- The Washington Times - Thursday, April 27, 2006

TOKYO — The cracks are starting to show in the land where everyone is supposed to be middle-class.

Growing evidence suggests that Japan’s economic revitalization isn’t benefiting all equally, creating new issues for this egalitarian society as it grapples with the idea of more rich and poor.

To be sure, economic indicators have been impressive, with the Nikkei 225 rising 46 percent in the last fiscal year. But behind the rosy data, analysts say, the growing segmentation of Japanese society into low, middle and upper class can be seen clearly in income figures, employment trends and regional conditions.

A five-year government survey on the gap between rich and poor issued in late March showed that the value of assets held by low-wage earners had fallen by 3.4 percent, while those held by the highest income group had gained 2.4 percent despite persistent deflation over the period. A separate poll showed that nearly two of every five Japanese now consider themselves to be lower-class, double the rate 20 years ago.

The widening disparity “may lead to an increase in social instability, as it is linked to a whole range of issues,” said economist Takuma Hashimoto at Dai-ichi Life Research Institute in Tokyo. He pointed to the link between low incomes and Japan’s rapidly aging population as one example. “As the trend toward late marriage and non-marriage progresses [because of financial concerns], a further drop in the birthrate can’t be avoided,” Mr. Hashimoto said.

The number of earners in the lowest wage bracket — less than 2.1 million yen ($17,700) per year — has crept up to about 19 percent of the population from 16 percent in 2000. Those with no savings at all make up a quarter of the population, up from 12 percent of the population six years ago, a Bank of Japan survey showed.

Part-timers increase

The increase in low-income earners can be attributed to a large group of Japanese in their 20s and 30s stuck in part-time jobs. Although the unemployment rate is falling, part-timers make up more than a quarter of the Japanese work force.

“If the social stratification among the young becomes permanent, it’s possible that people will lose their spark and become less willing to work,” Mr. Hashimoto said. “Along with this may come a growing tendency for the young not to develop their abilities and improve work skills, leading to a drop in the quality of human resources and, over the long term, economic growth potential.”

At the opposite end of the job market, a small group is earning more than ever as salaries tied to performance increasingly replace traditional systems such as lifetime employment at one company and seniority-based wages.

Nissan Motor Co., for example, has radically altered its wage structure in the past few years after coming dangerously close to collapse. In an about-face from the Japanese pay system based on length of time with the firm, Nissan now selects high-potential employees in their 30s for more work responsibility and big salaries.

Data show that the prime beneficiaries of the current recovery are those who work for major corporations and live in cities. Although the employment rate has risen overall, a survey issued last week by Teikoku Databank showed that large companies are increasing full-time hires this year by up to 20 percent more than middle- to small-size companies. Firms in the Tokyo region were 50 percent more likely to be lifting their full-time worker ranks than firms on the northern island of Hokkaido.

Despite a shrinking population nationwide, Tokyo is growing by 100,000 people a year as workers arrive in search of better jobs and pay. A study by Nomura Securities shows that as wage differentials among regions increase, the influx of people into the capital could help push population growth to as high as 220,000 a year by 2020.

Regional disparities grow

“Regional disparities stem from such factors as the high growth rate of firms in areas that are intensively industrial, and the tendency of nonurban areas to still rely on the [economically troubled] construction sector,” said senior economist Koji Kobayashi at Mizuho Research Institute, a private economic and public policy think tank. “How such regions act to address their employment conditions will be a crucial issue over the next few years.”

The growing gap between rich and poor also has become a topic of political debate. Prime Minister Junichiro Koizumi told the national Diet he doesn’t see the emerging gaps as a problem, and that society can’t advance if it obstructs those with talent.

Despite being severely weakened by a leadership change, the opposition is winning points by pressing Mr. Koizumi to strengthen the social safety net for at-risk groups.

The prime minister’s supporters argue that a certain degree of class disparity is a healthy thing in a modern society. They say the administration has simply allowed the economy to return to a more normal keel, dismantling a system created in the 1960s and ‘70s to lift rural Japan out of postwar poverty by redistributing wages through publicly funded building programs.

“Saying it is necessary for disparities to increase is not the same thing as saying society should become rigidly stratified,” said analyst Kazuhiko Noguchi of the Mitsubishi Research Institute.

“Mr. Koizumi meant that disparities have the ability to make a society more dynamic. But if disparities grow entrenched so that the strong continue to be strong and the weak continue to be weak, there is no doubt this would influence people’s happiness and invite social decline.”

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