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Editorial: Closing wealth gap fundamental in rebuilding coronavirus-hit Japanese economy

The novel coronavirus has made a direct hit on the Japanese economy, and laid bare the serious disparities in society. Those in vulnerable positions became even more vulnerable, while those in powerful positions became more powerful. What we see is an extremely lopsided state of affairs.

    It has been 10 months since one man in his 50s who had been working as a non-regular employee at a hotel in Tokyo lost his job. His pay was about 70% of that of regular employees, but he was proud of his job offering hospitality to the hotel's guests, and worked as much as any regular employee did for more than 10 years. Now that only non-regular employees like him have lost their jobs, he's not sure what to think.

    He hasn't been able to find a new job. He doesn't know how long he can sustain himself as he chips away at his savings. "I'm pretty much resigned to this state of affairs," he said.

    The number of non-regular workers -- who tend to be used by employers as a "regulator valve" that can be employed when needed and eliminated when they become a burden -- went down by at least 1.3 million in July 2020. Since then, the situation has not improved by much.

    From the beginning, loss of jobs among female non-regular workers who were employed by the lodging and restaurant industries, where wages are low, were prominent. According to research conducted by the Mitsubishi Research Institute, the lower one's income was to begin with, the higher the rate by which one's income declined.

    In contrast, however, there was strong growth in the sales of imported luxury cars even under the novel coronavirus crisis. At a major dealer in Tokyo, 30% more Porsche and Mercedes Benzes costing at least 10 million yen each have been sold.

    The people buying these cars are so-called "nouveau riche," who are senior executives at IT companies. They reaped the benefits of the widespread adoption of online meetings and online shopping under the coronavirus pandemic. Many of them invested in stocks, and high stock prices that were wildly removed from the realities of the economy offered a tail wind.

    The Japanese government will be declaring a state of emergency again. Restrictions on the operations of restaurants and other establishments will be beefed up, prompting fears that disparities in wealth will broaden even further.

    At the root of the problem is a major structural change in the Japanese economy.

    As economic globalization progressed, companies cut back on labor costs to strengthen their international competitiveness.

    With further digitalization, corporate activities became more efficient. This meant that employment numbers were not inclined to go up, and that those who benefited from increased profits became limited.

    However, the government has not confronted such issues head-on.

    Previous Prime Minister Shinzo Abe emphasized the improvements in employment during his tenure as prime minister, but the truth was that the majority of employment that increased comprised non-regular employment, for a total of a little under 40% of all employment in the country. Consumption remained low, and the economy itself had been stagnant since before the novel coronavirus crisis began.

    To rebuild the economy, it was crucial to overhaul "Abenomics," or the Abe administration's economic policy mix, but Abe's successor, Prime Minister Yoshihide Suga, put forth "self-help" as the first step toward the society to which he aspires. He probably intends to continue with the neoliberalism line of thinking that places importance on competition.

    Suga has repeatedly stated that digitalization will become the main driving force of the economy. But that means that there is a risk that major corporations will become even more productive and expand their advantage over small and mid-sized companies.

    The government indicated in its economic rebuilding policy that it would work on increasing the productivity of small and mid-sized companies as well through realignment, but if many companies are left behind, it will not help to raise the general level of the economy.

    Under capitalism, technological innovation through competition invigorates the economy. But when excessive competition broadens disparities, it has negative effects on the economy.

    If the number of people in poverty grows, more people will lose the motivation to work. People will no longer have the money to allocate to their children's education, which could possibly work to cement societal disparities. Economic vitality will be diminished, and ultimately productivity will fall.

    Toshiaki Tachibanaki, a visiting professor at Kyoto Women's University who is well-versed in wealth disparity-related issues, says, "In Scandinavian countries, they have struck a balance between policies to distribute income more equally and a high level of economic growth. When many citizens are able to feel secure about their future and society, they work hard and productivity goes up."

    The International Labor Organization promotes "decent work," which refers to work that delivers sufficient income, offers meaning and satisfaction, and is appropriate for human beings. If the number of people who can live stable lives grows, so does the base of people who can become consumers.

    Closing the gap between the poor and the wealthy, and thereby creating a solid middle class will lead to economic stability. To accomplish that, it is imperative that income redistribution be reinforced.

    Until now, taxes charged to people with large incomes and assets have been reduced. But the system should be changed so that the richer people are, the more taxes they are forced to pay.

    The brakes must be put on global competition to reduce corporate taxes that has continued in recent years, which has included Japan among its players. There is a need to ask such businesses as IT companies to bear more of the burden.

    Improving treatment of non-regular workers is another task that must be carried out promptly. Japan must raise its minimum wage, which is still lower than that of Europe. Equal pay for equal work must be ensured, and arrangements must be made to employ more people as regular employees and not non-regular employees.

    We are under pressure to effect fundamental change in our economic structure. We cannot expect a sound economic recovery if we continue to have deep societal gaps in wealth. Correcting the disparities we see in Japan's society will become the very foundation of its economic recovery.

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