Tokyo, Oct. 27 (Jiji Press)–The Japanese government should work to tackle the issue of wealth distribution, a key theme upheld by ruling and opposition parties for the House of Representatives election Sunday, by promoting economic growth, Rissho University President Hiroshi Yoshikawa said in a recent interview.
“Unless the overall size of the economy grows, we’ll be stuck in a dead end,” Yoshikawa, professor of economics at the university, said.
Explaining that former Prime Minister Hayato Ikeda, who introduced an economic policy dubbed the Income Doubling Plan in the 1960s, vowed to correct economic inequality through growth, the professor said, “While distribution is important, the classic way to solve the problem (of inequality) is through economic growth.”
The administration of Prime Minister Fumio Kishida, also president of the ruling Liberal Democratic Party, is seeking a new form of capitalism through the virtuous cycle of growth and distribution, while Yukio Edano, leader of the largest opposition Constitutional Democratic Party of Japan, has claimed that the economy will not grow unless proper distribution occurs.
Ruling and opposition parties have been calling attention to their cash handout plans and other forms of redistribution measures ahead of the general election for the all-important lower chamber of Japan’s parliament. But critics say debates on necessary financial resources have been left behind.
“If I compare fiscal spending to the accelerator and tax hikes to the brake, I would say it’s natural to think about braking when you hit the gas pedal hard,” Yoshikawa said. “We may be seeing a situation (in Japan) where you’re not supposed to say anything about braking when you step on the accelerator.”
Such a situation is “unhealthy,” the professor added.
Noting that people are not making a big deal out of the government budget being in the red because interest rates are currently lower than the pace of economic growth, Yoshikawa warned that the fiscal situation will be strained once interest rates start rising.
Since the launch of former Prime Minister Shinzo Abe’s second administration in December 2012, the Japanese economy has been growing only slowly, and consumption has remained lackluster, the professor said, explaining that the country’s average economic growth rate stood at as low as 0.9 pct on an annualized basis in price-adjusted real terms in 2013-2019, excluding 2020, when the economy was hit hard by the novel coronavirus crisis.
“This is an economic situation that can be labeled as ‘bizarre,'” Yoshikawa said.
“I don’t think achieving the 2 pct inflation target (set by the Bank of Japan) should be the biggest goal of the government’s economic policy,” he said. “The problem facing Japan is something substantive, rather than something related to prices.”
The professor added that the ultimate challenge for Japan is to promote technological innovations.
On the government’s growth strategies carried out since the previous Lower House general election took place in October 2017, Yoshikawa said they have not gone well as they were too focused on sloganeering.
For example, costs for vaccine development were included in the massive supplementary government budget compiled amid the COVID-19 pandemic, but no Japan-made vaccines have come out ready for practical use, he said, adding, “We have to think why this is the case.”
“Japan has been unable to make wise spending decisions,” the professor said.
Looking ahead, Yoshikawa said, “There’s no need for us to take for granted an economy in which per capita income doesn’t grow.”
He said it would be important for Japanese companies and others to steadily promote innovations in the fields of preserving the global environment and coping with the aging of society.