One Year After Taking Office, Fumio Kishida Has Failed to Redistribute Wealth in Japan.
Yet he had a unique window of opportunity.
One year ago, on September 29, 2021, traders in Tokyo were panicking, causing a panic in the Nikkei. On that day, Fumio Kishida had just won the internal elections of the Liberal Democratic Party (LDP), the major conservative party in power in Japan, and was about to be appointed Prime Minister, replacing Yoshihide Suga, who was too unpopular in the polls.
Fumio Kishida had won the election on a rather original reform program, potentially contrasting with the years of pro-market policies of the Japanese right. In his speeches, he even promised to bring about “a new capitalism.”
This is enough to make investors flinch.
The share of wages has declined
While Fumio Kishida does not deny the strategy of his predecessors called “Abenomics”, named after the right-wing leader Shinzo Abe, who was assassinated in July 2022, He believes that the executive must tackle the issue of wealth distribution in the archipelago.
Thanks to Abenomics, which has introduced a series of public spending plans and corporate tax cuts and supported a fall in the yen, large companies have become more profitable and the main indexes of the Tokyo Stock Exchange have regained their vitality during the 2010s. But households have had little taste of the economic upturn.
“There will be no new growth without redistribution,” warned Fumio Kishida after he is appointed head of government. Has the time finally come for workers, the great losers of the Japanese model, to benefit?
While wage increases have slowed considerably in recent decades in most developed countries, they have been non-existent in Japan. Between 1995 and 2017, productivity in the world's third-largest economy grew by 30%, as calculated by expert Richard Katz, but total worker compensation (wages and benefits) regressed by an average of 1% during the same period.
More and more employees are no longer hired on permanent contracts, but on contracts with little protection, paid at minimum wage. At present, the minimum wage in the country is still only 930 yen, or $6.60. Over the period 2000-2020, the annual profits of the big companies have almost doubled, but the share they devote to their employees' remuneration has fallen by 0.4%. They preferred to distribute a little more dividends, but above all to deposit more and more cash in the bank. For safety.
Is new capitalism possible in Japan?
With no central trade unions willing to defend them and no majority brave enough to confront these large groups, the employees have taken it upon themselves, in silence. Young people, who are particularly poorly paid in a system that rewards only seniority, now explain that they no longer dare to have a child for fear of not having enough money to raise it. In the first half of 2022, the country of 125 million inhabitants recorded only 385,000 births. This is unheard of in official statistics.
To stop this destructive demographic spiral, Fumio Kishida suggested new capitalism with Japanese characteristics. He mentioned a tax increase on the highest incomes, a tax on certain stock market gains, an adjustment of the minimum wage, and even exemptions for companies finally agreeing to raise their employees' wages. Economists applauded. But the lobbies were up in arms and the markets were panicking. When Fumio Kishida came to power, the Nikkei 225 had fallen for eight consecutive days.
Nearly a year later, the Nikkei has taken some consolation. The Prime Minister seems to have gradually abandoned all his reform plans. Yet he had a unique window of opportunity. The leader won the senatorial by-elections in July 2022 and theoretically has a large majority in both houses of the Diet for three years. He could therefore have forced through some strong laws. But the polls have scared him.
His popularity rating is in free fall. Public opinion blames him for the surge in Covid-19 cases during the summer of 2022, the start of inflation (2.6%), a possible revival of nuclear power, and his great indecision. The public is particularly annoyed by his inability to tackle the electoral links uncovered between many national and regional party officials and the Moon sect, following the investigation into the assassination of Shinzo Abe.
The killer explained that he wanted to punish the former prime minister for his support of the religious movement, also known as the Unification Church, which he claimed had caused the ruin of his family. Embarrassed by this controversy, Fumio Kishida was very slow to promise a major cleanup in these relations.
At the top of the polls at the end of September 2021, the share of those dissatisfied with his action is now higher than that of his supporters, in the latest survey for the TBS channel. The party caciques have made him fall in line and he is gradually resuming his declination of Abenomics. Sloppy stimulus plans, more and more public debt, and a guilty silence on the collapse of the value of the yen. All that pleases the traders, at the expense of the workers who will still have to wait their turn.
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