Polarized economy further discourages people from spending money -- Akahata editorial, May 10

A number of large manufacturers reported their biggest-ever profits. The Koizumi Cabinet emphasizes a "steady recovery" of the country's economy on the grounds that "there are signs of improvement in the corporate sector."

Business circles showed their satisfaction with this trend. President of the Japan Business Federation Okuda Hiroshi said, "We see an upturn in the economy and have an optimistic outlook."

This is in stark contrast with the general public who cannot feel that their household economy is recovering. While large manufacturers report record-high profits, the household economy cannot get out of the slump. This polarization is a typical expression of contradictions in the Japanese economy.

Politics encouraging corporate restructuring

With the sales of flat panel plasma TV displays increasing, there is a lot of talk about personal spending on a recovery track. However, nominal personal expenditure in FY 2003 decreased by two percentage points from the previous year.

With real income and disposable income declining, consumers have to cut expensitures on clothing, entertainment, and food in order to buy high-tech products. Thus, personal expenditure on the whole is not increasing.

The problem lies in the state of employment and wages. The average unemployment rate in the early 1990s was two percent, but it has more than doubled recently. The unemployment rate remains high by Japan's standards.

The rate in March went down to 4.7 percent, mainly due to the fact that the jobless rate for male workers dropped by 0.5 percentage points. The increase in the number of male employees, however, was not significant. This is because many people gave up looking for a job and were excluded from the unemployment statistics. The total amount of cash earnings fell for the ninth consecutive month.

Commenting on the recent economic situation, Chairman of the Japan Association of Corporate Executives Kitashiro Kakutaro said, "We restored corporate financial health through downsizing businesses with personnel cuts. We achieved recovery in business performance by building up a structure strong enough to yield profits even with sluggish sales."

Large corporations' business strategy that sacrifices jobs, workers' wages, and subcontractors' position is the root cause of the endless slump in the household economy.

The Koizumi Cabinet is stressing that the corporate sector is improving. However, surveys by the Bank of Japan and the National Life Finance Corporation show that financial indexes of small- and medium-sized businesses are far behind big companies. A full-fledged recovery of smaller companies that employ 70 percent of all workers in Japan is essential for increasing household incomes.

Prime Minister Koizumi Jun'ichiro is touting the large corporations' success as exactly what the Koizumi structural reform has tried to achieve. The Cabinet has been encouraging corporate restructuring by adversely revising the labor laws and reducing tax burdens on corporations. Under the name of "structural reform", it further pursues its strategy to put heavier burdens on households and discouraging people from spending.

According to a Cabinet Office survey, 50 percent of companies capitalized at 10 billion yen or more indicated the need to further promote corporate restructuring.

Weakness must be overcome

In addition to the government policy of supporting corporate restructuring, increase in taxes on citizens and adverse revisions of social welfare programs are decreasing workers' disposable incomes.

The Koizumi Cabinet with ruling Liberal Democratic and Komei parties joined by the opposition Democratic Party are trying to impose on citizens heavier burdens by cutting pensions and increasing the consumption tax rate.

The biggest weakness of Japan's economy is the weak structure for defending citizens' living conditions. The polarized economy shows this weakness clearly. It is impossible to achieve self-sustaining economic recovery at a time when personal spending, which amounts to 60 percent of the Japanese economy, is placed at a disadvantage.

The Koizumi Cabinet's economic policy only worsens the weakness of Japan's economy. In order to restore it, the weakness must be overcome by establishing rules for defending employment and workers' rights as well as using a larger portion of the national budget for securing living conditions and social welfare. (end)

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