Do not sacrifice household income for the sake of business circles' interests

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Do not sacrifice household income for the sake of business circles' interests
Akahata editorial

According to a preliminary report that the Cabinet Office published on November 14, gross domestic product (GDP) in the July-September quarter grew 0.5 percent (annual rate of 2 percent), continuing to increase for seven quarters in a row. This report, however, clearly shows distortions in the economic policy that extraordinarily favors large corporations which has been taken over by the Abe Cabinet from the Koizumi Cabinet.

Household consumption dropped at an annual rate of three percent, marking the largest decrease in the current "economic upturn" phase. In contrast, plant and equipment investment jumped by 12 percent and exports by 11.2 percent, showing large corporations' increased activities.

Large corporations siphon off family income

Household consumption, the main pillar of private-sector demand accounting for more than half of GDP, has been crawling along the bottom, far from a full-scale recovery, even in this supposedly longest "economic recovery" phase in the postwar period. Although large corporations are making record-high profits, the growth rate of household consumption reached the lowest level in the postwar "economic recovery" periods.

Household consumption may fluctuate due to various factors such as bad weather, but the problem is that household income has consistently been sluggish. Minister of State for Economic and Fiscal Policy Ota Hiroko admitted that the drop in consumption was caused by the sluggish growth in income, saying, "Behind this is the fact that the per-capita wage has not increased yet." The per-capita wage has decreased sharply in small-scale businesses in particular, and it has been experiencing a downturn as a whole.

At the Council on Economic and Fiscal Policy on November 2, a member said, "The fact that wages increase very slowly is a characteristic of the current economic upturn." Another said, "We need to consider a little income transfer from the corporate sector to the household sector." Obviously, nobody can keep looking away from the stagnation in wages.

At this panel meeting, ITOCHU Corporation Chairman Niwa Uichiro said, "Corporate growth and increase in profits will bring about an eventual increase in wages of employees." Prime Minister Abe Shinzo, however, only said that he would appreciate if corporate representatives can give him data showing the transfer from corporate profits into household income on the ground that this will help refute the opposition parties' argument on the widening social gap. Both business circles and the Abe Cabinet are continuing to try to deceive the public by employing the obsolete argument that large corporations' huge profits will trickle down to household income.

This is an argument they offered at the time of rapid economic growth, and even government reports have repeatedly pointed out that this argument is no longer valid. The fact that household consumption suffered the largest drop in this "economic upturn" phase once again proved that the argument put forward by business circles and the government is nothing more than deception.

The "structural reform" policy of increasing large corporations' profitability through deregulations of employment practices has rapidly increased low-wage jobs with wretched working conditions.

Large corporations have been making huge profits by decreasing household income. Therefore, it is nothing but a fiction to say that large corporations' profits will trickle down to households.

Adverse tax policy aggravates problem

In addition to the large corporation's direct siphoning off of family incomes, the adverse tax policy that imposes tax hikes on the public and offers tax cuts to large corporations is a mechanism to indirectly decrease family incomes.

Japan Business Federation (Nippon Keidanren) Chairman Mitarai Fujio (chairman & CEO, Canon Inc.) is calling on the Abe cabinet, which is more favorable even than the former Koizumi cabinet, to implement tax cuts of more than 4 trillion yen with a 10 percent reduction in corporate taxes by using a future increase in consumption tax as collateral.

Business circles' demands and Abe cabinet policies will keep any recovery of household incomes a mere dream. The general public is suffering from decreases in income even in the "economic upturn" phase, and will suffer more in the economic downturn. Such policies need to be drastically changed as soon as possible.
- Akahata, November 15, 2006