Raising Middle-Class Wages Main Goal Of ‘New Capitalism’

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Prime Minister Fumio Kishida chaired the first meeting of a council for the realization of a new form of capitalism Tuesday, kicking off discussions on a “virtuous cycle of growth and distribution [of wealth]”, a concept he promotes. The council’s main topic of discussion will be measures to expand the middle class by raising wages.

The question is to what extent the government will be able to realize policy goals that previous administrations were unable to fully achieve. It is necessary to provide concrete measures, including support for the growth of small and medium-sized enterprises.

The council is chaired by the prime minister, and has replaced the Growth Strategy Council chaired by the chief cabinet secretary. Kishida aims to present a form of capitalism for a new era that addresses issues such as climate change and the expansion of the middle class.

The members of the council’s expert panel are balanced in term of age and gender. Seven of its 15 members are women, including Miku Hirano, CEO of artificial intelligence developer Cinnamon, Inc., and Tomoko Yoshino, president of the Japanese Trade Union Confederation (Rengo).

“I felt that the prime minister also thinks that [capitalism] must change in order to improve the environment and people’s livelihoods,” said Haruka Mera, CEO of crowdfunding service provider Readyfor, Inc., after attending the meeting.

“What’s needed is to double the quality of life, rather than quantity [of income],” said another participant, Ken Shibusawa, chairman of an investment management company. “It is also important to visualize the value of companies that give consideration to the environment and human rights.”

Shibusawa’s great-great-grandfather Eiichi Shibusawa is considered the father of Japanese capitalism.

■ The Road Ahead

Kishida’s major policy goals, including the “virtuous cycle of growth and distribution,” productivity improvement through digitization and decarbonization, all relate to major issues facing Japan.

The administrations of former prime ministers Shinzo Abe and Yoshihide Suga also emphasized these goals without fully achieving any of them.

According to a study by the Organization for Economic Cooperation and Development, Japan’s average wage growth rate has fallen behind that of countries such as the United States and South Korea.

Kishida has been aware that problems with neoliberal policies, which emphasize market competition, have been prominent since the 2001-06 administration of former Prime Minister Junichiro Koizumi.

Kishida believes that the benefits of growth have been skewed toward large corporations and the wealthy, and have not reached the small and medium-sized enterprises that account for over 99% of Japanese companies, nor to middle- and lower-income people.

The government is expected to raise the level of the economy by providing generous support for small and medium-sized enterprises to change their business models and develop new businesses.

It is also important to improve the business environment, such as by addressing the “bullying of subcontractors” in which large companies abuse their advantage in negotiating transactions.

A senior Cabinet Secretariat official said: “The Cabinet, which is like a team of doctors in front of a patient called the Japanese economy, has changed. That doesn’t mean that the disease has changed.”

The new council will have to find a cure in about six months for a disease that has not yet responded to treatment.

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