Japan Flirts With Governance Reform

by Noah Smith for Bloomberg

Do you know what a “hostess” is in Japan? If you guessed that it’s a woman who greets you at the entrance of a restaurant, guess again. “Hostess” in Japan refers to a woman who works in a bar or a lounge and is paid to flirt with men. A French journalist once referred to them as “prostitutes who do not think they are prostitutes.”

Japanese corporate employees are the main customers at hostess bars. It’s a tradition in Japan to send (all-male) work teams to hostess clubs after hours, on the company dime. These sessions are often mandatory. Clients are also traditionally taken to hostess clubs by salesmen. Companies pay for these excursions , which  go under the heading of “entertainment expenses.”

These entertainment expenses are quite high. Decades of slow economic growth have squeezed corporate expense accounts, so in 2013, Shinzo Abe’s government introduced a plan to make “entertainment expenses” partially tax-deductible for large businesses (as they already are for small companies).

Needless to say, this is probably not a step in the right direction for Abe’s “Womenomics” initiative. But even more importantly, it illustrates one of Japan’s biggest structural problems: poor corporate governance. Fortunately, thanks to a new set of guidelines being introduced by Abe’s administration, governance may be about to experience a revolution. Read more here.

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