Growing income inequality troubles Japanese

While Japanese Prime Minister Shinzo Abe was campaigning to succeed Junichiro Koizumi earlier this year, much of the discussion focused on foreign policy and whether a hawkish Mr. Abe would continue his predecessor's "fighting diplomacy."

Yet the recent news that Japan's economy has unexpectedly slowed is a reminder that it could ultimately be domestic concerns that create the biggest challenge for Abe's new government.

Last year, the government announced that the population had started to contract, and current projections suggest that unless Japan can raise its birthrate above the its current 1.25 children for every Japanese woman, its population will drop by half by the end of the century. On top of this, there is evidence of growing income inequality and rising poverty.

Indeed, it is these last two points that many Japanese find most troubling. A poll conducted earlier this year by the Asahi Shimbun newspaper found that 81 percent of respondents were worried about running into financial difficulty. This July, a report on Japan from the Organization for Economic Cooperation and Development (OECD) noted that income inequality had risen above the OECD average, while the rate of relative poverty was among the highest of any OECD nation.

This hits hard in a country that in many respects defines itself by its egalitarianism, and in which 90 percent of the population have traditionally considered themselves to be middle class.

Tadashi Nakamae, president of the Nakamae International Research Institute, says that while this notion of egalitarianism was once accurate, the last decade has seen a noticeable rise in inequality. He believes that one of the main factors is the increasing use of part-time and temporary workers.

"In order to reduce costs, big companies increased their use of part-timers, as the cost of employing these part-timers is roughly a quarter or less than of regular workers," he says.

Toshiaki Tachibanaki, an economist at Kyoto University, suggested in a paper published in the Japanese Economic Review earlier this year that inequality has been growing since the 1980s. He cited figures from the Labor and Welfare Ministry, showing that the Gini coefficient – the standard inequality equation used by economists, which runs from 0 (full equality) to 1 – was 0.381 in 2002 after social security benefits were taken into account. That was up from 0.314 in 1981. This paper also pointed to a survey of 8,000 people in which almost two-thirds of respondents said that inequality is too high.

"There is a rising sense of unfairness among Japanese," says Naoko Sakaue, a researcher for the main opposition Democratic Party of Japan. "People in Roppongi Hills can earn millions with just a click, while those working in factories can work 10 or 12 hours a day for minimal wages."

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