Japan Press Weekly

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2008 July 9 - 15 [ECONOMY]

Government ‘structural reform’ policy is not the answer

Akahata editorial

The latest government survey that asks about 2,000 workers with jobs sensitive to economic trends their thoughts on existing and future economic conditions shows that Japan is experiencing a sharp economic downturn.

The Cabinet Office’s “Economy Watchers Survey” for June published on July 8 shows a decline in the main index for the third consecutive month, and the figures were the third lowest since the survey began. The Cabinet Office says that less and less people feel that the economic condition is improving.

The Bank of Japan’s report on the regional economy, published on July 7, made a downward revision for current economic conditions for eight out of nine regions, including stagnant household incomes and weakening consumer spending.

People are forced to pay more

Since the Koizumi Cabinet, the government has praised its handling of the nation’s economy by saying that the economy is on a long-term track of recovery. But, while export-oriented large corporations have made record profits, the household economy has not got a share of the “recovery” at all.

The index for economic conditions, which is affected by trends of productive activities, has dropped since last year. The recent Bank of Japan short-term survey also shows that large corporations’ outlook on the economy has been declining.

Without feeling any economic recovery, the household economy is worsening.
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The government’s “structural reform policy” has assisted large Japanese corporations like Toyota and Canon in their cost cutting schemes by giving them tax breaks and easing regulations on the use of temporary workers under the pretext of helping corporations increase their international competitiveness.

The government has been doing more than assisting big business. It has forced the elderly to pay more in taxes on income from pension benefits. It has abolished the fixed-rate tax cuts for salaried workers. It has driven young people into contingent employment. The government “structural reform” policy has thus taken it for granted that the poverty rate should increase.

The Liberal Democratic and Komei party government initially explained that it is implementing the economic policy in order to help continue the good performance of the business sector and thus improve the household economy. But the government has stopped mentioning this in its monthly economic report since December last year.

The U.S. economy, which Japan’s major corporations heavily depend on for their exports, is rapidly shrinking due to financial failures and the sharp rise in oil prices. However, they are also unable to expect an increase in domestic demand because of household spending becoming weaker. Recent economic indexes are showing that the Japanese economy is in a sharp decline and that the stock market is sluggish. This proves that the ruling coalition government’s economic policy is completely failing.

In responding to the recent economic survey, an electronics retail store operator in the Chugoku region in southwestern Japan said that the common wisdom that prices would go down even without a salary increase no longer holds true. Price decreases have in the past several years have helped reduce household financial burdens to some extent. But this trend has reversed to increase household expenditures. This is further discouraging people from spending money.

Use tax money to encourage household economy

The Bank of Japan is continuing its monetary policy of keeping the interest rate near zero with the aim of boosting prices. This policy is making it easier for U.S. and other speculative funds to raise money to be used for raising prices of oil and food, hitting the household economy in Japan. This clearly shows that the government’s structural reform policy has also failed in finance policy.

Japan’s economic and financial policies must now focus on measures to encourage households to spend money by ending the present policy of helping major corporations and by discontinuing the export-led growth policy for Japan in order to expand domestic demand. - Akahata, July 9, 2008