Hit by recession and higher taxes, Japan's working poor speak out

Analysis: Prime Minister Abe promises economic recovery, but working people shoulder the heaviest burden of his policies

Higher sales taxes have hit Japan's working poor and shaken faith in the economy. The prime minister has called snap elections for Dec. 14.
Yoshikazu Tsuno / AFP / Getty Images

TOKYO — Japan’s Prime Minister Shinzo Abe faces a vote on Dec. 14, seeking a mandate to continue economic policies that have imposed a harsh cost on working people. Eighteen months ago, Abe vowed to “bring back a strong Japan,” but the economy is reeling and a growing section of the electorate is losing faith.

Many analysts were shocked last week by the release of GDP figures showing that the world’s third-largest economy is in recession. Those numbers are widely seen as a key factor in Abe’s decision to call a snap legislative election.

Abe hopes the poll will restore some of the momentum he lost after hiking the sales tax from from 5 percent to 8 percent in April, which triggered a plunge in demand and a second consecutive quarterly downturn in the economy. The latest GDP bombshell forced him to postpone next year’s planned hike that would have brought Japan's sales tax to double the pre-April 2014 rate.

The prime minister argues that raising the sales tax will help pull Japan out of years of deflation by generating revenues to help offset the country’s mounting debt. But critics say that sales taxes are regressive—forcing the less affluent to shoulder a greater share of the tax burden—and they argue that Abe's policies are pushing more workers into unstable jobs while only temporarily boosting corporate profits.   

Stock prices have risen, and the yen has weakened since Abe came to power, which has helped export-dependent companies. But critics argue there is no evidence of a trickle-down effect from “Abenomics,” the prime minister’s market-oriented economic creed, and that its policies have hurt the working poor.

“I couldn’t quite see how Abenomics would ever work,” said Koichi Nakano, a political scientist at Tokyo’s Sophia University. 

The third arrow

Abe had promised to fire three “arrows” into Japan’s stagnating economy. In 2013, he implemented the first two: fiscal stimulus in the form of more than 10 trillion yen ($117 billion), and monetary easing, which boosted stock prices and weakened the yen.

But his third arrow — creating a national growth strategy based on long-lasting structural reforms — has proved most painful to many ordinary Japanese.

Midori Ito, a care worker, said her life has become “extremely difficult” following Abe’s sales-tax hike.

She is among the growing ranks of Japan’s working poor who earn less than 2 million yen (about $17,000) a year. Their numbers have increased by about 290,000 since Abe came to power in 2012, according to the National Tax Agency.

Ito has been trying to cut spending by socializing less and trimming non-essentials. Working two days a week caring for old people and juggling other small jobs, she lives on 100,000 yen a month ($851).

Living in Tokyo, where even cheap accommodation can cost as much as her monthly income, Ito says she has become more creative with money — one of her recipes involves cooking a 25 yen (21 cent) bag of bean sprouts to feed herself and her roommate. “We have learned to lower our living standards,” Ito says.

The company she works for has begun assigning workers to short shifts of less than an hour, which means less income for Ito and her colleagues. Even if their pay complies with the legal minimum wage of 888 yen ($6.80), care-workers struggle to earn enough income to cover the cost of living.

Abe has sought to make it easier for companies to hire and fire irregular workers but has not raised the minimum wage. The prime minister believes that Japan’s job market is still too protected and that job mobility will boost productivity.

But the erratic schedules and poor pay drive many casual staff away, Ito says, and full-timers end up working late into the night, on weekends and holidays. Even then, they pocket no more than 200,000 yen ($1,685) a month. “We are made to think that’s still better than nothing.”

Ito is not alone. Real wages fell for the 15th consecutive month in September, and the working class is spending less than last year, according to the labor ministry. Evenmajor corporations, which have so far this year enjoyed rising profits, have expressed concerns over consumer spending trends, according to a survey by the Asahi newspaper.

“Consumers have become sensitive to prices,” an executive with Nippon Ham, a major Japanese food processor, told Asahi. “We can’t yet claim that consumers are experiencing economic growth.”

To boost corporate spending, Abe asked major companies in April to raise wages for salaried workers but left out casual workers. Critics say this only encouraged corporations to replace permanent stable jobs with temporary work.

Japan had 1.23 million more irregular workers in the July-September quarter this year than in the same period a year earlier. They now make up over 30 percent of Japan’s workforce.

The change has been especially tough on women. They now make up half of Japan’s entire workforce but are disproportionately represented among part-time workers—despite Abe’s promise that his policies would provide more opportunities for women to “shine.”

Calls for help

Akai Jinbu, a Tokyo Youth Union organizer, said temporary workers are regarded as even more expendable today than in 2008, when tens of thousands were dismissed at the start of the global recession.

Many temp workers in their 30s, 40s and even 50s end up living with their parents or sharing rooms because they cannot afford the rent in Tokyo, where a single bedroom can fetch $1,100 a month.

“I’m just stunned thinking about how they are going to be able to survive after the layoff,” Jinbu said.

The union says that calls for help from workers have doubled over the past year. Jinbu says his organization fields more than 200 phone calls a month—most from callers who have been left without any backup plans or social security after being laid off.

Abe sees things differently. He says that without the second sales tax hike, Japan’s economy will worsen and investors will lose confidence. The nation must stabilize social security systems and rebuild its finances, Abe said this month. Japan carries the largest debt in the industrialized world.

Political scientist Nakano calls Abe’s economic policies a time bomb, warning that the snap election will simply postpone the explosion. “As long as it doesn’t blow up while he’s holding it, he doesn’t seem to mind,” Nakano says.

Analysts believe that a strong showing in the election would give Abe a mandate to pass unpopular policies, including plans to steer Japan away from its postwar pacifism; beef up defense; increase government secrecy; and switch on the nation's nuclear reactors.

But public interest in the election is low, Japan’s opposition is in disarray, and Abe may be reelected simply because voters see no alternative. The big question then is not whether Abe and his Liberal Democrats will win, but whether his conservative coalition government will return with a clear majority.

“Many people are finding it hard to believe that there is something better to follow,” Nakano said. “We had the lowest voting rate the last time in December 2012 in postwar history, and it’s most likely to be lower this time.”

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