Since the collapse of the bubble economy in the 1990s, Japan has been stuck in a period of stagnant growth and weak corporate competitiveness, which is known as the "lost 30 years." Many experts have expressed their opinions on why there has been a "lost 30 years", and Ryutaro Kono, chief economist at Paris Securities, has also expressed his unique insight, and he fears that Japan will "lose another decade". In his view, an important reason is the increase in the social insurance contribution standard of the working population.
"In my view, the economic downturn of the past 30 years is not a problem that can be solved by a growth strategy," the quick-thinking economist said at the start of an interview.
The report said that since the mid-1990s after the collapse of the Japanese bubble economy, the IT revolution has realized the popularization of the Internet, and the world has changed. According to Kono's analysis, the middle income class has disintegrated. "Information can move across borders in an instant. This allows companies in developed countries such as Japan to locate factories and capacity in countries such as China and Southeast Asia, where labor costs are low, while managing them remotely at home." According to Kono, the result of economic globalization is that middle-income workers in developed countries who were once busy on the front lines of production have lost their jobs.
The effect is also felt in non-manufacturing sectors. "The bank I used to work for used to have a lot of people working at the Windows, deposit-taking operations and so on, but the digital transformation has saved a lot of people," says Mr Kono. That is to say, there is no place for the middle income class in these industries.
Even if you want to change jobs, it is difficult to get well-paid jobs without a higher level of skills. As a result, the unemployed, who had been earning a decent amount of money, took low-skill, low-wage jobs. Japanese business leaders, facing increased competition from globalization, have begun to promote informal employment in low-wage jobs to secure short-term profits by cutting costs. "In the IT revolution sweeping the world, the only business models that have emerged and continued to expand in Japan are those that make full use of low-wage informal workers," Kono says.
Kono says this should be a period of skills training for middle-income people who have lost their jobs. In other words, it would be nice if one of the most important tasks proposed by the Kishida administration today - "re-learning of workers" - could have started 30 years earlier. "Unfortunately, neither business nor the government were able to support those who moved into low-paid jobs and saw an increasing number of people enter the informal workforce," he said.
Reported that in the Kishida government's economic policy, Kono is most worried about the number of "different dimensions of the fewer children countermeasure" that is regarded as a benchmark policy. Although it is unclear where the ¥3.5 trillion ($23 billion) a year will come from, a plan to squeeze ¥1 trillion out of the budget by raising social-security contributions has emerged.
"They seem to have learned nothing from the failure of the Junichiro Koizumi administration." What does he mean by "failure"? Since the mid-to-late 1990s, the middle income class in Japanese society has been shrinking, and politics has further accelerated this vicious circle, according to Kono. The culprit was the Koizumi administration's reform of the social security system.
"I will not raise the consumption tax while I am in office." Koizumi repeated this line during his premiership, and in order to replenish the financial resources of social security, he demanded that the social security contributions of employees be raised. "It is difficult to get public support for a tax increase, so Prime Minister Koizumi chose to make up for the lack of funding from the least politically resistant source," Kono said.
According to the Ministry of Health, Labor and Welfare, the proportion of informal workers in Japan was only 19.1 percent in 1989, and nearly doubled to 36.9 percent in 2022. It can be said that in Kono's view, a series of government policies at the time amounted to inducing companies to hire more informal workers.
Between 2017 and 2019, before the COVID-19 pandemic, private consumption did not grow, even though Japan had become a society with a severe shortage of labor. In Kono's view, this is because many people lack security. He said, Irregular workers are not willing to spend money because they are worried that they will lose their jobs if the economy goes into recession. Even if their wages rise, they will choose to save for a rainy day. This is the biggest reason why the Japanese economy is stagnant.