An American's Advice to Japan,
His Adopted Country

Bill Totten

[8 June 1998]

Bill Totten is president of K.K. Ashisuto, an information technology company from Kawasaki, Japan. He also publishes a cyber newsletter titled "Our World." He can be contact by email at: kka_ss@ashisuto.co.jp.

We live in topsy-turvy times. Nearly everything being said and done about Japan's economy is wrong. The Liberal Democratic Party (LDP), Ministry of Finance (MOF), and Japan's mass media - all of which have legitimate reasons to be concerned with Japan's economy - say it is languishing while the US economy is thriving. The US government, IMF and World Bank - none of which have any legitimate reason for meddling in Japan's domestic affairs - all say the same thing. And they're all wrong: Japan's economy, not the US economy, is the one thriving. The ones who are suffering are average Americans, not average Japanese.

Despite bizarre reports of recession and "minus growth" in Japan's frenzied media, any careful comparison shows that Japan's economy is serving its citizens much better than the US economy is serving most American citizens. Although currently experiencing a brief bubble similar to what Japan endured in the late 1980's, the US economy has deteriorated steadily for over three decades and continues to deteriorate. Some recent studies on compensation and income distribution provide details for comparison.

According to Business Week (September 1, 1997; "Sharing Prosperity"), for example, "the US still has a two-tier economy, and many Americans are struggling...At $10.49 an hour (1,363 yen) on average, US wages are still nearly 8% below the all-time high of $11.35 an hour, reached in 1973... Household incomes...fell by 5% in real terms during the 1990s recession, according to Census Bureau figures...By 1995, the latest year available, the average household still took in 4% less than in 1989".

A 1989 survey by the US Federal Reserve compares the decline in US wages and benefits to the situations found in other nations. "Production workers in every other G-7 nation saw their compensation grow. In Japan, average annual compensation growth during the decade [1979-1989] was 1.3%. It was 1.9% in Germany and 1.9% in France...Overall, compensation for average US workers fell by 6% between 1979 and 1992 while it increased by 26% in France, 35% in Germany and 26% in Japan".

Other statistics indicate that the income gap between wealthy and lower- income Americans continues to grow. According to a survey by Professor Edward Wolff of New York University, "the portion of the nation's wealth held by the top 1% nearly doubled between 1979 and 1989 - skyrocketing from 22% to 39%". And an OECD report showed that the top 20% of the US population has about 11 times as much annual income as the bottom 20%. That is about twice the disparity found in such countries as Germany, France, and Italy. Japan's ratio of 4.0 indicated that it had the most equal income distribution of major OECD countries.


What's worse, having misdiagnosed health for illness, the charlatan economic doctors are prescribing "remedies" that can only harm Japan's healthy economy. Their so-called remedies are patently wrong and harmful. The media, LDP politicians, and the MOF all tell us that (1) Japan's economy is sick because it is not growing adequately; (2) to make it grow more, the government needs to stimulate personal consumption; and (3) to stimulate personal consumption it needs to cut personal and corporate income taxes. This prescription is wrong on all counts.

Growth is not the goal of an economy. The goal of any society's economy should be the happiness and well-being of its members. As Matsushita Konosuke and other leaders of Japan's "economic miracle" explained often, (1) the goal of a society is the happiness of its members; (2) the role of business is to provide goods and services that contribute to the happiness of citizens as well as jobs that allow them to earn income to pay for those goods and services; (3) a company should seek only the amount of profits required for investments needed to enable it to continue providing goods, services and jobs that contribute to the well-being of citizens; and (4) instead of taking profits beyond that level, a company should lower prices, or raise the wages and benefits it provides to its employees.

The idea that an economy is not healthy unless it is growing, as well as the idea that an economy's health is proportional to its growth, has plagued Anglo-American economic thinking since Alfred Marshall first popularized mathematical economics a century ago. He assumed that an economy is a physical mechanism, and began applying the mathematics of mechanics to the analysis of economies.

But an economy most obviously isn't a physical mechanism; it is a living organism. It is governed by the decisions and actions which we as consumers, workers, bureaucrats, politicians and other citizens make. Like plants, animals and all other living organisms - an economy has an optimal size. Just as humans tend to get fat and sick if they eat too much, an economy gets sick if it consumes too much.

How much is enough? Japanese already have the lowest unemployment rate, the highest average wages, and one of the highest rates of consumption of all major economies. And because their personal consumption needs have largely already been satisfied, they also have the largest accumulated personal savings in the world - about 1200 trillion yen. Can you think of anything (other than a nicer home) you or your friends want to buy but cannot afford? If not, how would more economic growth via personal consumption benefit Japan? Any more growth in personal consumption would harm Japanese society in the same way that overeating harms an individual.

English and American usurers and rentiers have exploited Marshall's mistaken notions for their own advantage. By having their publicists perpetuate the illusion that economies are mechanical in nature, they have disproportionately influenced economic policies in their countries. Today the English and American economies are being operated primarily for such unbalanced "growth". The results are that profits for relatively small numbers of rentiers and usurers have increased dramatically, while the real incomes, job security, and affordable private and public goods and services for most English and American citizens have all decreased substantially. The latest twist of this terrible scam is to deregulate the financial industry, eliminating restrictions against usury, which major Western authorities - from Biblical writers, through Plato, Shakespeare, Adam Smith and most economic writers up to John Maynard Keynes - all damned because usury allows the few rich to plunder everyone else.

Most informed world leaders see the danger of this Anglo-American disease and try to prevent it from spreading to their own economies. Unfortunately, the LDP, from ignorance or greed, or because it keeps itself in office by administering Japan as a colony of the US instead of as a sovereign nation for Japanese citizens--or perhaps because of all those reasons--is actively importing this Anglo-American disease. It is doing this via policies of deregulation, globalization, "Big-Bang", and cutting taxes for the rich while raising consumption taxes for everyone else.

Even supposing that stimulation of personal consumption were a good idea (which it isn't) the LDP's proposal to cut corporate and personal income taxes would be a bad way to try to achieve it. While reduction of consumption taxes might stimulate personal consumption, cutting corporate and personal income taxes would not. Cutting corporate taxes would only reward corporations that buy politicians via campaign contributions and venal bureaucrats via "amakudari". Further, cutting personal income taxes would reward rich politicians, high-level bureaucrats, top-level business executives and even media pundits (whose broadcasts and publications advocating tax cuts attract advertising revenue).

Avarice, rather than ignorance, may be the motive behind this poisonous prescription to "cure" Japan's healthy economy via income tax cuts. There may even be a conspiracy to deceive us into believing Japan's economy is "sick" so that we will accept the idea of tax cuts for the rich who initiated and hiked taxes on our consumption. We should realize that when Hashimoto and his affluent LDP cronies cut taxes on wealth and high incomes, they are cutting their own taxes in particular. The average declared personal assets of LDP members of the lower house was over 115 million yen last year!

Moreover, Japan cannot afford to cut taxes. According to the OECD, national and local government debts in Japan already amount to 93% of GDP, compared to only 64% of GDP in the US, 62% in the UK, 67% in Germany and 63% in France. Cutting taxes would only run up more debt; are we now going to accrue debts that our grandchildren will have to repay?

Cutting income taxes is particularly irresponsible. Hashimoto Ryutaro is lying when he says he wants to "bring Japan's income taxes down to international levels". As the following OECD table indicates, Japan's average income tax rate already is one of the lowest in the world: Average Income Tax Rate for Select OECD Countries (1990)

Country Tax Rate
Denmark 25.6
Sweden 21.6
Finland 17.8
New Zealand 17.8
Canada 15.2
Belgium 13.8
Australia 13.3
Luxembourg 12.1
Norway 12.0
Ireland 11.9
Holland 11.2
Switzerland 11.0
United States 10.7
United Kingdom 10.4
Germany 10.3
Austria 8.8
Iceland 8.7
Japan 8.4
France 5.2

(Source: OECD Financial Statistics)


There are two things the LDP and government should do to improve the economy to increase the well-being of Japanese citizens. FIRST, they should stop inhibiting the fall of land prices. Most Japanese citizens want nicer homes closer to where they work, and most businesses would be more competitive if they didn't have to pay exorbitant prices for office and factory space. Moreover, if individuals and businesses could afford better homes and facilities, their purchases of new appliances, office equipment, and other furnishings would stimulate the economy somewhat. But the LDP and government are striving to prevent the natural fall in land prices. They favor Japan's Usury Industry (which views land as a financial asset) over Japan's citizens and businesses (which see land as places to live, work and produce).

The SECOND thing the LDP and government should do to improve the economy for average Japanese citizens is to increase SOCIAL investments as opposed to promotion of personal consumption. Although the Japanese people are satiated with goods and services they can buy personally, they are rather destitute in goods and services that must be bought socially. For instance, the government has not adequately invested in disaster preparedness nor in financial programs to alleviate financial hardships of citizens affected by natural disasters. Even today, more than three years after the Hanshin earthquake, 24,000 families are still living in temporary shacks. Surely financial hardship on citizens affected by natural disasters could be minimized if we had a national earthquake insurance program like our health insurance program. Speaking of health insurance, rather than cutting spending on health care, the LDP and government should be improving investments in that area to cope with the aging of our population.

Another important social investment is defense. Japan is the only defenseless major nation in the world. The LDP and government have duped the Japanese populace into believing they're protected by the so-called US-Japan Security Treaty. But anyone who reads that short document can readily see it guarantees no US protection of Japan whatsoever; it merely licenses the continued occupation of Japan by US military forces. And anyone who has watched US actions over the past 25 years should realize US citizens would never permit their government to spill the blood of Americans to defend Japan. Japan needs to build the capability that every other nation maintains to defend itself. That includes not only strengthening its Self-Defense Forces, but also rebuilding its agriculture. It's a tragedy that the LDP and the government have brought the food sufficiency of this nation down from more than 70% to under 30%during the past twenty years. Ostensibly this has been done to appease US trade negotiators but perhaps secretly it has been done as part of a Faustian bargain by the LDP to keep itself in power while keeping Japan subjugated to the United States.

In sum, instead of subsidizing usurers and reducing taxes on the wealthy, the government should invest more SOCIALLY. It should invest to provide cleaner water and air, to build more and better parks, to put electrical poles and lines underground, to conserve the natural environment and to preserve the historical and cultural heritage. Instead of decreasing investment in health and nursing care, increases should be made to care for Japan's aging populace.

Further, because the US-Japan Security Treaty is a fraud and merely licenses continued US military occupation of Japan without committing the US to defend Japan--thus making Japan the only nation within either the G7 or OECD without defense against military attack--Japan should make the investment necessary to securely defend itself against military attack. All of these social investments would increase the well-being, security and happiness of Japan's citizens while increasing economic activity through improved opportunities for companies as well as jobs for citizens.