Helicopter Kuroda: For Workers, Not for Japan Inc.


Helicopter Kuroda: For Workers, Not for Japan Inc.

Panel Discussion

Lyric Hughes Hale MODERATOR

This week the central bank of Japan continues its unprecedented adventures in qualitative and quantitative easing. In the absence of true structural reforms, the burden of boosting Japan’s economy has fallen upon the shoulders of Bank of Japan Governor Haruhiko Kuroda. While unconventional monetary policy, including negative interest rates and massive share purchases, has a diminishing chance of closing the gap on the BOJ’s two percent inflation goal, there are other measures within his powers that could move Japan’s real economy forward. They might just require Gov. Kuroda take on the moniker of Helicopter Kuroda, a nickname first applied to another central banker, Ben Bernanke.

Although Womenomics and immigration have been touted as paths to increased prosperity in Japan, there is something that could be done immediately for an already existing group of 20+ million workers. These are haken, temporary employees, who are hardly temporary; some have worked for the same company for twenty or thirty years. In contrast to permanent employees, haken are permanently disadvantaged in Japanese society on many levels, a factor contributing to Japan’s slow-motion demographic crisis. They are precluded for example, from taking out a mortgage. Their numbers have skyrocketed since the financial crisis, and according to Japan’s Ministry of Health, Labor & Welfare, all classes of these workers now make up at least half of Japan’s entire workforce.

How has this state of affairs been allowed to continue in an egalitarian society such as Japan? One might say that only in Japan would millions of workers put up with second-class status for the entirety of their careers. Permanent employees are well organized, and are not anxious to share their good fortune. They are so entrenched that it has been seriously suggested that it will be necessary for them to die or retire before this changes. 

Richard Katz
Richard Katz EXPERT
I find your proposal intriguing and will mull it over. It definitely shifts the discussion in the right direction, even if that particular proposal proves unfeasible. Its unfeasibility lies in the fact that, as Kuroda said, it’s illegal. On the other hand, there is no law preventing the government from giving non-regular workers a $3,800 bonus and the BOJ continuing to buy enough JGBs to cover the resulting deficit. Ben Bernanke proposed something like this in a 2003 speech in Tokyo that was disregarded.

Whether the agency that actually turns the money over to the workers is the government or the central bank, your proposal is, in fact, classic fiscal stimulus: the equivalent of a tax cut. Though Kuroda denies that the BOJ is monetizing the fiscal deficit, that is exactly what he is doing. The only difference is that, instead of the BOJ buying JGBs directly from the government, private investors do and then the BOJ buys it from them. But the BOJ is buying more JGBs than the government is issuing. As a result, the net government debt to non-BOJ holders has dropped from 152% of GDP at the peak in 2011 to 124% of GDP as of Oct-Dec. 2015, and it will keep on dropping as long as the BOJ maintains its current policy. That makes the much-dreaded, but not yet seen debt crisis even less likely.

One other note. It is already against the law in Japan to pay unequal wages to men vs. women, or regular workers vs. non-regulars. No new law is needed. What is needed is enforcement. There is no government agency mandated to investigate complaints or prosecute violators. Abe speaks of equal pay for equal work, but, so far as I know, has not yet spoken of the simple expedient of enforcing the law.

Secondly, while giving non-regulars a one-shot pay boost this year would boost spending and ease their lives, what Japan really needs is for the growing ranks of these workers to get decent wages each and every year. They will have more money to spend, not just today, but in the future, and thus more confidence to spend what they have. One tiny quibble. The 65% marginal propensity to consume number is misleading as it implies a savings rate of 35%. In fact, Japan’s household savings rate went slightly negative in 2014.
Lyric Hughes Hale MODERATOR
Agree with you Rick, especially regarding enforcement, and I did not know that no government enforcement agency for wages exits.  That would make for an interesting op ed! Amazing to me that this is not even being discussed.

And you are right, what I am proposing is fiscal stimulus since after all, monetary stimulus is without doubt producing diminishing if any returns.  If this increase in wages were made permanent, the effects would be multiplicative.

Although the overall saving rate is indeed negative in Japan, a fact which many people have not caught up with, my thought was that if a haken were given a check for $3800, I bet that they would save a third at least until the following year.  I could be wrong there.  Is there significant debt among lower paid workers?  Do you think that some of the money would be used to pay off credit card debt or other loans, as it might in the US?