Japanese Prime Minister Fumio Kishida promised to tackle wealth inequality and help struggling workers. But a year after he came to power, financial traders are once again the winners.
TOKYO — Panic on the Nikkei, the Japanese stock market. Almost a year ago, at the end of September 2021, traders went into a panic in Tokyo. On Sept. 29, Fumio Kishida had just won the general election for the country's main conservative party, the Liberal Democratic Party. He was about to be named Prime Minister, succeeding Yoshide Suga, who'd grown too unpopular in the polls.
Kishida had won through a rather original reform program, which was in stark contrast with years of conservative pro-market politics. In his speeches, he had promised to generate a “new capitalism”. A phrase that makes investors shudder.
While he did not completely renounce his predecessors’ strategy called “Abenomics” — named after free-market stalwart Shinzo Abe, who was killed last July — Kishida declared that the government needed to tackle the issue of the redistribution of wealth in the island nation.
Thanks to Abenomics, which created a series of public spending plans, lowered taxes for companies and supported the fall of the yen, big companies profited and the main Tokyo Stock Market indexes revived their vitality during the 2010s.
But Japanese households did not feel the benefits of this economic growth. "There will not be any new growth without redistribution," warned Kishida after being nominated as head of the government.
Increasing wealth disparity
Had the time come for workers, who have been the biggest losers of the Japanese model? If pay rises have considerably slowed down these past decades in most developed countries, they have been nonexistent in Japan.
Between 1995 and 2017, the productivity of the world’s third economic power has increased by 30%, as calculated by political scientist Richard Katz, but workers' compensation has on average dropped at the same time by 1%. More and more workers are employed, not for permanent contracts, but for minimum wage jobs with little protection — currently, the minimum wage is at ¥930 ($6.52) in the country.
Between 2000 and 2020, the biggest groups’ profits have almost doubled while the part allocated to employee salaries has decreased by 0.4%.
A passer-by checks the Nikkei 225 index in central Tokyo in June 2021.
A new Japanese capitalism
Without union offices willing to defend them and no majority brave enough to confront the big corporations, the employees kept to themselves silently. Young people, who are particularly badly paid in a system that bases its rewards on seniority, say that they do not dare to have children because they are afraid they won't be able to afford to raise them. During the first half of 2022 the country of more than 125 million residents recorded an unprecedented 385,000 births. Never in the past two decades have so few births occurred.
More and more workers are employed, but for minimum wage jobs with little protection.
To halt this cycle, Kishida suggested a new capitalism with Japanese features. He mentioned a tax increase for the highest incomes, a taxation on some stock market profits, an adjustment of the minimum wage and exemptions for companies that agree to increase their employees’ salary.
Economists applauded, but lobbies became defensive and markets panicked. When Kishida came into power, the Nikkei had recorded eight consecutive days of decrease.
The workers can wait
About a year later, the Nikkei has calmed down. The Prime Minister seems to have gradually renounced all of his reform projects, even though he benefited from a unique window of opportunities.
The leader emerged victorious from the partial senatorial elections in July and has had for at least three years a large majority in both Houses of the Diet, Japan's Parliament. He could have imposed a few strong laws, but the polls scared him away.
Traders are happy.
His approval rating is in freefall. Public opinion is punishing him for the rise of COVID-19 cases over the summer, the start of inflation (2.6%), a potential revival of nuclear power and his indecisiveness. The population is mostly angry about his inability to tackle the electioneering links between national and regional executive members of his party and the Moon cult, which were revealed after the investigation on Shinzo Abe’s assassination.
The killer explained that he wanted to punish the former Prime Minister because of his support for the religious movement — called Unification Church — that, according to him, caused the bankruptcy of his family. Kishida was late to promise a clean-up in these connections.
He was highest in the polls at the end of September 2021, but more people now disapprove of him than approve. The higher-ups of the party brought him back into line and he is now progressively getting back to his own version of Abenomics.
Rushed stimulus packages, more public debt and a guilty silence on the downfall of the yen. All of this satisfies traders. The workers can wait.
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