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Use a part of corporate internal reserves to address coronavirus crisis
A proposal by the Japan Research Institute of Labor Movement (Rodo-soken)

The Japan Research Institute of Labor Movement (Rodo-soken) says, “Now is the time for corporations to use a part of their internal reserves for the revitalization of the Japanese economy.” The labor think tank, which is associated with the National Confederation of Trade Unions (Zenroren) on January 20 issued a proposal concerning the 2021 labor talks known as Shunto (Spring Struggle).

Rodo-soken points out that Japan is experiencing a greater difficulty than most other countries in revitalizing its economy due to declines in domestic demand as the consequence of neoliberal economic policies the government pursued for many years and the large corporations’ short-sighted profit-first policy. It calls for a policy shift to end the coronavirus crisis by boosting domestic demand through substantially increasing wages, improving the working conditions, and reducing the consumption tax rate.

During fiscal year 2019 (ending March 2020), the large corporations amassed 702.6 trillion yen (about 6.7 trillion US dollars) in internal reserves, which include nonessential money amounting to 400 trillion yen (about 3.8 trillion US dollars). The proposal says that the use of only a fraction of the nonessential proportion of the internal reserves can help turn the coronavirus crisis into a chance to revitalize the economy.

Zenroren and the Joint Committee for the Spring Struggle are demanding a wage increase of at least 25,000 yen (about 238 US dollars) per month, which is possible if just 5.05 percent of the nonessential proportion of the internal reserves is used. A wage increase of 1,500 yen (about 14 US dollars) per hour is possible if 4.25 percent is used. The establishment of employment rules that include the elimination of unpaid labor, securing a right to use the annual paid leave, and the enforcement of the five-day workweek is possible if 3.79 percent is used. If a 15.57 percent is used, it is also possible to offer contingent workers permanent positions.

The proposal emphasizes that improvement of the working and employment conditions may increase companies’ labor cost, but that an increase in household spending will contribute to boosting domestic production and improving companies’ financial positions, which in turn help revitalize the nation’s economy.

The proposal supports the demands put forward by Zenroren as legitimate and realizable. Below is the Executive Summary of the proposal:

Executive Summary of A proposal concerning the 2021 for Spring Struggle

Now id the time to use a part of internal reserves to revitalize the Japanese economy
Seize the coronavirus crisis as a chance

January 18, 2021
Japan Research Institute of Labor Movement (Rodo-soken)

Ezra Vogel, who died on December 20 last year, is one of the US scholars well versed in Japanese affairs. His Japan as Number One published in 1979 was a best-selling book. Today, Japan is seen by many foreign leaders as a country that must not be followed as an example. One reason they give for the view is that the neoliberal economic policies promoted under the initiative of the ruling Liberal Democratic Party have proven to be opposite to what should be done. The other reason is that the large corporations have only sought to gain immediate profits by carrying out corporate restructuring policy, engaging in impossible price war, and making inroads into other countries in disregard of the Japanese people.

The year 2000 was a turning point, which should be the starting point of economic revitalization. That means it is necessary to raise wages by 9.26 percent or 32,922 yen per month, reduce the ratio of contingent workers to all employees to the 2000 level, cut the consumption tax to 5 percent from the present 10 percent, and raise the corporation tax rate to 30 percent.

Increasing production costs should be shifted on to prices. Improvement of employment conditions this proposal calls for is expected to lead to a 4 percent increase in prices, but that is not a bad price rise.

Japan’s government debt has swelled to 1,240 trillion yen (about 11.8 trillion US dollars) after a supplementary budget devoted to anti-COVID-19 measures was added to the fiscal 2020 budget. In the meantime, the corporations have 702.6 trillion yen (6.7 trillion US dollars) in internal reserves, which includes 400 trillion yen (about 3.8 US dollars) , which is believed to be a nonessential portion of their resources. Now is the time to make effective use of the money in order to push ahead with economic reform to make up for the “lost three decades.” Such an effort will be able to turn the coronavirus crisis into a chance of economic revitalization.

Business leaders argue that the internal reserves are the accumulated gains of business activity. But the fast growth of internal reserves since 2000 has been made possible mostly as a result of cutting taxes for corporations and shifting the burden onto the workers. The elimination of unpaid work, ensuring the full use of paid holidays, the strict implementation of the five-day work week, promotion of contingent workers to permanent employment, and the realization of a wage increase of 25,000 yen (about 238 US dollars) per month are all possible if 84.65 trillion yen, or 21.16 percent of the nonessential portion of the internal reserves is used.

Improving labor and employment conditions will mean higher labor costs paid by companies but will lead to an expanded household expenditure, triggering new domestic production and benefiting companies. Added value, employment and tax revenue will increase, revitalizing the nation’s economy.

Many scholars and businesspeople are saying that the global economic downturn taking place amid the coronavirus pandemic is making it imperative for companies to change in the way the economy is run. That is all the more important point for Japan because of the country’s long-lasting economic recession causing “lost three decades.”

The 2021 Spring Struggle should not be just another wage struggle for a fair distribution of gains; it should be a major struggle to win a major shift in the Japanese economy. The labor union movement has a very important role to play and is called upon to fulfill its responsibility. The key is reconstructing the Spring Struggle setup. It is possible to receive unorganized workers and create a greater campaign only in a workers’ united struggle.

The PDF of the proposal in Japanese language can be found here.

 

 
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