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Wednesday, July 14, 2010


Aim to expand the middle class

Although the government announced in June a growth strategy that emphasizes the creation of new industries in such fields as environment, nonfossil-fuel energy and health-related services, the big problem for Japan is that its middle class is waning.

The period of high economic growth begot the phrase "ichioku so churyu" (100 million people in the middle class). They enjoyed strong purchasing power and avidly bought the "3Cs" — cars, coolers (air conditioners) and color TVs. This mass consumption spurred strong domestic demand, which along with brisk exports served as a locomotive for the economy in the 1960s and 1970s.

At present, exports are playing the role of underpinning the Japanese economy, even under deflationary conditions. Exports to Asian countries including the expanding markets of China and India have helped cushion the impact of the global financial crisis that started in the United States in the fall of 2008.

While it is critical for Japan to improve its competitiveness to win competition in overseas markets, it is also important to take measures to increase personal consumption, which accounts for about 60 percent of the nation's gross domestic product. Because exports can fluctuate greatly depending on economic conditions abroad, domestic demand should be strong enough so that the Japanese economy can withstand a sudden fall in exports.

In recent years, the government and business managers have sought deregulation of the labor market in the name of diversification of the form of employment and workers' freedom of choosing various types of employment. But the end result was an increase in the number of temporary workers, who are paid relatively lower wages and can be dismissed at any time.

Temporary workers now account for about one-third of the nation's labor force. Their low wages and unstable employment are suppressing domestic demand. The government and companies need to adopt measures that will increase the number of full-time workers and thus broaden the middle class.

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