| Review of: | Confronting Income Inequality in Japan: A Comparative Analysis of Causes, Consequences, and Reform by Toshiaki Tachibanaki |
|---|---|
| Reviewed By: | Deborah J. Milly |
| Reviewed in: | Governance |
| Date accepted online: | 14/01/2008 |
| Published in print: | Volume 20, Issue 03, Pages 545-556 |
Book Reviews
The longer the Japanese people have dealt with economic doldrums and efforts to revive the economy, the more visible the theme of social inequality has become in political debate. Many recent analyses indicate that economic inequality has increased, and in the past year, Prime Minister Koizumi's critics have been vocal in blaming this increase on his structural reforms.
Tachibanaki's volume is extremely helpful in systematically parsing the sources and extent of rising inequality. While the image of an egalitarian Japanese income distribution propagated inside Japan and internationally was based on income data from the late 1960s, Tachibanaki demonstrates that this pattern has reversed dramatically, particularly since the mid-1980s. The author places Japan's level of income inequality as "currently among the highest of the advanced and industrialized countries," although not at the levels of the United Kingdom or the United States during the 1980s (7). In a Japan that has been confronting challenges of a rapidly aging population, slow economic growth, and limited employment growth, this analysis adds one more piece to the mosaic of a troubled Japan.
Tachibanaki provides a thorough treatment of the patterns of economic distribution in Japan historically and as compared with those in other industrialized countries. The author traces the evolution of income distribution during the twentieth century in a way that highlights the shift from prewar inequality to postwar conditions shaped by Occupation efforts to promote equality. The general patterns of economic change will be familiar to many readers. Rapid economic growth expanded opportunities for employment in the industrial sector and wage inequalities between large and small firms declined. Tachibanaki further attributes heavy reliance on an egalitarian seniority-based wage system to the type of production (manufacturing) that prevailed. With increased population mobility from rural to urban areas, household size decreased as well, affecting the measurement of income distribution.
For Tachibanaki, the mid-1980s marked a definite shift toward increased inequality, triggered by the rising values of land and equities during the bubble economy, but compounded by changes in the tax system. Real estate and equities, as sources of rents and capital gains, led to increased incomes for those who were already better off (65). Even after the bubble burst, the decline of land values brought no parallel decline in the inequality of wealth distribution as the bubble economy had merely "magnified the upward movement of land prices" over a longterm postwar trend (144). Especially helpful is the discussion of changes in the tax system since the 1980s and the impact these had on income distribution. Tachibanaki provides compelling data on incomes before and after redistributive taxation and social security policies were for years through 2002. While redistributive efforts continued to moderate the unequal pattern of incomes, both pre- and post-tax income inequalities continued to rise over this time period.
Likewise, I found the discussion of how intergenerational transfers of wealth-namely, inheritances-have contributed to inequalities of wealth especially fascinating, as this has not been a major focus of the discussion of Japanese inequality among North American specialists. Such bequests account for a substantial part of the wealth held by Japanese households: "Total wealth inequality [is] explained largely by bequests of real assets. Put plainly, individuals with real assets as bequests show high wealth holdings, whereas those without real assets as bequests show low wealth holdings" (153). Be that as it may, while Japan's comparative position shifted in terms of income inequality, Japan has still demonstrated low levels of wealth inequality internationally, at least based on data for the 1980s. Unfortunately, the data for the 1990s were not yet available for analysis (35), but once available, they may clarify the extent to which Japanese inequalities of wealth have progressed.
This book combines a sophisticated level of technical subtlety with explanations that should make most topics accessible to noneconomist specialists in related fields. Without doubt, it should be required reading for anyone in the social sciences who expects to conduct research related to Japan's income distribution, social stratification, or welfare regime. In addition, the discussion of government data sources, their respective advantages and drawbacks, and their implications for analyzing inequality will make this an essential reference for anyone who intends to employ Japanese data related to incomes, assets, or consumption. The care the author takes to present alternative analyses of data and to situate them in broader international debates over income distribution speaks to the difficulty of conducting such research and discourages simplistic analysis of conditions in Japan.