平和
和平
평화
JAPAN
21 May 2014
Statesmen’s Forum: HE Shinzo Abe, Prime Minister of Japan

Trade union concerns about Abenomics

Japan's trade unions have many concerns about Abenomics, as Nobuaki Koga, President of the Japanese trade union federation, RENGO, explained to us at OECD Forum 2014.

Japan's trade unions have many concerns about Abenomics, as Nobuaki Koga, President of the Japanese trade union federation, RENGO, explained to us at OECD Forum 2014. Ultimately, Japan faces the risk of social unrest and breakdown.

Koga recognizes that Japan has suffered from deflation for more than 15 years and that Abenomics has boosted hopes and expectations for the future among the Japanese people.

But he insists that Abenomics, which is a mix of reflation, government spending and a growth strategy, does carry a big risks for Japan.

The first of Abenomics' "three arrows", a bold monetary policy, has weakened the Japanese yen. This has boosted the profits of Japan's exporting companies.

But since Japan is a country which relies on imports, especially for much of its food and energy, a weaker yen has resulted in a rise of prices of basic necessities. For companies, prices of raw materials have now gone up, which has affected profits of domestic industries.

The second arrow of Abenomics was a dramatic fiscal stimulus package, which has pushed up the total public debt to 1,000 trillion yen -- about 10 trillion US dollars or more than 200% of GDP. It is true that the public investment has created some jobs and the unemployment rate has decreased slightly. But Koga says that it is highly doubtful that this is sustainable. The real economy has not improved.

In order to boost consumption, it is necessary to improve people’s livelihood including through raising the minimum wage.

Under the third arrow of Abenomics, a growth strategy to boost private investment, and undertake structural reforms is being carried out. Koga does not "necessarily oppose" all kinds of structural reforms. But Koga, and Rengo which he represents, are strongly opposed to deregulation of the labor market.

The deregulation of the labor market which the Abe administration is trying to carry out includes: 1) a revision (downwards) of the Worker Dispatch Law; and 2) dismissal of employees with severance pay as well as a White Collar Exemptions (no overtime pay for certain “white collar” workers). RENGO has launched a nationwide campaign against these structural reforms in the labor market.

With regard to wages, it is true that there were wage increases agreed at this year’s Shunto (annual spring wage negotiations) in large companies -- for the first time in years. Prime Minister Abe has in particular pressured companies to increase wages, as a measure to boost demand.

But such wage increases have not flowed down to small and medium companies or to non-regular workers and others in precarious situations. It is urgently needed to raise minimum wages and ensure equal treatment for non-regular workers, which now account for some 40% of the workforce.

Overall, Koga is particularly worried about the growing anxiety that Japanese workers feel about their future. In contrast to Europe, Japan does not have well developed social safety nets -- a product of Japan's traditionally strong job security.

The validity of Koga's concerns are well borne out by OECD analysis, which shows that Japan's inequality and poverty are worse than the average for OECD countries. For example, any visitor to a Japanese Internet cafe will see young people sleeping there, using them as cheap accommodation.

Japan's traditionally passive population shows few signs of social unrest, although there are still weekly protests against nuclear power in front of the Prime Minister's residence.

But it is important for Japan's political and business elite to look ahead. All societies can reach a breaking point, when people feel desperate.

Already, OECD research also indicates that the Japanese feel in poor health (despite their high life expectancy), they are not happy with their work-life balance, and they report a low level of well-being. The likelihood of continuing major natural disasters, growing public debt, and a fading sense of hope will further feed anxiety.

This may well be the last chance for Japan to avert a future possible social crisis.

Author

John West
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
Tags: japan, abenomics, rengo, tuac, oecd forum 2014, oecd week 2014, OECD

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