By Eva Cheng
More workers in Japan are likely to lose their jobs or have their pay packets cut as the rise of the yen to new heights encourages Japanese companies to shift more production lines to the Third World, where costs are cheaper.
After shrinking at an annual rate of 3.4% in the last quarter of last year, the Japanese economy is on the verge of yet another recession.
Though already understated, official unemployment is expected to surge despite having climbed substantially in the past few years to 3%. Nissan Motor, for example, last month announced plans to shed 12% of its work force to 43,000, which came on the heels of a 2.7% shrinkage in Japanese manufacturing employment last year.
The official unemployment figure tells only part of the story. The exclusion of "voluntary" drop-outs from the work force disguises the problem. This category is not negligible in Japan, because it's common for women to quit jobs for marriage or to raise children. But not everyone is able to choose this freely. Many are pushed into this non-option by the bleak job market. They are lumped statistically with women not in the official work force, which accounts for half of Japan's female population.
More paid jobs are being converted to part-time or other "flexible" categories, destroying job security and many job benefits. In 1992, 2.5% of the Japanese female work force lost their full-time jobs while 1.2% gained part-time ones.
While women tended to be the first to lose job security, male workers have suffered pay cuts in recent years. Take-home pay in some cases was cut by as much as 30%, as happened to workers of Japan Airline and NEC in 1992.
The Japanese government has been tossing around an income tax cut plan to boost consumer demand, but there are few benefits this can provide to workers. Lower income workers, in particular, are likely to be worse off because of the concurrent measure to more than double consumption tax to 7%. Any benefits to workers from slashing income tax are likely to be dwarfed by the damages caused by consumption tax. The unemployed and pensioners would be sure losers.
Neither would the multi-trillion-yen fiscal spending packages of recent years turn the picture around easily, because the public sectors account for a relatively small share of the Japanese economy.
Economic problems are compounded by the government's lack of authority. Three governments have collapsed in the last 20 months, following an uninterrupted monopoly of the Liberal Democratic Party for 38 years. The present ruling coalition, headed by Prime Minister Tomiichi Murayama, seems to be built on sand. Major steel producer NKK's chairman, Yoshinari Yamashiro, predicted the country would collapse if the current administration lasted "too long."
Japan's economic woes are partly caused by the country's success in building a vibrant export sector, which led to huge trade surpluses and a strong currency. Big businesses were the key beneficiaries of these gains, achieved at the expense of the Japanese working class and the Third World.
Japan's exports are competitive because they cost less, with savings coming primarily from paying workers less and from cheap sourcing from the Third World.
Savings have also come from cheap energy and raw materials imported from the Third World. Together with food, they account for 70% of Japan's imports. The 4.5% rise in real wages in Japan in the nine years to 1983, while there was a 42.5% jump in labour productivity, indicates who benefited from the economic success.
The cost advantage was translated into trade surpluses with other developed countries, to the irritation of its trade partners, especially when they are in economic troubles. Surpluses with the US rocketed when pent-up demand in the US exploded after three years of recession and tax was cut substantially in 1983-84. There were enormous pressures to trim the imbalance as Japan enjoyed a huge trade surplus of $31.5 billion in 1983, which came largely from the US, while the US suffered a worldwide deficit of a whopping $61.1 billion.
This brought the concerted efforts in 1985 of major First World countries, most of which have trade deficits with Japan, to force open its markets. A forced appreciation of the yen was a key means to that end because Japanese products would become more costly and less competitive. The yen has appreciated from 275 to the dollar to 88 a few weeks ago, but the deficits continued.
Meanwhile, the massive wealth generated from the trade surplus has largely gone to speculative investments in the US, or in loans, aid or direct investments to consolidate Japan's economic domination in the Third World. Huge budget deficits have turned the US from a net creditor into a prime net debtor, funded primarily by Japan through purchase of US government bonds. Other Japanese funds have gone into property speculation around the world.
The funds have gone more into speculation than into productive uses even in Japan, resulting in a massive growth in financial assets and a "bubble economy".
The bubble burst five years ago, but Japanese stock prices are still significantly inflated compared to the state of the real economy.