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The Japanese economy is at a critical juncture, having emerged from a long period of stagnation and now heading toward renewed growth. Rather than competing with each other through proposals for budgetary handouts, political parties should debate specific measures to boost growth.
Economic measures should be focused on how to deal with rising prices and ensure that larger wage increases take root.
Political parties have set immediate measures against high prices as the main pillar of their campaign pledges for the upcoming House of Representatives election.
The Liberal Democratic Party has pledged to provide cash benefits to low-income households. The LDP apparently is thinking it is necessary to take measures to support households struggling with rising prices of rice and other necessities.
However, it is difficult to understand why Prime Minister Shigeru Ishiba announced the compilation of an economic stimulus package that would exceed the size of the supplementary budget for the previous fiscal year. Why would a large-scale supplementary budget of over ¥13 trillion be necessary in normal times?
Meanwhile, the Constitutional Democratic Party of Japan has proposed the introduction of tax credits with benefits, which would combine consumption tax cuts and benefits, for low- and middle-income earners. The Japan Innovation Party, the Japanese Communist Party and the Democratic Party for the People have called for a cut in the consumption tax rate.
Considering the nation’s fiscal conditions are at the worst level among advanced countries, it is not responsible to appeal to voters with tax cut proposals without sufficiently presenting alternative fiscal resources. This could amplify anxiety for the future due to the worsening fiscal conditions, possibly leading to a curb on consumption.
The Japanese economy is at a critical point whether it can completely overcome deflation.
To help wage increases continue to outpace price rises, it is essential to move toward a growth-oriented economy in which wages and investment both increase. A growth strategy aimed at improving corporate productivity must be formulated.
However, the economic measures proposed by each party are all just a series of slogans; they lack specific steps regarding how to implement them, and therefore are not convincing.
The LDP pledges to promote “job-focused employment” in which remuneration is determined by the content of the job, and the CDPJ is calling for “thorough investment in people.” However, these proposals are not sufficient to fully revive the Japanese economy.
Japan’s nominal gross domestic product was overtaken by Germany last year, falling to fourth in the world. For Japan to increase its international presence, it must come up with a strategy to succeed in highly competitive fields, such as decarbonization and digitization.
Raising the minimum wage is also important. The ruling and opposition parties are almost completely agreed on the need to raise the current hourly wage of ¥1,055 to ¥1,500.
However, small and medium-sized companies, which account for about 70% of employment in the nation, have little room to increase wages, so it will not be easy to achieve this. Parties should present effective support measures for small and medium-sized businesses.
