Saturday, April 15

Revival in Japan Brings Widening of Economic Gap

April 16, 2006
Revival in Japan Brings Widening of Economic Gap

OSAKA, Japan — Japan's economy, after more than a decade of fitful starts, is once again growing smartly. Instead of rejoicing, however, Japan is engaged in a nationwide bout of hand-wringing over increasing signs that the new economy is destroying one of the nation's most cherished accomplishments: egalitarianism.

Today, in a country whose view of itself was once captured in the slogan, "100 million, all-middle class society," catchphrases harshly sort people into "winners" and "losers," and describe Japan as a "society of widening disparities." Major daily newspapers are running series on the growing gap between rich and poor, with such titles as "Divided Japan" and "Light and Darkness."

The moment of reckoning has come as the man given credit for the economic revival, Prime Minister Junichiro Koizumi, prepares to retire in September after more than five years in office. Mr. Koizumi's Reaganesque policies of deregulation, privatization, spending cuts and tax breaks for the rich helped lift the national economy, but at a social cost that Japan's more 127 million residents are just beginning to grasp.

Thanks to a growing economy and rising corporate profits, companies hired several hundred thousand more young Japanese for the start of the fiscal year on April 1. The broad Topix stock index closed recently on a 14-year-high. Commercial land prices in the country's three biggest metropolitan areas rose for the first time in 15 years, and high-rise luxury apartment buildings have kept sprouting across Tokyo.

At the same time, the number of Japanese without any savings has doubled in the last five years, and the number receiving welfare payments or educational assistance have spiked by more than a third.

Mayumi Terauchi, 38, began receiving education aid when her 7-year-old son, Yuuki, started school last year, to help bear the costs of the backpack, cafeteria lunches and other necessities not covered in public schools. She frets that his place and that of her 1-year-old daughter, Natsumi, are already fixed in the new Japan of winners and losers.

Ms. Terauchi sees a "huge gap" in quality between public and private schools here in Osaka. But she and her husband cannot afford the private schools, or even the cram schools — for-profit supplemental programs — that would raise their children's chances of getting into good colleges and securing their future.

"I want to provide them with an education that will allow them to choose from, say, 10 different kinds of jobs," Ms. Terauchi said. "But I can only provide them with an education that will offer them three kinds of jobs. I think it's wrong that only kids who go to cram schools can choose from 10."

Her husband works at a small company that makes time recording equipment, leaving the house at 8 a.m. and returning after midnight on the last train. He has not received a raise in the last decade, and most of the overtime he works goes unpaid. Ms. Terauchi, who used to work at the same company, is now a homemaker.

In Osaka, home to medium-size and small businesses that have yet to bounce back from the long economic downturn, nearly 28 percent of schoolchildren receive, based on household income, about $500 in annual aid provided by Osaka and the national government. It is the nation's highest rate, followed by Tokyo, with 25 percent.

The focus on the widening economic gap has put Mr. Koizumi on the defensive.

"I don't think it's bad that there are social disparities," he said in Parliament, explaining that he favored a "society that rewards talented people who make efforts."

Mr. Koizumi later appeared to soften his position. "Winners and losers shouldn't be trapped in those categories. If someone loses once, he should be given a second chance."

From a highly stratified prewar society, postwar Japan was transformed into a nation where companies famously offered lifetime employment and promoted employees according to seniority, not performance.

"Until the mid-1990's, the government used its power to contain the widening of social disparities," said Masahiro Yamada, a sociologist at Tokyo Gakugei University, who has written a best seller called "Society of Disparities in Expectations."

Even after the so-called bubble economy collapsed, the government kept spending liberally on public works that sustained companies, which, in turn, continued to take care of their employees. Eventually, Mr. Yamada said, Japan just did not have the means to practice this form of paternalistic capitalism.

Critics say that though some changes under Mr. Koizumi were necessary, others went too far in favoring the rich at the expense of the average Japanese.

Even as many companies abandoned lifetime employment, laid off employees and began tying promotions to performance, Mr. Koizumi lifted most restrictions against hiring temporary workers. Critics say these workers are a growing underclass of Japanese, with permanently lower wages, few benefits and little chance of becoming full-time employees.

Until a generation ago, in keeping with the belief that wealth must be redistributed, the highest personal income tax rate was 75 percent. It was gradually lowered, to its current rate of 37 percent in 1999, before Mr. Koizumi took power. Under his government, the capital gains tax on sales of stocks was lowered from 20 percent to 10 percent in 2003, and inheritance laws were changed to make it easier to transfer large assets. Meanwhile, the government decreased health and pension benefits.

"It's trickle-down theory," said Toshiaki Tachibanaki, an economist at Kyoto University, who argues that Mr. Koizumi's policies have widened social disparities. "Rich people should be helped so they will contribute to the economy."

The government says that the aging population, more than anything else, has caused income gaps. But critics say aging alone does not account for the sweeping changes since 2000, the year before Mr. Koizumi became prime minister.

In that period, in a country famous for its savers, the number of households reporting no savings doubled to 24 percent — the highest figure since the early 1960's. And the number of households receiving welfare payments rose by more than 37 percent to more than a million households. From 2000 to 2004, the number of schoolchildren receiving aid rose by 36 percent to almost 13 percent of elementary and junior high school students.

Mr. Yamada, the sociologist, says the disparities are sharpest among Japanese in their 20's and 30's, among whom two groups have emerged: full-time employees and permanent temporary workers.

"The reason that there are no riots in Japan as in France is that most of these young people live with their parents," Mr. Yamada said, pointing out that even 12 percent of Japanese between the ages of 35 and 44 lived with their parents in 2004. With free housing and food, those with temporary jobs can still afford to pursue personal interests.

Most troubling to many critics are the emerging inequalities in education. Private junior high schools, offering guaranteed access to a prestigious private high school and high chances of getting into a top university, have been attracting increasing numbers of students in the last five years.

To get into such a junior high school, a child usually attends cram school for three years through the sixth grade, at a total cost of about $20,000. A magazine called President Family profiles families with children who have entered high quality junior high schools. Typically, the father is a high-earning professional, while the mother is a homemaker who concentrates on the child's schooling.

"We see polarization," said Toshio Koido, who has taught for 30 years at Yata Elementary, a public school, in southern Osaka.

Nearly 60 percent of the school's students receive educational assistance, even though Osaka has raised the income threshold to qualify for it. Mr. Koido said that many of the children's fathers had been laid off or shifted to lower-paying jobs in recent years.

"Some children are spending evenings alone because their mothers work at night," Mr. Koido said, explaining that students' home environment had become a problem in recent years. "They can't focus in the classroom. They're late, not just by minutes but by hours."

Elementary and junior high school are mandatory and free in Japan. But Kotaro Tatsumi, 29, an official at a private welfare organization, said that even with educational aid many families struggled to pay for supplies.

"One family asked us to look for a used school uniform because they couldn't afford to buy one," he said. "So we looked for one through our newsletter and found one."

Miyuki Matsuda, an office worker at the same organization, receives school aid for her 10-year-old son. She and her husband, a cement truck driver, also have a 2-year-old daughter. Unlike the families in "President Family," Ms. Matsuda, 34, said that among families in her neighborhood both parents work.

"I can tell that from the fact that very few parents show up for open school events," Ms. Matsuda said. "People say they could be fired if they take the time off."

"I wonder what kind of country Japan is becoming if you're told you're either a winner or loser," she said. "I don't want to be either. I just want to lead an average life."