Shinzo Abe's First 100 Days: Heizo Takenaka

By Encouraging Reforms, the Government is not Advocating Socialism.

The situation Japan faces today is very similar to the New Economy phase that took place in the United States ten years ago. New Economy occurred around the mid-nineties. Until then, general consensus held that the US’s productivity growth was about 2%. However, one section of the population argued that the US’s productivity growth should be higher than 3%.
There were two reasons: one was peace dividends, and the other was the revolution taking place in the IT industry- both of which were contributing to the increase in productivity. Those who objected argued that such projections wouldn’t go according to plan, and that productivity growth wouldn’t increase so simply. However, what actually happened was the debate came to an end around 1997 and the US’s official productivity growth rate currently ranges from 3.2% to 3.3%, according to the US government. In other words, the proponents of New Economy were correct.
Turning to Japan, though the present growth potential is said to be somewhat lower than 2%, the same situation that faced the US also seems possible in Japan. There aren’t any peace dividends, but reform dividends could be possible. Another point worth mentioning is the IT revolution; Japan has developed a broadband infrastructure that is not only the lowest priced but also the fastest, giving it an edge over the US. And presently, we see that systems are progressively changing. With such possibilities kept in mind, we should be pursuing that growth potential.
As was the case when debated in the United States, this is a very difficult issue. I don’t think it is something that can be resolved simply. Furthermore, Japan is dealing with public finance issues. However, if, in the future, the nominal productivity growth rate increases to 3, 4%, a natural increase in revenue will clearly result, making it much easier to balance the economy and public finances. Some of that is already apparent, as the natural increase in revenue is exceeding expectations. Under these circumstances, such economic growth will become increasingly possible.
With regards to the disparity issue – I think it’s mainly those with a vested interest in maintaining their current status that are running an opposition campaign against reforms. However, from a political standpoint, I do think there is one thing we must do: examine the poverty issue. Disparity is an issue of higher and lower income brackets, and solving it becomes an issue of how and whether to deal with those in the higher income brackets. However, to do so would be socialism. As Thatcher said, it is no t a question of making the poor rich by making the rich poor. What we need is for hardworking people to do their best.
The issue is poverty. A proper study of poverty should be conducted and the results used to create appropriate measures to tackle the issue. Rather than calling it an issue of disparity, I think we should see it as an issue of poverty. Even the government should just state, “We are not socialistic”. This would be a strategic way to set the agenda.
With the House of Councilors elections approaching, you may be wondering what issues will be focused on. I think one issue will be countermeasures to poverty, and another issue will be the Gateway Initiative plans. Plans for the Gateway Initiative will be released in May, and will be focusing on the House of Councilor elections in July. Therefore, I think it would be wise to produce forward looking policy issues.
In addition, one political measure I would really like to see implemented is reformation of the labor market. Prime Minister Abe’s guidelines in that respect are very relevant, as he is trying to include part-time employees in insurance plans. And he should endeavor to do so. What does including part-time workers in insurance plans entail? It means losing the distinction between formal employment and temporary employment. At the moment, the disparity between formal and temporary employment is quite large. Though the employees may be doing the same work, one is being overpaid for their productivity, while the other, in order to compensate for the overpayment of the first employee, is working at a much lower wage.
We can’t ignore these kinds of disparities. However, labor unions are opposed to changes. On top of that, business managers are opposed to including part-time employees into insurance plans. Business managers should be looking to reform themselves.
Therefore, the Abe administration should take a strict stance towards both the labor unions and the economy. It’s also said that corporation taxes are favorable only on businesses. The government should be stricter with businesses. I believe it is a twofold issue. One issue is insurance, and the other is minimum wage. The minimum wage should be increased. If the government firmly resolves to increase it, the Prime Minister will feel the nation’s support. We needn’t be lenient with businesses; we should make them cry in areas in which they should be crying. We are in the situation we are in today because the only pressures on the government are from those who want relaxed restrictions and those who call for white-collar exemptions. White-collar exemption is both a freedom and responsibility. Management should have freedom. But in exchange, they should also take responsibility in implementing a safety net. White-collar exemption currently refers only to the freedom.
The Abe Administration needs a strategic approach in setting the agenda. With the upcoming House of Councilors election, I am looking forward to constructive policy oriented debate.

Translator: LAURA KUMATAKA

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