Growth Through Redistribution: Japan's New Capitalism

“In Japan, the issue of redistribution versus growth is suddenly at the center of the debate.

Amazing things are happening in Japan's frozen politics. 

 

For many years there has been a discussion in America and Europe as to whether increasing inequality in income is damaging to growth. 

 

In Japan this debate never really came up. The weak opposition complained about low wages and precarious working conditions, but was not heard. The politically dominant Liberal Democrats focused on growth. Within a few weeks the picture has changed completely. The new Prime Minister Fumio Kishida preaches growth and distribution of income are necessary for a harmonious economic development, and calls for a new capitalism. Suddenly the issue of redistribution versus growth is at the center of the debate.

 

Japan does not have exorbitantly high manager salaries. Income inequality is around the OECD average. It has increased since 2000 but is offset by effective redistribution.

 

Monetary policy also fueled a bull market in equities from which only a few wealthy benefited. Because the Japanese are still very risk-averse and lose money in times of zero and negative interest rates. The Prime Minister does not speak of this redistribution caused by monetary policy. He wants to hold on to monetary easing.

 

But he suggests raising the tax of 20 percent on financial income."

 

 It is time for us in Lithuania to adopt such a new growth model.