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The origins of income equality with a small government in Japan: An analysis of the formation of Japanese-style income policy in 1975

The origins of income equality with a small government in Japan: An analysis of the formation of... Japan was one of the most equal societies from the 1970s to the 1990s, in terms of income among the OECD countries, despite its small government. This study sheds light on the income policy formation process in 1975 as a critical juncture, when labour unions were demanding wage increases in response to rising prices after the 1973 oil crisis. A common theory holds that the formation of this income policy is explained by labour-management relations; however, this study emphasises an intervention by the Ministry of Finance (MOF). The sharp wage increases resulting from the spring offensive (Shunto) resulted in higher salaries for civil servants through the National Personnel Authority. Consequently, the MOF attempted to intervene in the spring offensive to maintain fiscal discipline. Specifically, the MOF suppressed the wage increase rate by directly persuading labour union representatives and adopting policies to curb aggregate demand. Consequently, the unions refrained from demanding a sharp wage increase. In return, companies maintained employment, and the government – having succeeded in suppressing wages – generated jobs by expanding public work projects. Thus, this relationship between labour, companies, and the government became the basis for the “equal” and small government of the 1990s. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Contemporary Japan Taylor & Francis

The origins of income equality with a small government in Japan: An analysis of the formation of Japanese-style income policy in 1975

Takahashi, Ryotaro
Contemporary Japan , Volume OnlineFirst: 19 – Nov 2, 2022
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The origins of income equality with a small government in Japan: An analysis of the formation of Japanese-style income policy in 1975

Abstract

Japan was one of the most equal societies from the 1970s to the 1990s, in terms of income among the OECD countries, despite its small government. This study sheds light on the income policy formation process in 1975 as a critical juncture, when labour unions were demanding wage increases in response to rising prices after the 1973 oil crisis. A common theory holds that the formation of this income policy is explained by labour-management relations; however, this study emphasises an...
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Publisher
Taylor & Francis
Copyright
© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
ISSN
1869-2737
eISSN
1869-2729
DOI
10.1080/18692729.2022.2137757
Publisher site
See Article on Publisher Site

Abstract

Japan was one of the most equal societies from the 1970s to the 1990s, in terms of income among the OECD countries, despite its small government. This study sheds light on the income policy formation process in 1975 as a critical juncture, when labour unions were demanding wage increases in response to rising prices after the 1973 oil crisis. A common theory holds that the formation of this income policy is explained by labour-management relations; however, this study emphasises an intervention by the Ministry of Finance (MOF). The sharp wage increases resulting from the spring offensive (Shunto) resulted in higher salaries for civil servants through the National Personnel Authority. Consequently, the MOF attempted to intervene in the spring offensive to maintain fiscal discipline. Specifically, the MOF suppressed the wage increase rate by directly persuading labour union representatives and adopting policies to curb aggregate demand. Consequently, the unions refrained from demanding a sharp wage increase. In return, companies maintained employment, and the government – having succeeded in suppressing wages – generated jobs by expanding public work projects. Thus, this relationship between labour, companies, and the government became the basis for the “equal” and small government of the 1990s.

Journal

Contemporary Japan – Taylor & Francis

Published: Nov 2, 2022

Keywords: Income policy; ministry of finance; income distribution; public administration; spring offensive ( shunto )

References

  • Kuni no yosan: Showa 50 nendo yosan, Showa 49 nendo hosei yosan [National budget: budget for 1975, supplementary budget for 1974]
  • Nihon ha “Kakusa Shakai” ni Nattanoka? Hikaku Keizaishi ni Miru Nihon no Shotoku Kakusa [Has Japan Become a “Gap Society”? Japan’s Income Inequality in Comparative Economic History]
  • The Evolution of Income Concentration in Japan, 1886–2005: Evidence from Income Tax Statistics
  • The tax-welfare Mix: Explain Japan’s Weak Extractive Capacity
  • Increasing Returns, Path Dependence, and the Study of Politics
  • Wage Bargaining in Japan: Why Employers and Unions Value industry-level co-ordination, CEP Discussion Papers dp0334
  • Zaisei Kōchokuka Dakai no Michi ha Kewashi [The Road to Overcoming Fiscal Inflexibility Is Steep]
  • An Analysis of the “First Welfare Year” policy-formulation Process in Japan: The Key to Responding to the Balance of Payment Imbalance Problem
  • Analysis of the Formation Process of the 15-month Budget in the Late 1970s: Focusing on the Relationship between Gaiatsu and Treasury Control
  • Liberal Preferences and Conservative Policies: The Puzzling Size of Japan’s Welfare State