Nov 24, 2014 9:58 AM
Japan's young fret as unexpected recession hits
The Associated Press
TOKYO (AP) When Prime Minister Shinzo Abe decided last week against walloping Japanese with another tax hike, it was cause for worry not celebration among the country's young.
Despite the government trying everything short of dropping money from helicopters, the economy that is home to manufacturing titan Toyota, pop culture icons such as Hello Kitty and the famous dancing Asimo robot, had slipped into recession.
Abe, under pressure to reduce the developed world's heaviest debt burden, had hiked sales tax in April. The economy, already fragile after two decades of malaise, shrank for two quarters in a row.
For young Japanese, the recession that unprecedented stimulus couldn't stop marks a crucial moment in their country's herculean effort to halt its decline.
The generation born as Japan's economic bubble burst in the early 1990s will be supporting a vast cohort of retirees and saddled with a national debt of more than a quadrillion yen. They will be making do without the culture of lifetime employment enjoyed by their parents and grandparents. The economy of neighboring China has eclipsed Japan's in size and its up-and-coming tech and industrial companies are increasingly potent rivals.
Mai Yamaguchi, a 29-year-old trading company employee heading into the gaudy Shibuya shopping area for an outing with her 4-month-old son, was unimpressed by Abe's decision.
"The pension system is on the verge of bankruptcy," she said. "I think it would have been better to go ahead and raise the tax as planned."
"This is our children's futures," said Yamaguchi, who was just a baby herself when Japan's economy hit its peak in the late 1980s. "Child care, elder care, social welfare are all going to be even bigger burdens for us."
Due to low birth rates and increased life expectancy, Japan's working age population is thinning out while the number of retirees and centenarians is swelling. The rapid aging of Japanese society is so evident in the mix of pedestrians on the street, in the media and in political discourse that it's an issue on just about everyone's mind.
Ryosuke Sunaga, a college senior decked out in his best job hunting suit and brand new briefcase, said by the time he has kids, he expects the sales tax will be at least 15 percent. It is currently 8 percent after being lifted from 5 percent in April.
On Friday, Abe dissolved parliament for a snap election to be held Dec. 14 that he was calling to seek public approval of the tax hike delay and to affirm public support for his all-or-nothing policies to revive the world's third-largest economy.
He has pledged to vanquish Japan's long stagnation by injecting tens of trillions of yen (hundreds of billions of dollars) into the economy, pushing prices higher and the value of Japan's currency lower. He also has promised a sweeping and drastic overhaul to help improve the country's crumbling competitiveness.
So far, that combination, dubbed "Abenomics," has yielded mixed results.
Profits of big exporters have surged, thanks to the weaker yen, but higher costs have hit households and smaller companies. Despite some wage increases, many ordinary Japanese feel less well off than before, exacerbating longer-term trends linked to the demise of the lifetime employment culture.
"I'm not a permanent employee, and that worries me," said Kaori Endo, a 21-year-old bread factory worker from Ibaraki, north of Tokyo.
"Right now I'm living with my family, but I'm thinking about how I will support my parents. If I were a full employee my parents would be less worried."
Over the past two decades, Japanese companies struggling to compete with rivals in China dismantled much of the lifetime employment system that was standard for most urban white collar and factory workers. Today, about four in 10 Japanese work in part-time or contract jobs with little job security and scant benefits. For young Japanese, permanent, career-track jobs are the exception, rather than the rule.
As lawmakers rush to prepare for December's snap election, Abe is renewing his campaign to persuade Japanese companies to raise wages and offer more opportunities for women workers. He also has promised to slash corporate taxes beginning next year to entice companies to invest more in Japan.
In the meantime, Abe has been pushing ahead with cuts to social welfare, raising health insurance premiums and co-payment requirements for all, including retirees.
Ultimately, Japanese taxpayers will end up shouldering an even greater share of the country's surging costs for health insurance, elder care and pensions, said Koichi Hamada, a former economic adviser to Abe.
"It's not very fair to poorer constituents, but still we have to go ahead with the consumption tax hike."
College student Yuto Tanaka, 19, said he knows that there's millions of yen (tens of thousands of dollars) in debt for every person in Japan. But fretting won't resolve that problem, and neither would an immediate tax hike, he said.
"If they raise the sales tax now, it will hurt the economy and tax revenues will fall anyway," said Tanaka, taking a break at the bustling intersection in Shibuya known as "Scramble" before heading to classes.
"We have to hope," he said. "If Japan falls to pieces, our society will be finished. We have to muddle through."