Amazing things are happening in Japan's frozen politics. For many years there has been a discussion in America and Europe as to whether increasing inequality in income is damaging to growth. In Japan this debate never really came up. The weak opposition complained about low wages and precarious working conditions, but was not heard. The politically dominant Liberal Democrats focused on growth. Within a few weeks the picture has changed completely. The new Prime Minister Fumio Kishida preaches growth and distribution of income are necessary for a harmonious economic development, and calls for a new capitalism. Suddenly the issue of redistribution versus growth is at the center of the debate.
For Japan this discussion is unnecessary and harmful. Prime Minister Kishida stole the populist argument from the opposition that neoliberal politics had driven income inequality since the turn of the millennium. But that's at most half the story. Japan does not have exorbitantly high manager salaries. Income inequality is around the OECD average. It has increased since 2000 but is offset by effective redistribution.
At its core, Japan created a great deal of part-time and temporary work for employees and companies to evade the frozen system of lifelong employment.
That helps jobs and growth.
Undesirable consequences for income are corrected through redistribution, for example for single mothers or seniors.
The level of compensation may be viewed as inadequate.
That is not the reason for a broad side against deregulation and liberalism.
The Japanese invest cautiously
This is even more true when looking at the asset side. The gap between the highest and lowest wealth in Japan is among the smallest in the OECD. Most recently, Abenomics' aggressive monetary policy easing has widened the small discrepancy somewhat. Real estate, the most important asset, became noticeably more expensive in the coveted metropolitan areas, while people in suburbs or in the country suffered losses in value in a shrinking society.
Monetary policy also fueled a bull market in equities from which only a few wealthy benefited.
Because the Japanese are still very risk-averse and lose money in times of zero and negative interest rates.
The Prime Minister does not speak of this redistribution caused by monetary policy.
He wants to hold on to monetary easing.
But he suggests raising the tax of 20 percent on financial income.
That would be counterproductive.
The government punished the Japanese even more for investing in securities.
Nothing would be gained for the distribution of wealth.
It takes qualitative growth
The call for a new capitalism culminates in the call for an income-doubling program. This is a romantic reminiscence of the economic boom, when Prime Minister Hayato Ikeda launched state investments and expanded the social systems in the 1960s. At that time, economic output was doubled after seven years and Ikeda's plan was met ahead of schedule.
But the times are no longer like that. Japan's population is shrinking and aging. Double-digit growth rates are no longer imaginable. The potential for women and seniors who can still be drawn into the labor market is finite. Japan must grow above quality. This requires higher productivity not only in large export-intensive industries, but also in medium-sized companies. Debureaucratisation and deregulation are needed for more dynamism. In the World Bank's Doing Business report, Japan only ranks 106th when it comes to starting a business. The anti-performance system of seniority wages still dominates the labor market.
In contrast to his predecessors, Kishida does not speak of this need for reform.
His business is the half-baked and utopian plans for growth through redistribution and higher wages.
That is why investors on the stock exchange acknowledged his appointment with the Kishida shock and price losses.
Also the appearance in the population shortly before the general election was not great in the polls.
As a result of the higher financial tax, the head of government swore for the time being.
But whoever starts out as a romantic redistributor will not end up as a liberal economic reformer.Keywords: japan, new capitalism in japan, growth, fumio kishida, redistribution, debate, center, things, discussion, income, inequality, politics, prime minister, wages, country