Japan Press Weekly

Tweet

2015 January 7 - 13 [ECONOMY]

Abe’s economic policy ignores concern over rising inequality

Amid a growing concern among other developed countries about rising economic disparities, Prime Minister Abe is still adhering to the old idea that benefitting large corporations and the rich will boost the economy in the end, known as the now discredited trickle-down theory.

At a New Year party held on January 6 by Japan’s three major business organizations, Abe said that tax breaks for large corporations will lead to higher wages for workers. He also proclaimed that the more profitable companies become, the better off people will be.

However, the trickle-down theory, the basis of Abe’s economic policy, has long lost its credibility.

The Organization for Economic Cooperation and Development (OECD) consisting of 34 developed countries in December 2014 issued a report titled “Focus on Inequality and Growth”, and sounded an alarm on the widening economic disparities. The report points out, “The gap between rich and poor is at its highest level in most OECD countries in 30 years. Today, the richest 10% of the population in the OECD area earn 9.5 times more than the poorest 10%.” The OECD report suggests that income inequality damages medium-term growth. The report states that Japan’s economic growth was slashed by 5.6 percentage points in the past 20 years. The report clearly denounces the trickle-down theory by stating, “The benefits of growth do not automatically trickle down to the rest of across society.”

Sugiura Tetsuro of the Japan Economic Research Institute on a business website said that Japan’s economic policy has helped the wealthy people become even wealthier. This has resulted in a shrinking middle class and a rising inequality, rather than a healthier economy.

Fujiwara Hiroyuki of the Nippon Research Institute in the December 23 issue of Japan’s Economist magazine cited National Tax Agency data and said that the income gap in Japan is widening. He added that the middle class was once regarded as the driving force of the Japanese economy, but this situation is changing.