4: Number of employees and net profit

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Thus, Itochu's work style reforms are not just about changing work practices; they highlight a significant transformation in corporate culture and values. From a medium to long-term perspective, these reforms are essential for sustainable corporate growth. By realising satisfying work styles for each employee, the overall labour productivity and corporate competitiveness can be improved.

 

In Conclusion: SuMi TRUST AM’s Initiatives

Work style reforms bring substantial benefits not only to companies but also to society. They enhance employee well-being, contribute to solving societal issues, and serve as important steps toward sustainable development. The initiatives undertaken by Itochu Corporation provide valuable lessons for many other companies and are likely to remain in the spotlight.

At Sumitomo Mitsui Trust Asset Management (hereafter "SuMi TRUST AM"), we aim to support such corporate initiatives as responsible institutional investors. By engaging with ESG (Environmental, Social, Governance) issues and voting based on 12 ESG materiality criteria (Figure 5), we strive to enhance the value of our investee companies. We continue to engage in discussions on human capital initiatives and gender gap reduction, showcasing good examples like Itochu to other companies. By promoting constructive engagement towards enhancing the overall corporate value of the Japanese market, we aim to drive sustainable growth in the medium to long term and enhance the value of the assets entrusted to us.

Graph 5: SuMi TRUST AM’s 12 ESG materialities

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