Aside from the self-evident equity issues, the female pay gap actually has tangible costs for Japan's productivity and GDP growth. If a significant majority of the working population – in this case, women – are underutilized or undercompensated, the economy runs below its full potential. If highly skilled women are steered into lower-pay work that doesn't take best advantage of their abilities, the productivity of labor suffers. Furthermore, the earnings gap can discourage women from joining or staying in the workforce, cutting back on aggregate supply. This is especially crucial to Japan, with a decreasing working-age population due to aging and falling birth rates. Every worker's input counts under such a population structure, and gaps in employment and pay by gender get in the way of aggregate production.
Development economics theories account for these dynamics. Human Capital Theory, introduced by economists like Gary Becker, contends that individuals' salaries are a reflection of their productivity, which depends on their experience, education, and skills – their "human capital." A large gender wage gap may suggest disparate human capital accumulation among men and women. In Japan, it may be said that women's career breaks (usually due to childrearing) lead to less experience and, therefore, less pay. Education for women in Japan is as good as for men, and many women have rich skills not being translated into incomes. The human capital hypothesis is insufficient; instead, the gap reflects inefficiency in how Japan is deploying its human capital. Macro-economically, if women are being kept out of higher-paying, high-productivity jobs, then some of the country's human capital is, in effect, under-employed. This reduces the growth in labor productivity. Economists note, for example, that Japan's enormous gender pay gap – and the resulting over-concentration of women in part-time jobs – is one cause of the country's historically slow wage growth in general. Essentially, untapped or wasted ability means lost output.
Amartya Sen's Capability Approach provides an additional model: it concentrates on the idea that development is a question of expanding people's capabilities – their ability to be well off. Under this model, the gender pay gap is not just an economic inefficiency symptom, but a fundamental development issue. It reflects the idea that women in Japan have lower capacity to turn education and skills into economic autonomy. The gap restricts women's occupational choice and economic autonomy, hence limiting their "functionings" (the doings and beings they care about). Sen's insight reminds us that gender equality is both a process and an outcome in development. Reducing the wage gap would improve women's agency and well-being (an intrinsic good), as well as set conditions for enhanced economic growth (an instrumental good). In Sen's own words, Japanese society would be "freedoms" and more prosperous if women had the same opportunities of employment and benefits as men. This broader vision highlights that the gap is not a matter of higher GDP, but half the population being empowered to participate fully in economic and social life.
From a purely economic point of view, a number of studies have estimated the return to growth from closing gender gaps. Goldman Sachs analysts, in their popularization of "Womenomics," famously projected that getting male and female labor participation (and thus closing gender income gaps) into equilibrium could boost Japan's GDP by 10–15%. The International Monetary Fund also estimated that eliminating women's barriers – particularly in high-productivity sectors – would significantly boost Japan's growth potential. For instance, IMF research in 2023 shows that raising the proportion of women working in STEM occupations (science, technology, engineering, mathematics) would boost Japan's long-term productivity growth by 20%. This is merely because more women in STEM would raise the number of qualified workers needed for innovation and technological advancement. Over the last decade, Japan did experience a growth dividend from rising women's participation in the workforce: as childcare support increased, the female labor force participation rate increased from 63% in 2012 to 74% in 2022, adding new workers to the economy. These new women workers reduced labor shortages, increased household incomes, and raised GDP growth. Yet, many of them found employment on a part-time or lower wage basis, and therefore the gender wage gap remained, and the increases were mostly due to quantity of work rather than quality. In the future, narrowing the pay gap can be a new growth stimulus by enhancing the productivity (quality) of Japan's workers, as opposed to the participation rate. Overall, closing the gender pay gap is good economics: it would increase Japan's effective labor pool, improve productivity, increase family incomes (and expenditure), and even potentially improve population trends (since greater balance between work-life and income distribution could encourage higher fertility in the longer run and ease Japan's population issue).
There is a business case at the micro level too: firms that make better use of female talent can benefit from more varied leadership and perspectives, which research has linked to improved performance and innovation. Conversely, the pay gap can itself be a symptom of misallocation of talent – if women are not being paid or promoted equally, firms may be forgoing productive potential. All these are demonstrations of how gender equity in compensation is not merely a social aim but an economic strategy to preserve Japan's progress. As the World Bank put it concisely, gender equality is "smart economics" as it promotes economic efficiency and other development outcomes.