Why have the lives of Japanese people continued to become more difficult for 30 years?

Why does our life remain difficult?

Hello.
In recent years, when watching the news, you often see topics like "Stock prices are at a high!" or "Major companies are reporting strong earnings!" But,

However, how does it actually feel in your daily life?

• Looking for discount stickers

• Being surprised at the supermarket checkout, thinking, "Wait, was it this expensive?"

• Thinking your bonus went up, only to have it almost entirely offset by taxes and social insurance premiums

"Why doesn't life get any easier?"

Isn't that a question that almost everyone feels?

History proves that a society where the middle class is struggling cannot be sustained.
This time, I would like to think about why this gap between "economic prosperity in numbers" and "the hardship of real-life experience" is occurring.

The basic mechanism of economic recovery

First of all, what does it actually mean for the economy to improve?

Simply put, it means that the "flow of money" becomes active.

• We go shopping (consumption)

• Companies make capital investments (investment)

• The government carries out public works (government spending)

When these three flows become vigorous, the entire economy becomes active.

But in Japan today,

• Individuals: Let's save money because the future is uncertain (mindset)

• Companies: Let's refrain from domestic investment where demand is not growing (global economy)

A state where...

In that case, the government has no choice but to become the main driver of the economy.

Increasing take-home pay through tax cuts, injecting money directly through public investment, and reducing anxiety about the future by enhancing social security.

These are certainly effective methods.

However, government funds are limited.
While funds can be raised by issuing government bonds, that is not infinite either.
How to balance "economic growth" and "fiscal soundness" is always a major challenge.

What happened over the past 30 years?

How has the government dealt with the period known as the "Lost 30 Years"?

What actually happened over these 30 years:

• Gradual increases in the consumption tax (3% → 5% → 8% → 10%)

• Increased burden of social insurance premiums

• Reduction in public investment

There is a view that these policies reduced our take-home pay, dampened corporate investment appetite, and consequently cooled down the entire economy.

However, there were also valid reasons for these policies.

• Securing financial resources for social security in an aging society

• Controlling the national fiscal deficit and avoiding future credit instability

It can be said that tax increases were not merely economic restraint measures, but a "painful choice" to maintain a sustainable social security system.

Furthermore, the general view is that the stagnation of the Japanese economy was caused by a complex interplay of multiple factors, including not only fiscal policy but also the prolongation of deflationary psychology, changes in international competitiveness, delays in industrial structural transformation, and an increase in non-regular employment.

Expectations for policy shifts and reality

"If you really want to recover the economy, you have to start with tax cuts."

This way of thinking is persuasive. One can expect a virtuous cycle: tax cuts increase take-home pay → consumption becomes active → corporate sales rise → employment increases and wages rise → consumption becomes even more active...

In countries like the United States and Germany, there are examples where bold fiscal policies have actually acted as a catalyst for economic recovery.

However, there are also major challenges to changing policies.

Balancing with fiscal discipline
Tax cuts on consumption and large-scale public investment could potentially expand the fiscal deficit in the short term. How to manage that fiscal risk and maintain international trust is a significant issue.

Uncertainty of effects
There is also unpredictable uncertainty regarding whether the effects of tax cuts and public investment will truly lead to sustainable economic growth, or whether inflation might progress too far.

What we can do

The challenges facing the Japanese economy are complex, and there are no easy answers. It cannot be said that all policies of the past 30 years were 'mistakes,' but at the same time, we cannot ignore the current 'economic recovery without a sense of improvement.'

What is important is,

• Stimulating domestic demand through tax cuts

• Maintaining fiscal discipline

• The optimal solution between the two

Perhaps it is for each and every one of us to take an interest in and learn about these things.

What policies the government chooses and how we engage with them. Can we find the answer to this difficult question?

Economic topics are difficult, but they are important issues that directly affect our lives. With the House of Councillors election approaching, what do you think?