Commentary / Japan

The real policy challenges facing Japan

by Haruaki Deguchi

In the Upper House election last Sunday, which ended in yet another victory for the ruling coalition, candidates focused on issues such as the planned consumption tax hike this fall from 8 percent to 10 percent, as well as Prime Minister Shinzo Abe’s drive to amend the Constitution. There are, however, other major policy challenges confronting Japan that must receive priority.

First, Japan faces a rapidly aging population with an ever-decreasing number of children. Japan’s total fertility rate has declined for three years in a row to 1.42 in 2018, far below the 1.80 that the government has sought to achieve. Japan’s situation is all the more serious given that many other advanced countries have achieved a V-shaped recovery in the fertility rate by introducing generous measures to support people in both raising children and pursuing careers.

History shows that no country or region has prospered while sustaining a medium to long-term population decline. Policymakers should consider this historical fact and look carefully at the nation’s fertility decline with a greater sense of crisis.

Second, the aging of the population in Japan is very advanced compared to other countries. People 65 or older now account for more than 28 percent of its total population. Many people take a pessimistic view of the graying population. But is that the right approach?

In his final days, Qin Shi Huang, the first emperor of China, is said to have longed for a society of perpetual youth and longevity. If we look at the current situation differently, it could be said that Japan is the frontrunner in the quest for a society of perpetual youth and longevity, a longtime ideal of humankind.

Of course, an ideal society like this must not be full of bedridden elderly people. Japan is believed to have more such people than any other developed country. It needs to adopt measures to prevent people from falling into such conditions and prolong their healthy life expectancy.

Most doctors say that working is the best way to keep people healthy at a more advanced age. Therefore, it is the government’s duty to abolish the mandatory retirement system as quickly as possible and create an environment in which people can work no matter how old they are.

During the latest election, a Financial Services Agency report saying that public pension benefits alone cannot cover a person’s expenses in retirement, and that a retired couple would need ¥20 million in savings if they live to the age of 95, became a topic of heated discussion.

The way the report raised the issue may be fundamentally wrong, however, because it is based on the assumption that the mandatory retirement system will be maintained. To put it very simply, people will not need to save ¥20 million for retirement if the age-based mandatory retirement system is abolished and they can keep working irrespective of their age.

Having said that, we cannot deny that in an aging society people’s expenses will naturally expand. Society may become poorer unless the economy grows and people make more money as a result. In theory, Japan will need to have higher economic growth than the United States and Europe. Instead, Japan’s growth rate in recent years has been at the lowest level among these advanced economies. Its labor productivity — the key to higher growth — has been the lowest among the Group of Seven economies since relevant statistics became available in 1970.

There is a positive correlation between labor productivity and the ratio of people in the overall population who finish graduate-level education courses. Among developed nations, Japan has one of the lowest ratios.

As society relies more and more on information technology and continues to make progress in developing artificial intelligence, the view that education is key to economic growth has become commonly shared worldwide. Yet Japan’s investment in education in proportion to GDP has always been at the lowest level among OECD member countries. It’s not just investment in education that’s falling behind. The real-term value of budgetary spending on policy-related investment in fields such as education, defense and public works has remained nearly flat compared with 30 years ago.

The reason is simple: The government cannot make fresh policy-related investments because of rising government debt and deficit spending. In short, you cannot give what you don’t have. Even if just to increase investment in education, which will serve as the seed for economic growth for the next generation, creating a balanced fiscal budget is a pressing task for this nation.

In Japan, the concept of the government versus the citizens is often raised. But if we hold to the principle of sovereign power resting with the people, the government and citizens can never be opposing concepts. Citizens make the government. An election is not just a means for the citizens to make the next government; it is also their greatest weapon.

If the principle of equality under the law is to be taken seriously, it is the natural right of each person to be given one vote. In Japan, however, the disparity in the value of votes between electoral districts remains exorbitantly wide. In the widest gap among Upper House constituencies, one person’s vote can equal three votes elsewhere. As it is, we can hardly call the nation a healthy democracy.

It should be quite easy to resolve this matter through applying the latest information technology and restoring the principle of one person one vote. It has been quite a long time since the problem was first taken up. After each Diet race, a lawsuit is filed charging that the just-concluded election was unconstitutional. It is only negligence on the part of politicians that this problem has not yet been fundamentally resolved.

The voter turnout for the latest Upper House election was a mere 48.8 percent. The average voter turnout in Diet elections is around 50 percent. With such low turnouts, it is easy for candidates from governing parties supported by vested interest groups to win. As a result, it is difficult to inject new blood into the realm of politics.

In Japan’s national politics, more than 50 percent of Diet members are so-called hereditary legislators — those who inherited support organizations and election machines from their relatives. In other Group of Seven countries, such legislators reportedly account for less than 10 percent of the total. There is no way that hereditary lawmakers backed by support organizations would be remotely tempted to change the status quo, because there are no reforms that would keep those vested interests intact.

What can be done to increase voter turnout and bring new faces to the world of politics? That is yet another big policy challenge for Japan.

Haruaki Deguchi is the president of Ritsumeikan Asia Pacific University in Beppu, Oita Prefecture. A popular lecturer and author of more than 30 books, he founded Lifenet Insurance in 2008 after a career spanning nearly 35 years at Nippon Life Insurance Co.