December 5, 2011

Movements calling for decreasing economic gaps between the rich and the rest are spreading worldwide. How is the real situation concerning poverty and income gaps in Japan?

In 2008, people in the top two income brackets took in 45.5% of the total income in Japan. The percentage rose by 3 percentage points from 42.6% in 1993. Meanwhile, people in the bottom two income brackets in 1993 had an average annual income at 1,659,000 yen. In 2008, however, their average annual income dropped to 1,225,000 yen, about 70% of what was in 1993.

In the background to the widening income gaps lies the increase in unstable employment such as temporary jobs.

Between 1993 and 2008, the number of salary earners who annually earn over 20 million yen increased by 1.49 times, while the working poor who earn less than 2 million yen a year increased by 1.45 times. The number of people in income brackets between 2 and 8 million yen and between 8 and 20 million yen slightly declined, suggesting that the so-called “middle-income” class fell into the low income class.

In terms of financial assets, the contrast between the rich and the poor is far clearer. The number of households with no savings, accounting for only 8% in 1995, increased almost threefold to 22.3% in 2010. A rapid increase was seen between 2002 and 2003. This was when the Koizumi Cabinet was promoting the “structural reform” policy.

In 2010, households with savings of over 40 million yen accounted for more than 40% of the total savings. However, the share of households with savings over 40 million yen was only 10.2% of all the households in Japan. This means that the 10% high savings households account for over 40% of the total savings.

This real picture of the Japanese economy shows that the need is to put an end to the “growth policy” which only favors large corporations and the rich and only helps to widen the rich-poor gap. Politics should give priority to improving everyone’s living conditions.

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The Organization for Economic Co-operation and Development (OECD) on December 5 recommended that its 34 member states raise taxes on the wealthy in order to redress the rich-poor gap, which reached the widest levels in the last three decades.

The OECD study shows that the average income of Japan’s wealthiest 10% corresponds to 10 times that of the bottom 10% income earners. In the 1990’s, it was 8 times.

Angel Gurria, OECD Secretary-General, said in a statement, “There is nothing inevitable about high and growing inequalities.” He also said that higher taxes on the rich will be able to redress the disparity.