Amid Recession, The New Poor Demand Safety Nets

By Suvendrini Kakuchi, IPS, 11 September 1998

TOKYO, Sep 11 (IPS)—Raita Taguchi, an economics graduate from prestigious Keio University, thought he had embarked on a stable career when he joined Kankaku, a leading securities company, 10 years ago.

But he lost his job three years after starting work as the firm reeled from the drastic fall of the Nikkei, Japan's stock market, from a high of 38,000 in 1987 to less than 20,000 five years later.

I was asked to politely leave in 1991 as part of the company's restructuring programme to meet revenue losses, he recalled.

Still, Taguchi was luckier than others and landed a job at the computer section of Ebara Corp, which deals with machinery and plant equipment.

Almost eight years later, Japan's grim economic picture has upset Taguchi's life once more. As Asian economies collapsed around Japan, Ebara, which has manufacturing firms in six of them, got the jitters. Taguchi lost his job in January.

But this time, Taguchi is not content to just sit by. In April he joined Network Union, a trade union formed to help Japan's increasing number of unemployed young people, and is suing Ebara for unfair dismissal.

People must be treated differently from commodities. Hard workers must not be forced to take the brunt of a recession that is caused by bad management and unfair policies that were enforced as a result of greed, Taguchi explained.

He argues that the company could have cut back on other sectors first before resorting to lay-offs. Taguchi considers himself a victim of Japan's high-growth policies, which often included bureaucrat-led excessive production and consumption, and bred corruption.

Today, people like him feel Japan is in an economic rut, the subject of desperate efforts at revival but locked in recession and headed, many say, for a deflationary cycle.

Amid recession, distressed companies need more credit but banks are unable to respond because their client firms are in turn unable to repay loans. Firms are hard pressed too because demand is falling and people are holding on to their savings, forcing companies to cut back on investments and fire staff.

These form a destructive cycle that weakens Japan's economy further, and is starting to a toll on a population that for a long time did not have to worry about hard times.

Taguchi, part of the growing ranks of the unemployed, is quite a new social phenomenon in the world's second richest country.

In May, the Management and Coordination Agency reported that unemployment stood at 4.2 percent, or 2.93 million in a country of 126 million people. That is Japan's highest jobless level since the Pacific War.

The worst hit are workers between 45 and 54 years of age, but the report cites a new phenomenon in the rise of unemployment among younger workers. The media estimates this number to be almost 8.4 percent, up from 7.1 percent last year.

Last week, Hitachi, one of Japan's largest manufacturers of electric machinery and semiconductors, said it expects a group loss of 1.8 billion U.S. dollars for the fiscal year ending March 1999, its first loss ever.

This is the largest crisis since Hitachi was established in 1920, President Tsutomu Kanai said. The company plans to lay off 4,000 workers, bringing to 66,000 the number of staff it has fired.

Likewise, Japan has just seen the biggest collapse of a manufacturer since the Pacific War—in the fall of Toa Steel Co which said it would liquidate at the end of this fiscal year.

Japan's slump is extremely severe, said Taichi Sakaiya, the new head of the Economic Planning Agency. He predicted growth for 1998 at between 0.5 percent and minus 0.5 percent.

Japan is in the throes of an eight-year recession. Production fell by 5.3 percent last year and personal and corporate bankruptcies are rising. In June alone, reports the private Tokyo Shoko Research company, the number of corporate collapses was 1,736, a 36 percent rise from May.

Domestic demand remains stagnant despite government attempts to stimulate spending. Household spending in July was around 2,448.59 dollars, down by 3.4 percent, marking the ninth straight year-on- year decline.

Small and medium firms that comprise majority of bankruptcies are folding up since banks do not enough resources to lend. Interest rates were cut further on Wednesday, but some analysts fear the economy is in such bad shape it is not responding as expected by picking up consumption.

With more trouble coming, more people in this affluent society are realising the need for social safety nets and are calling for a review of the same growth policies largely responsible for Japan's progress since the Pacific War.

What we need is a new concept, said Yasuhiko Shibata, a senior fellow at the Yomuiri Research Institute. It's important to establish a system that would enable us to survive in the next century and develop mechanisms to prevent further environmental destruction and to use our limited resources efficiently.

Faced with the social costs of this economic depression, the government of Prime Minister Keizo Obuchi is having to struggle with new proposals that no longer focus solely on growth.

While the government has promised to revitalise the economy by the year 2000 by enacting reform that would hasten deregulation, it is also introducing measures to ease the burden on the public.

Japan's system is sometimes called Japanese socialism, because it seeks to give economic security to everyone, for instance through the system of seniority in wage systems.

But this is likely to change as Japan moves undertakes more privatisation and deregulation under the label of economic reforms. In fact, Japanese media have been airing public concern about the risks of failure due to cut-throat competition.

The government has proposed an income tax as a way of dealing with growing economic burdens, but critics find this a stopgap measure at best.

Recent media surveys show that people want improved social infrastructure, criticising Tokyo's emphasis on public works when they say the need is for housing, education and welfare.

The government's role is to ensure social fairness for the sake of social stability. It is imperative to ensure that in a period of low economic growth, no one falls through the cracks, the Asahi Shimbun daily argued recently, reflecting how high social concerns have climbed amid recession.