How Did Japan’s Realize Societal Equality with a Small Government in the 1980s? - An Analysis of the Formation of Japanese-Style Income Policy -

Ryotaro Takahashi, Keio University

From the 1980s to the 1990s, among the OECD countries, Japan was an equal society in terms of the Gini coefficient of equivalent market income, despite its “small government.” To solve this puzzle, this research investigates the background of Japan's small government and society, particularly in the 1970s, mainly using the "Finance Ministry Dictation Record " created by the Ministry of Finance and primary-source documents of labor union officials. This study focuses on the formation and consequences of Japan’s income policy in 1975 as its core case. The Japanese-style income policy was to control the wage increase rate that had been adopted to suppress a rise in prices during the “Shunto” (spring offensive) of 1975 following the 1973 oil crisis. The wage increase rates for regular workers in Japan were fixed during labor–management negotiations, known as Shunto, in May every year. Until the Shunto in 1975, the rate of wage increase was determined using the “previous year + a” method. However, since 1975, the employment and labor policy has attempted to raise real—rather than nominal—wages and the rate of wage increase has become extremely low. As a background to labor–management cooperation, this research investigates the intervention of Fumio Takagi, acting Vice-Minister of Finance, in this cooperation and the rationale behind his intervention. These three actor relationships resulted in two goals: real-wage increases and full employment. To achieve them, the government maintained the real wage through income-tax cuts, while employment measures were taken by expanding public works. These developments ensured that the size of the Government of Japan remained small and contributed to market income equality.

No extended abstract or paper available

 Presented in Session 256. Public and Private Means of Social Protection