People had an illusion that they could enjoy a wage hike after the Spring Labor Offensive 2014. The average wage hike resulted in 0.6%, which cannot cope with an increase of the consumption tax rate by another 3%. Living conditions of the working population aggravate because prices rose simultaneously with the tax surge. Under the circumstances the government recently announced negative growth in the GDP (gross domestic production).
RISE OF CONSUMPTION TAX RATE ATTACKS PEOPLE’S LIFE AND NATIONAL ECONOMY
GDP figures of April-June were announced in the spot news by the Cabinet Office on August 13, which shows a big decline. It is equivalent to 6.8%, a big drop, if it is estimated on the annual basis.
The Abe government pretends to remain calm, saying the result is within the estimation. Minister of National Strategy and Economic Policy Amari Akira emphasized good performance, saying: ‘reactions to the increased consumption tax have faded down and a good prospect is seen. I do not believe it necessary at this moment to pump up the economy by way of compiling supplementary national budgets’. He adds that ‘economy is a living creature. It is healthy at a time and not healthy at another’. He does not look at people’s sufferings.
5% Decline in Consumption of Individuals
In spite of the minister’s view, the Japanese economy has been hit down steadily due to the elevated consumption tax rate. It is losing potential. A tax hike has a destructive power to undermine economy with a single blow. A proof is shown in a minus record in the GDP.
The rise of consumption tax rate in April has caused a decrease in consumption of people. The country’s economy has been supported by purchases of individual persons up to 60%. The greatest factor in the drop of GDP record lies in a fall of people’s consumption. Reacting to the bigger demand immediately before April, a drop rate was 5%, which is the largest since April, 1994.
Comparing rural areas with metropolitan areas, in the former less people enjoy an income hike. Therefore, if economy recovers very slowly in these regions, the entire growth will be impacted. As for a result of export during April-June, it is smaller by 0.4% than that of the previous three months. The Bank of Japan has rectified a prospect to a lower estimation, altering to ‘a weak development’ from ‘growth is maintained horizontally’.
As for the automobile industry, production lines have shifted overseas. Thus, despite a cheap Yen appreciation in the exchange market, car export does not go up. An officer of a major producer of automobile parts, Yorozu Co. Ltd., says that ‘it is much better to build plants abroad than in a country which lacks cost-efficient competitiveness’. The car industry keeps a strategy to ‘manufacture in the area where purchases are made’.
Wage Hike by 0.6%
The Rengo, the Japanese Trade Unions Confederation, appreciated the Labor Offensive 2014 as saying that ‘the nation’s economy has overcome deflation as the labor won a wage hike rate on the 2% digit, which is a record high after 15 years’. The Keidanren, the Japan Business Federation, announced ‘a wage hike ended on the average with 7,697 Yen among the major 41 companies’, agreeing to the Rengo’s view. The Ministry of Health, Labor and Welfare told in the same way as the Rengo; a wage increase was of high performance after 15 years of failure. The ministry estimates the rate as 2.19%.
Look at the statistics in detail. They are figures of a few big companies, the result of which does not reflect a wage of vast majority of workers. The Ministry has made a statistics of 314 major firms ‘whose capital exceeds 1 billion Yen, with over 1,000 employees and labor unions’. Ordinary workers did not enjoy an increase in the salary negotiation during Spring Offensive. The average surge rate among 56.17 million workers was 0.6%.
A price index of consumers rose by 3.3% in June. A wage increase does not cope with the sharp rise of prices.
On the other side, however, Big Business has piled up its internal reserves by 24 trillion Yen for the past one year, expanding to 304 trillion Yen from 280 trillion. Wages of workers are not heightened, while taxes and prices go up. A decline in the GDP is a direct outcome of these factors.
September 2, 2014