Abstract
This chapter explains why the welfare state in modern Japan should be described as the “Industrious State” and discusses how and why its development diverged from that of the European-style model. The Industrious State was based on a model of personal responsibility, supported by a historic ideology extolling the virtues of hard work and savings. The Industrious State was built on the pillars of cuts in income taxes that would return income to workers and of investments in public works that would ensure opportunities for work. In the 1990s, however, the Industrious State was confronted with the collapse of the “bubble economy” followed by a sharp decline in income levels and a sagging savings rate. Since then, Japan has struggled to replace the Industrious State.
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Notes
- 1.
Naohiko Jinno, “Nihon-gata Hukushi Kokka Zaisei no Tokushitu;” Mari Osawa, Gendai Nihon no Seikatu Hosho System.
- 2.
See, for example, Margarita Estevez-Abe, Welfare and Capitalism in Postwar Japan; Gene Park, Spending without Taxation; Sven Steinmo, The Evolution of Modern States.
- 3.
Eisaku Ide, “Tochi noZentai-zo to shite no Doken Kokka (The Construction State as the Whole Picture of Governance);” Toshiya Kitayama, “Doken Kokka Nihon to Shihonshugi no Shoruikei;” Thomas Feldhoff “Japan’s Construction Lobby Activities;” Gavan McCormack, “Growth, Construction, and the Environment.”
- 4.
On the tax history of postwar Japan, see W. Elliot Brownlee and Eisaku Ide, “Fiscal Policy in Japan and the United States since 1973: Economic Crises, Taxation, and Weak Tax Consent:” Eisaku Ide and Sven Steinmo, “End of the Strong State? The Evolution of Japanese Tax Policy.”
- 5.
See Charles Yuji Horioka, “A Survey of Household Saving Behavior in Japan.”
- 6.
About the description of local community in Japan in the eighteenth and nineteenth century, see Yusaku Matsuzawa, Cho-son Gappei kara Umareta Nihon-Kindai; Meiji ChihoJichi Taisei no Kigen; Yoshihiro Yamasaki, Kinsei Koki no Ryoshu Shihai to Chiiki Shakai.
- 7.
Eisaku Ide and Yusaku Matsuzawa, “Bundan Shakai no Gen-hukei.”
- 8.
Hakuichi Kachi, “Obei Denrai no Jinsei-kan to Kokoku Kinro-kan no Dokuji-sei.”
- 9.
It is important to pay attention to the fact that this “obligation to work” meant, in Japanese, not just the “obligation to work,” but the “obligation to industrious labor.” “The Constitutional Problems Investigation Committee” (Kenpomondai chosa iinkai), chaired by Joji Matsumoto, made the following significant comment about the obligation to work: “Labor is not something where you work for the state; it is the notion that if you don’t work you can’t eat and, therefore, we must guarantee the right to survive to those who do work.” This statement represented the view, which was common among Japan’s educated classes, that the right to survival was something to be guaranteed to those who fulfilled their “obligation to work.” See Hirohumi Takase, “Arubeki kokumin no Saiteigi to shiteno Kinro no Gimu.”
- 10.
Hayato Ikeda, Kinko Zaisei, 164.
- 11.
Ryo Muramatsu, “Senryo-ki Nihon ni okeru Zeimu Gyosei to Shotoku-zei Genzei.”
- 12.
In 1953, Prime Minister Masayoshi Ohira said that “It would certainly be heaven if you could eat even if you played, or avoid responsibility for getting sick, but the vitality of our nation and the feeling of personal responsibility would be lost” (http://www.ohira.or.jp/cd/book/zai/za_08.pdf). In 1978, when he sought to become the governor of the LDP , he said “I want to work toward building a fair and vigorous Japanese-style welfare society, incorporating appropriate levels of public welfare while fully protecting the Japanese spirit of autonomy and self-help, close interpersonal relationships, and the system of mutual help” (http://www.ohira.or.jp/cd/book/zc/zc_48.pdf).
- 13.
Kazuo Shibagaki, “Sangyo Kozo no Henkaku,” 86–87.
- 14.
Yoshio Hayashi, Zaisei-ron, 34–35.
- 15.
Kazuhiko Kase, “Nouson to Chiiki no Henbo,” 238–239.
- 16.
While around 1950, the percentage of those supporting the conservative party in farming communities was less than 30% on average, by 1970 it had reached approximately 60%. Kent Calder, Jiminto Choki Seiken no Kenkyu, 197.
- 17.
Regarding the special-interest politics, see Takashi Inoguchi and Tomoaki Iwai, Zokugiin no Kenkyu.
- 18.
Ikeda , Kinko Zaisei, 62–63.
- 19.
Hiromitsu Ishi, Gendai Zeisei Kaikaku-shi, 198.
- 20.
Ishi, Gendai Zeisei Kaikaku-shi, 176.
- 21.
On the history of the corporate income tax reform in postwar Japan, see Satoshi Sekiguchi, “Corporate Income Tax in Postwar Japan and the Shoup Recommendations.”
- 22.
Takatsugu Akaishi called this “tax-cutting culture.” See Takatsugu Akaishi, “The Shoup Recommendations and Japan’s Tax-Cutting Culture.”
- 23.
For the details of FILP , see Park, Spending without Taxation.
- 24.
Ikeda , Kinko Zaisei, 93.
- 25.
Ikeda thought that during the occupation era economic reforms designed to enhance the social welfare had gone too far, given the weakness of the economy. Moreover, he criticized popular attitudes that favored expanding entitlements without requiring personal effort on the part of their recipients. Ikeda , Kinko Zaisei, 46.
- 26.
However, workers without a home or a regular job were excluded from the social security system. This triggered frequent riots by workers. Shouji Arakawa, Yutakasa e no Katsubou, 143–147.
- 27.
For an important comparison of Japan’s welfare state with those of other industrial nations, see the influential work of political scientist Margarita Esétvez-Abe, Welfare and Capitalism in Postwar Japan. Her stress on the importance of Japan’s “functional equivalent programs” is suggestive, but it is not clear why and how such programs function equivalently. This paper aims to examine such questions by focusing on the historical development of key fiscal institutions.
- 28.
For example, according to “the polling data on urban life” in 1970, city dwellers considered environment disruption and traffic accident problematic and expressed their intention to accept a greater tax burden in order to reduce these problems. See https://survey.gov-online.go.jp/s44/S45-01-44-15.html.
- 29.
Kazushi Tamano, Tokyo no Local Community, last chapter; Calder, Jiminto Choki Seiken no Kenkyu, 292.
- 30.
Kakuei Tanaka’ program, “The Plan for Remodeling the Japanese Archipelago,” emphasized the importance of strengthening local economies. Shigezo Hayasaka, Tanaka Kakuei Kaiso-roku, Chap. 3.
- 31.
Kase, “Nouson to Chiiki no Henbo,” 233–234, 240–242.
- 32.
On the local progressive movements in the 1960s and 1970s, see Junichi Hasegawa, “The Rise and Fall of the Progressive Governors and Mayors of the Local Governments in Japan;” Naoki Kawakita, “The Establishment of the Kuroda Local Government;” Chuji Sakamoto, “Sengo Nihon ni okeru Chio Jichi Zaisei no Kaiko;” Kurt Steiner, Ellis S. Krauss, and Scott C. Flanagan, Political Opposition and Local Politics in Japan.
- 33.
Tax revenue had decreased by 3.9 trillion yen and, in response, in FY 1975 the government created a supplementary budget that included issuance of 2.3 million yen of debt-finance bonds. Oral records by Michio Takeuchi (October 30, 1979, Ministry of Finance, Policy Research Institute), 19. This was the first major increase resurgence of debt-financing bonds since a supplementary budget in FY 1965.
- 34.
Susumu Sato and Hiroshi Miuajima, Sengo Zeisei-shi, 283–284. Minoru Nagaoka, who was a Director-General of the Budget Bureau of Ministry of Finance during the 1977–78 budgetary process, noted that excessive investment in plant and equipment shortly before the oil crisis had caused a structural recession and that, at the same time, domestic demand was inadequate. Oral records by Minoru Nagaoka (December 1, 1983, Ministry of Finance, Policy Research Institute), 4–5.
- 35.
W. Carl Biven, Jimmy Carter’s Economy, Chap. 5; Eisaku Ide, Keizai no Jidai no Shuen, Chap. 1.
- 36.
According to the recollections of Hirosuke Dan, the person in charge of this negotiation, Japan was required to turn its trade surplus into a deficit and to expand the import of products. He also mentioned that this requirement bordered on inappropriate interference in Japanese domestic affairs. Oral records by Hirosuke Dan (February 6, 1980, Ministry of Finance, Policy Research Institute), 31–32.
- 37.
Thanks to this public relations strategy, the Fukuda cabinet succeeded in restoring its approval rates. Masaru Mabuchi, Okura-sho Tousei no Seiji Keizaigaku, 288–290. It is worth noting the pressures to expand domestic demand and expand public works were not entirely external. Some policymakers were worried about a strong yen and its discouragement of exports.
- 38.
Shortly before Fukuda became Prime Minister, he said he regarded 3% real GDP growth as reasonable. Oral records by Shigeya Yoshise (July 25, 1980, Ministry of Finance, Policy Research Institute), 38.
- 39.
See, for example, Masatsugu Amou, “Nihongata Fukushi Shakai to Kigyou Chusin Shakai no Keisei;” Liberal Democratic Party, Nihon-gata Hukushi Shakai; Naomi Maruo, Nihon-gata Hukushi Shakai.
- 40.
Junko Kato, Zeisei Kaikaku to Kanryo-sei, 129–138; Masaru Mizuno, Zeisei Kaisei Gojyu-nen, 242–247.
- 41.
Excluding the occupation period, this was the largest post-war tax increase.
- 42.
Mizuno, Zeisei Kaisei Gojyu-nen, 177–178, 276–278.
- 43.
The reliance of the government on the borrowing of private savings to increase expenditures during the formation of the Japanese-style welfare state had a significant effect in shaping public opinion regarding fiscal policy. The extended practice of building roads and public facilities without increasing taxes conditioned the public to assume that only the reduction of expenditures would suffice to fix the budget deficit.
- 44.
For a discussion of the constitutional basis for MOF’s influence, see W. Elliot Brownlee and Eisaku Ide, “Fiscal Policy in Japan and the United States since 1973: Economic Crises, Taxation, and Weak Tax Consent,” 67–68.
- 45.
Oral records by Yoshise, 33–37.
- 46.
Oral records by Jiro Yoshikuni, (August 22, 1979, Ministry of Finance, Policy Research Institute), 45.
- 47.
Hiroshi Ando, Sekinin to Genkai, Jyo-kan, 132–134.
- 48.
Most of the directors of the Budget Bureau in the post-war period later became Vice Minister of Finance. Only four individuals who had experience as director of the Budget Bureau never became Vice Minister, and three of the four were either ejected from public office altogether or ensnared in corruption scandals. Hashiguchi’s misfortune was a rare occurrence within a bureaucracy that operated under strict political discipline. Mabuchi, Okurasho Tosei no Seiji Keizaigaku, 257.
- 49.
Oral records by Masataka Okura, (November 28, 1983, Ministry of Finance, Policy Research Institute), 10.
- 50.
Vice Minister of Finance Okura strongly objected to the idea of expanding domestic demand while implementing emergency import measures to improve the current account balance. However, he was told by Miyazawa that “Prime Minister Fukuda and I have told you to do it, so it doesn’t matter what you say.” Okura felt he had no choice except to follow orders. Oral records by Okura, 11.
- 51.
Oral records by Nagaoka, 24.
- 52.
The minimum equity ratio, which is calculated as equity divided by total assets, was set at 8% for companies that wished to conduct international operations. Financial institutions cut back drastically on their corporate lending in order to shrink the denominator, which is total assets.
- 53.
Outstanding public debt as a share of GDP increased from 66.9% in 1990 to 131.5% in 1999 and this reached to 238.1% in 2015. Government Finance Statistics, IMF.
- 54.
This was a two-phase tax increase, with the rate going to 8% in 2014 and 10% in 2015. As described below, the Abe administration, while carrying out the rise to 8%, twice delayed the rise to 10%.
- 55.
The consumption tax increase that went into effect in April 2014 pushed the GDP growth rate for that fiscal year down to −0.3%. However, growth in the previous fiscal year had been 2.6% as people consumed in advance of the tax increase.
- 56.
The percentage of households with an income under 4 million yen in 2017 is about the same as it was during the 1980s.
- 57.
About 30% of households comprising at least two persons and 50% of single-person households responded that they had no savings.
- 58.
See OECD Income Distribution Database.
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Ide, E. (2018). The Rise and Fall of the Industrious State: Why Did Japan’s Welfare State Differ from European-Style Models?. In: Huerlimann, G., Brownlee, W., Ide, E. (eds) Worlds of Taxation. Palgrave Studies in the History of Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-90263-0_9
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