Media  Global Economy  2023.02.13

In Japan, "while the level of income inequality is higher than the OECD average, its perception is lower".

Le Monde on February 3rd, 2023

This article was initially published in French in Le Monde newspaper on 3. February 2023, as part of a series of monthly columns on Asian economies. The original article can be found here:

Economic Policy

Column by Sébastien Lechevalier, Professor at Ecole des Hautes Etudes en Sciences Sociales (EHESS, Paris), Senior Researcher at Maison franco-japonaise (UMIFRE 19, Tokyo) and at the Canon Institute for Global Studies (CIGS, Tokyo).

The strong belief in equality of opportunity among the Japanese, even if it has declined significantly among young people, explains why the demand for redistribution is lower in Japan than elsewhere, observes researcher Sébastien Lechevalier in his column.

Column. Income inequality has increased substantially in the countries of the Organization for Economic Cooperation and Development (OECD) and social mobility has slowed down considerably over the past three decades.

This situation is at the root of strong social discontent and a decline in confidence in institutions. This is aggravated by systematic discrepancies between the statistical realities, as measured by converging studies on this subject, and their perception by citizens.

This gap largely explains the difficulty governments have in gaining support for their policies, even when they contribute to reducing inequalities. Therefore, in order to design and implement policies that are supported by a majority, it is essential to understand how the perception of real inequality influences the demand for redistribution.

Growth matters most

The Japanese case is particularly interesting because it is paradoxical: while the actual level of income inequality is higher than the OECD average, the perception of it is lower. This is mainly due to a strong belief in equality of opportunity, even though this has declined significantly among young people. This explains why the demand for redistribution is lower in Japan than elsewhere.

At a roundtable discussion in Tokyo organized by the OECD in collaboration with the Japan Institute for Labour Policy and Training (JILPT) on December 8, 2022 ("Does Inequality Matter? How People Perceive Economic Disparities and Social Mobility in Japan", Mana Nakazora (BNP Paribas Japan), a member of the Council for Economic and Fiscal Policy, presented a fairly dominant view among Japanese elites, even after 30 years of economic stagnation: growth is the most important thing; inequality is only the result of a lack of growth and opportunity.

Yuki Murohashi, director of the Japan Youth Conference, a nongovernmental youth support organization, has a radically different interpretation: the low demand for redistribution is mainly due to the fact that Japanese youth - including the most disadvantaged - have given up on changing society.

This deep pessimism is reflected in a popular Japanese expression, oya-gacha ("parents' lottery"), which refers to the fact that the fate of young people depends fundamentally on their parents and their financial ability to pay for private schooling in order to get into the best universities.

A more "sustainable" capitalism

Yoshio Higuchi, labor economist, emeritus professor of Keio University and president of JILPT, stressed the importance of investment in human capital to fight inequality, provided that it promotes true equality of opportunity. The implementation of a more progressive tax system could be a solution. As for competitiveness, we cannot deny its importance, but we should probably set objectives in terms of well-being and quality of service rather than quantitative growth.

As a representative of Japanese employers stated during the roundtable, it is urgent to promote a more "sustainable" capitalism, far from the excesses of liberal capitalism. The current Prime Minister, Fumio Kishida, was elected in September 2021 on a platform of promoting a "new capitalism" that would reconcile efficiency and equity. This recognizes the importance of a return to the social cohesion that was once the strength of the Japanese economy.

It is time to rediscover it, including in Europe: social justice is not the enemy of the economy, quite the contrary.