Koike Yuriko in World Economic Forum: “Why inequality is different in Japan” (= because “We Japanese have a deeply ingrained stoicism”)

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Hi Blog.  Shifting gears a little, here we have another LDP spokesperson peddling Japan’s exceptionalism to worldwide socioeconomic forces, and to an international audience.  While food for thought, it’s clear by the end that this is just Koike shilling for PM Abe’s economic policies, spiced up with some Nihonjinron.  Once again Japan gets away with shoehorning in “Japan-is-unique” mysticism within any social scientific analysis just because Japanese are seen as “funny quirky people from an island country affected by a long history of self-imposed isolation”.  I’ll be talking a bit about the politics of that in my next Japan Times column, coming up on Monday April 6 (out on Mondays now starting in April).  Dr. ARUDOU, Debito

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Why inequality is different in Japan
By Yuriko Koike
World Economic Forum, Mar 2 2015, courtesy of GD
https://agenda.weforum.org/2015/03/why-inequality-is-different-in-japan/

Six months after Thomas Piketty’s book Capital in the Twenty-First Century generated so much buzz in the United States and Europe, it has become a bestseller in Japan. But vast differences between Japan and its developed counterparts in the West, mean that, like so many other Western exports, Piketty’s argument has taken on unique characteristics.

Piketty’s main assertion is that the leading driver of increased inequality in the developed world is the accumulation of wealth by those who are already wealthy, driven by a rate of return on capital that consistently exceeds the rate of GDP growth. Japan, however, has lower levels of inequality than almost every other developed country. Indeed, though it has long been an industrial powerhouse, Japan is frequently called the world’s most successful communist country.Japan has a high income-tax rate for the rich (45%), and the inheritance tax rate recently was raised to 55%. This makes it difficult to accumulate capital over generations – a trend that Piketty cites as a significant driver of inequality.

As a result, Japan’s richest families typically lose their wealth within three generations. This is driving a growing number of wealthy Japanese to move to Singapore or Australia, where inheritance taxes are lower. The familiarity of Japan, it seems, is no longer sufficient to compel the wealthy to endure the high taxes imposed upon them.

In this context, it is not surprising that Japan’s “super-rich” remain a lot less wealthy than their counterparts in other countries. In the US, for example, the average income of the top one percent of households was $1,264,065 in 2012, according to the investment firm Sadoff Investment Research. In Japan, the top 1% of households earned about $240,000, on average (at 2012 exchange rates).

Yet Japanese remain sensitive to inequality, driving even the richest to avoid ostentatious displays of wealth. One simply does not see the profusion of mansions, yachts, and private jets typical of, say, Beverly Hills and Palm Beach.

For example, Haruka Nishimatsu, former President and CEO of Japan Airlines, attracted international attention a few years ago for his modest lifestyle. He relied on public transportation and ate lunch with employees in the company’s cafeteria. By contrast, in China, the heads of national companies are well known for maintaining grandiose lifestyles.

We Japanese have a deeply ingrained stoicism, reflecting the Confucian notion that people do not lament poverty when others lament it equally. This willingness to accept a situation, however bad, as long as it affects everyone equally is what enabled Japan to endure two decades of deflation, without a public outcry over the authorities’ repeated failure to redress it.

This national characteristic is not limited to individuals. The government, the central bank, the media, and companies wasted far too much time simply enduring deflation – time that they should have spent working actively to address it.

Japan finally has a government, led by Prime Minister Shinzo Abe, that is committed to ending deflation and reinvigorating economic growth, using a combination of expansionary monetary policy, active fiscal policy, and deregulation. Now in its third year, so-called “Abenomics” is showing some positive results. Share prices have risen by 220% since Abe came to power in December 2012. And corporate performance has improved – primarily in the export industries, which have benefited from a depreciated yen – with many companies posting their highest profits on record.

But Abenomics has yet to benefit everyone. In fact, there is a sense that Abe’s policies are contributing to rising inequality. That is why Piketty’s book appeals to so many Japanese.

For example, though the recent reduction in the corporate-tax rate was necessary to encourage economic growth and attract investment, it seems to many Japanese to be a questionable move at a time when the consumption-tax rate has been increased and measures to address deflation are pushing up prices. To address this problem, the companies that enjoy tax cuts should increase their employees’ wages to keep pace with rising prices, instead of waiting for market forces to drive them up.

Herein lies the unique twist that Piketty’s theory takes on in Japan: the disparity is not so much between the super-rich and everyone else, but between large corporations, which can retain earnings and accumulate capital, and the individuals who are being squeezed in the process.

==============================

This article is published in collaboration with Project Syndicate. Publication does not imply endorsement of views by the World Economic Forum.

Author: Yuriko Koike, Japan’s former defense minister and national security adviser, was Chairwoman of Japan’s Liberal Democratic Party’s General Council and currently is a member of the National Diet.
ENDS

20 comments on “Koike Yuriko in World Economic Forum: “Why inequality is different in Japan” (= because “We Japanese have a deeply ingrained stoicism”)

  • Loverilakkuma says:

    So, what’s her bottom line? Is she trying to say that Japan is immune to Piketty’s theory because of its uniqueness??(Sarcasm meter up)

    Funny how her belief in nation’s low-income inequality flies in the face of reality that 1 out of 6 children is in poverty, which is 4th highest among OECD nations, following the US, Spain, and Italy, according to UNICEF IRC report. It’s higher than Germany, France, UK, Canada, and most Scandinavian countries.

    http://www.unicef-irc.org/publications/pdf/rc10_eng.pdf

    The report above also shows that Japan is ranked 7th(31.3%) in child poverty gap(between the poverty line and the median income of those below the poverty line). And she thinks the impact of inequality on these people are the same as anyone belonging to 1% like her?

    (crickets chirping)

    >”the disparity is not so much between the super-rich and everyone else, but between large corporations, which can retain earnings and accumulate capital, and the individuals who are being squeezed in the process.”

    If the owners of large corporations belong to Japanese 1%($240,000 on average), under her definition, Japan would likely be on top 5 in high poverty rate/high debt rate.

    (Sarcasm meter swing to far right)

    PS: If someone wants a better critique of Piketty’s book, perhaps you should see Thomas Frank’s Salon article below. It’s way better than same-old Japanese-is-unique cliché that does not even bother to respond to what Piketty said about Japan’s economy.

    http://www.salon.com/2014/05/11/the_problem_with_thomas_piketty_capital_destroys_right_wing_lies_but_theres_one_solution_it_forgets/

  • Right. That’s sensitivity of inequality is probably the reason why Abe’s daddy was foreign minister, his grand daddy was a member of parliament, and his grand-grand daddy was a general in the imperial army, his other grandfather was prime minister, and his grand-uncle was also prime minister.

    I guess they all worked really hard, right? I mean everyone in Japan is equal, it’s just that some are more equal than others. But then again, three generations, so the Abe clan will run out of money soon…

  • Meh. No surprises that someone hooked into the power structure would have a worldview that defends the very same structure they profit from. “Inequality isn’t that bad in Japan (and even if it were, we japanese just naturally “gaman” through it anyway)”. Of course it’s bullshit, and every country has its specific kind of bullshit to peddle (America for example thinks of itself as THE “everybody can make it, yay!” society when most metrics show that social mobility is actually worse than in many other developed nations).

    See the “successes” of Abenomics as evidence: So the stock market is up 220% ? CUI BONO! Let me just take a wild guess that the author already has a sizeable investment portfolio, quite in opposition to the regular japanese people – oh but fear not, folks, your pension money account will now be turned over to the stock market too (which is always a great idea at current prices) so the asset looting party for the one percent can go on juuust a bit longer before the inevitable cash-out comes. (quick disclosure, sure I’ve made some profitable punts on Japan myself over the last years, dollar hedged, and a cynical thanks to Abe).

    Also I’m not so sure what to make of the authors claim that wealth in Japan is typically not generational. Power in general most certainly is, at least from my uneducated observation, see that hereditary politicians for example being more the rule than the exception. The humble CEO makes for a cute little anecdote, but you could also tell countless others to illustrate that japanese elites have the same “fuck you, serfs!” attitude as everybody else just as well too.

    As for the not japan specific, general idea about wealth inequality and the discussion Piketty started, it was already obvious to me from the start (and I didn’t need a fat book to prove it) that capital gains exceed wage growth (thus “rich get richer” ie those that have assets see them appreciate faster than those who just rely on their labour for income). Wages grow at what, 1-2% annually, at most, on average. Just the stock market alone makes >5 % per year (sure, some down years in between, again on average). I figured that out a long time ago and therefore stepped off the employment threadmill as soon as I had enough capital together, and geez now I get more money with even less “work” than before. If you can’t beat em, join em, I guess.

  • Jim Di Griz says:

    Err, so let me get this straight.
    Apart from muddying the water with rubbish like claiming that Japan’s rich people don’t spend their money on beachfront condos and yachts (which they do, BTW), she’s also saying that the wealth disparity in Japan isn’t as bad as it is in America (a deflection argument that Japanese use for almost every discussion, like war-crimes- ‘they did it too!’), she is bang on with the statement that rich (enough) Japanese are abandoning the country in droves to live in places like Singapore (and why wouldn’t they?).

    But for me, the best part is her argument that Japanese can endure massive wealth discrepancy between the masses and the elite, because of some obscure idea of ‘being Japanese’.
    Interestingly, this is something I commented about recently right here. This is the goal of Abe’s ‘Beautiful Country’ nationalism;
    The elite can rob the country blind, and the masses will ‘endure’ because they have been told that to ‘endure’ is the ‘proper’ Japanese response.

    Telling the masses this creates a self-fulfilling prophecy- you will endure because you are Japanese, to complain would be un-Japanese.

  • Funny fact, left out by Koike: while direct income itself is not as big in Japan as the 1% of America, the rich of Japan’s corporate life enjoy extraordinary benefits on company money. So, in a weird way, at least the theft in the US is straightforward, while in Japan is indirect and deducted as business expenses.

  • Baudrillard says:

    So Koike admits Japan is fascist/corporatist (not capitalist) then-“in Japan: the disparity is not so much between the super-rich and everyone else, but between large corporations, which can retain earnings and accumulate capital, and the individuals who are being squeezed in the process.”

    Yes, that is the definition of Corporatism, And as Benito Mussolini said, “Corporatism is fascism.” Corporatism is stealth practiced in several western countries under the guise of free market capitalism, when the reality the government, the banks and the large corporations are all in bed together.

    At least in the UK people are waking up to this, witness the election of Mark Reckless and Nigel Farage -‎
    10 Oct 2014 … Crony corporatism is not the free market. …

    http://www.cityam.com/209322/ukips-nigel-farage-claims-corporatism-has-made-us-all-victims-economy

    Meanwhile in Japan, its the LDP that is carrying on the crony corporatist agenda, with their cosy nepotistic connections to the banks and corporations and even NHK, making it difficult for any other party if elected, e.g. DPJ, to govern. Koike and her ilk are the problem, not the solution.

  • “Yet Japanese remain sensitive to inequality, driving even the richest to avoid ostentatious displays of wealth.”

    What on earth is she even talking about here? Is she just one of those wealthy people who just moved to Singapore and doesn’t know much about day-to-day life in Japan anymore?

    Japanese people don’t like ostentatious displays of wealth? Um, yeah, that’s not true.

  • FaithnoMore says:

    What makes Abe and Koike and their ilk so dangerous is the fundamental irrationality of their faith or beliefs. This sort of mystic belief in Japanese exceptionalism goes back to all those conversations people who have lived here for a while will get from drunks, the not so well educated, or those who want to want to try out their Engrish on gaijin, who, after all, are only here to service and entertain, before they go home.

    The hilarious and childish and patent nonsense includes the ideas that Japanese people are innately peaceful and cooperative because of agriculturalism deep back in history, and have longer intestines, unlike the violent meat-eating barbarians. Then it gets worse – Japanese snow is different, or more recently, Japanese radiation is different.

    What Koike and her ilk do is consciously project their belief and vision of a pure Japan with all its mystical elements, that’s the heart of it, a unique and pure race, under the Emperor. Even the Emperor doesn’t seem to really believe this nonsense, and is prepared to publicly pronounce, however obliquely, on the side of rationality over rewriting war history.

    But once you have a belief framework, everything can be made to fit into it, adjusted to fit the picture. If you are actually sliding into irrational lunacy like blinky neo-fascist Shintaro Ishihara, it can even lead to weird ideas that the 3/11 earthquake was a divine punishment. Of course there is a sliding scale to this silly and dangerous mysticism. Ishihara is firmly in the sort of territory travelled by Christian extremists and fundamentalists, for example. But I get the horrible feeling that under the facade or being quite reasonable, Koike and her ilk really do belief in their irrational articles of faith, which is incredibly disturbing.

    — Ooh, I think you’re going to like my upcoming Japan Times column on Monday…!

  • j_jobseeker says:

    I was going to go on a tirade after reading this obvious BS article by an obvious LDP shill poster child. However, I must doff my cap to the Debito readers and commentors. You’ve said what I wanted to say only better and it’s abundantly clear she’s not fooling anyone with half a brain. Kudos to Debito for cultivating the eloquent readership you all are and thank you for your well thought out comments. We may not always agree, but that is the point of a discussion.

  • The transition between paragraphs 6 and 7 was rather jarring due to the POV shift. Was this because the article was written by several people? The tone of the article read like different people were inserting their own paragraphs without transitioning them properly. . .

    Anyways, in paragraph seven the totality of her arguments outstretch reality as there have been public outcries — plenty — but they are not reported in mainstream media. I used to see them all the time when I worked near the Tokyo Metropolitan Building. Outcry this, outcry that. But if it ain’t on TV being explained by an Official Information Transmitter then I guess no public outcry occurred and as a result an argument can be made and published which contradicts a reality, and that contradictory reality becomes the Official Story.

    Anyways, Chinese and American super-rich displaying their wealth is a known fact, but let’s not forget Japan’s bubble era where people would sprinkle gold on their ice cream and fly to Hokkaido for lunch. Jeez-please people! How much of a dark hole do you live in and explain yourself to the world from?!

  • Jim di Griz says:

    @ FaithnoMore #8

    I liked this;
    ‘ If you are actually sliding into irrational lunacy like blinky neo-fascist Shintaro Ishihara, it can even lead to weird ideas that the 3/11 earthquake was a divine punishment.’

    It’s like a religious cult, this belief in ‘Japanese uniqueness’, since it functions in exactly the same way (and, incidentally, viewing Imperialist Japan’s war of aggression as a ‘holy war’ in the way that Dower describes, makes a lot more sense), when these policy makers and talking heads are given demonstrable proof that Japan is not ‘unique’ (e.g. Fukushima disaster management and cause shows that Japan’s ‘safety culture’ is below international par, and that Japan’s ‘unique’ group ethos hasn’t stopped anyone from creaming a load off the top while thousands remain displaced), instead of resolving thier cognitive dissonance by examining the idea that maybe they are not unique, in fact has the opposite outcome;
    a doubling-down on the belief system, and any contortion required to make facts fit.

    It’s like one of those cults that become even more ‘devout’ believers after the leaders apocalypse prophecy DOESN’T come true- they invent a new rationalization for it.

    And we all know how those kind of cults end up.

    Don’t believe me?
    The last time the Japanese indulged in this type of cult-of-Japaneseness Max, there was a bloody war of extermination, and even when they were losing, they never rebelled against thier leaders who were telling them that it was better for them all to die.

    It’s a death cult, this Japanese ‘uniqueness’.

  • “…One simply does not see the profusion of mansions, yachts, and private jets typical of, say, Beverly Hills and Palm Beach….”

    Hmmmm…seems she is unaware of a country called Australia an america and what was bought up then.

    A good book such as: Samurai in the Surf by Joe Hajdu, clearly highlights the boom time of the Japanese in 1980-90s, commonly buying up most of the Gold Coast and the acquisitions of the properties etc as being a status symbol for the company and family’s owing the company buying up the strip. The buying up of endless hotels and gold courses was seen a “ego trips” by the locals. I could go on.
    Oh yeah..and the good ol’ US of A…i bet she has forgotten the acquisitions there too, with the claims in the US press of “The Japanese are coming”..as they bought up anything they could get their hands on..

    Funny how myopic the Japanese are when critquing thmelves.

  • Jim Di Griz says:

    @ John K #12

    This is a very interesting point;

    “…One simply does not see the profusion of mansions, yachts, and private jets typical of, say, Beverly Hills and Palm Beach….”

    This is untrue. Rich Japanese do buy ‘rich man’s toys’. Just for an example, I took a photo with my old ‘galapo-kei’ about 5 years back of the coffee shop around the corner from the apartment I was living in at the time- outside were 2 Ferraris and 3 Lamborghinis, and this was a regular thing.

    The fact is that the Japanese do indeed own a lot of this stuff as Baudrillard has pointed out above, in the name of the companies that they own for various tax purposes (just as rich people do in any other country), as well as things owned by rich private individuals.

    Do you know what the difference is?

    In the west we have shows like ‘Through the Keyhole’, and ‘Cribs’ that show you how ‘the other half live’, along with articles in all sorts of lifestyle and business magazines that show off these peoples affluence. Western culture is aspirational (log cabin to Whitehouse anyone?), so our culture feeds us these images of the rich splashing their cash to incite and encourage us to strive to achieve our own dreams.

    Japan doesn’t have this. Japanese TV doesn’t show you the rich living it up because that would be ‘hade’ (vulgar). Japanese magazines don’t attempt to inspire you to achieve, they attempt to aspire to make you conform; entrepreneurial spirit is ignored, you need to ‘ganbare’ and not buck the system. And even then these dry business magazines in Japan hold up interviews with crusty old Japanese presidents as an image of ‘Japanese success’.

    There’s no Steve Jobs, Zuckerberg, doing their thing, and kicking back in a huge house with a millionaire lifestyle. No, Japanese ‘success’ stories are fake humble, and the message is ‘don’t buck the system’. Vested interests at work. Stifling anything new.

    OR….

    There are some Japanese lifestyle magazines, but really, all they are are marketing efforts to get you to buy the things that you can already afford (shoes, bag, watch), nothing to make you ‘aspire’ to really go for it. It’s just another system of control.

    Meanwhile, the super-rich Japanese are part of (for example) Rolls-Royce’s record 2014 sales in Japan, but there is no media attention, because the masses might wake up.

  • @13 JDG

    “…Rich Japanese do buy ‘rich man’s toys’. Just for an example, I took a photo with my old ‘galapo-kei’ about 5 years back of the coffee shop around the corner from the apartment I was living in at the time- outside were 2 Ferraris and 3 Lamborghinis, and this was a regular thing…”

    Where I live now…daily and I mean daily…i see at lest 1 or 2 super cars. By that I mean the serious high end stuff. I seem to be surrounded by many boys with their toys. There is a nice road not far from where I live which is ideal for taking your “non-flashy” very expensive sports car to thrash it through the gears and endless winding curves. On sundays, there is a “club” of them….usually around 10 or more driving in convoy!

    No show of ostentatiousness…..give me a break.

  • @Jim (#13) I think it goes even further than you say – I remember plenty of TV shows, like a particular one by the “Tunnels” duo called “Kaimono” or something, where well-known “Geinoujin” are kidnapped and “forced” to buy luxury cars or expensive watches – and not of the “somewhat expensive” kind, but of the really bling-y, new-money kind, like gold watches for USD $30,000 or a Mercedes-SUV for USD $150,000.
    Add to that the many “Sekai no XYZ” shows, which are basically adverts of Japanese travel agencies, where the “talento” checks out a hotel in a foreign country, and it is always, without fail, the most luxurious place possible, as in one night setting you back a couple of thousand USD.
    Another segment I remember from the “Downtown DX” show (one of the most popular in Japan) was about ranking the guests by the total price of their wardrobe. I think the lowest ranking guest still wore garments and accessoires worth a couple of hundred dollars, and the person in first place always had more than USD $20,000 worth of “fuku” on them. So, I think it is safe to say that Koike is full of it and that rich Japanese people do flaunt their wealth on TV all the time. Even if those shows aren’t real, i.e. just for laughs, it doesn’t change the fact.

    This idea of the Japanese of American culture is a self-fulfilling prophecy – the Japanese in general are only interested in the most trivial news and shows from the US – “Real Cop” shows, celebrity gossip, shows about rich people’s lifestyles, etc., and then complain that American culture is too trivial.

  • I been reading/hearing this nonsense for years about Japan; how unique and special it is and should get a free pass for its xenophobia and denial of WW2 events. The spinsters are always claiming Abenomics is working so well, however outside media sources tell us otherwise. Its almost like comedy, when your reading a JT piece that starts off about how well Abenomics is doing, you start to believe it till you get towards the end and see who the writer, almost always some member of some cabinet. Inflation is at zero, so it seems its all become a zero sum game. With the demographics and Japans extreme insularity (as evidenced so clearly here), perhaps the only thing left to do is spin as hard as you can.

  • Debito, on 3/28 you said that you were coming out with a JT article on Monday. But it’s Tuesday and I don’t see it. Did you mean next Monday?

    — Yeah, my mistake. I got it a week wrong. Go back to where you first read it and you’ll see I amended. Sorry.

  • Jim Di Griz says:

    Yes, those Japanese sure resist the urge to indulge in conspicuous displays of wealth, don’t they?
    Oh, wait….

    http://www.japantoday.com/category/national/view/pair-of-mangoes-sell-for-y300000-at-auction

    And you can find stories like this every year for all kinds of fruit, and especially for tuna.
    And the whole point is to be as conspicuous about the high price as possible, since this is a stunt to buy PR for your business. I guess the apologists will say this doesn’t count.

  • @Jim,

    Or how about this recent article on “amakudari” and the blatant-but-legitimized corruption that is taken as a norm in Japan?

    http://www.japantimes.co.jp/community/2015/04/12/issues/bridging-corruption-legitimacy/

    Of course Koike wouldn’t notice this or count it as an example of “inequality” because she just takes it for granted. I’m sure Koike would be shocked to find that this kind of behavior is frowned upon in most of the world, and blatantly illegal in others.

    Also worth noting how often Japanese companies are brought up on anti-trust charges in other countries. It’s all well and good for her to crow about how little corruption and inequality Japan has, all while Japanese companies demonstrate over and over again that they cannot live up to global standards of business.

  • Jim Di Griz says:

    @ Chester #19

    Thanks, that’s a great article!

    You’re absolutely right about Koike, she most likely takes it totally for granted that this system of kleptocracy, stealing from the masses to line the pockets of the ‘erai hito’, is ‘Japan’s unique culture’, and doesn’t give it a second thought.

    To be honest, the fact that the Japanese taxpayers take all this laying down, tells me that they’re getting the governance they deserve frankly. After all, them and their children, grandchildren, will have to clean up when the (fiscal) party is over. The ‘erai hito’ will have enough money to last the rest of their lives, in or out of Japan.

    Because the myth that anything that doesn’t comply with international business standards is just another unchallenged example of Japan’s ‘uniqueness’, there will be no change since it would require challenging the underlying religion of ‘Japaneseness’ in exactly the way the latest JBC desribes. The article is correct to suspect that this is why Japan drags it’s feet over complying with international norms. After all, how rotten is Japan Inc.? How many other Olympus’s are out there, covered up? Those who know, understand that Japan Inc. is just as corrupt as China, maybe more so. China, after all, wants to attract foreign investment at least for the selfish reason of receiving technology transfer.

    Japan Inc. isn’t interested in that, it’s prime goal is to deny access to NJ forms. It has a captive market.

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