‘Robin Hood’ Fakuda is not welcome in Japan

‘Robin Hood’ Fakuda is not welcome in Japan
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First Published: Thu, Dec 20 2007. 12 09 AM IST
Updated: Thu, Dec 20 2007. 12 09 AM IST
Yasuo Fukuda doesn’t wear a green tunic and matching felt hat. That hasn’t stopped Japan’s prime minister from fashioning himself a modern-day Robin Hood.
Fukuda is taking a page from the English folk hero famous for robbing from the rich and giving to the poor. He aims to transfer 2.6 trillion yen (Rs91,000 crore) of corporate tax revenue to help narrow economic disparities between urban and rural areas.
Now, on the surface at least, there may be some logic to such a shift.
“People’s lives are not conducted in cities alone,” Fukuda said in an 1 October speech. “Under the concept of mutual cooperation, in which the local regions and the cities support each other, we will further transfer power to local governments so that a system will be developed that enables local regions to explore ideas on their own and implement them, and we will strive for local tax and financial reforms so that the local regions can become financially independent as well.”
Yet Fukuda should be clear about what’s really at play here: Regaining favour with his party’s historical stronghold, rural Japan. What’s more, investors should know that this might herald a return to the Liberal Democratic Party’s (LDP) wasteful spending on roads, bridges and other public works projects.
If only Fukuda borrowed some of Robin Hood’s other perceived virtues—like fighting against the forces of injustice. To hear Fukuda tell it, his rob-from-the-cities-and-give-to-the-countryside strategy does exactly that. The real story is that the LDP is still reeling from July’s Upper House election defeat and is channelling money to rural areas to win back the support of a voting bloc that is losing faith in the party.
Real problem
Japan’s real problem is that its longest recovery since World War II isn’t fattening pay cheques or accelerating the creation of new businesses.
Japan does have its share of innovation. In fact, a June survey of 82 nations by the Economist Group declared Japan the world’s most innovative country on account of its number of patents per million of population. Names such as Canon Inc., Toyota Motor Corp., Fanuc Ltd, Advantest Corp., Sharp Corp. and Matsushita Electric Industrial Co. Ltd are global powerhouses, and deservedly so.
The flaw here is Japan’s tax system, which was created to reward prefectures in which successful companies are headquartered. These areas thus get a higher portion of corporate tax revenues. That’s partly why other prefectures such as, say, Hokkaido or Shikoku, get a smaller cut.
Start-ups needed
While we can debate the system’s fairness, depressed areas should be considering how to create new jobs locally, not seeking handouts from Tokyo. The rise of China alone arguably means Japan shouldn’t have a single manufacturing job at the moment. Sadly, many rural area leaders haven’t risen to the challenge, nor has the Central government in Tokyo offered leadership on an issue that’s critical for Japan’s future prosperity.
Japan needs more young people starting businesses—folks perched before laptops with visions of creating their own Internet success stories and taking Japanese companies to a higher level of global competitiveness.
Japan, Asia’s biggest economy, has been reluctant to take other steps economists say are needed in the years ahead. To look at just one, consider the continued aversion to immigration.
Shrinking population
The population began declining in 2005 and may fall by as much as a quarter by 2050. Japan has never had to rely on mass immigration, unlike countries such as the US and Australia. Yet it’s becoming a pressing need. Instead, the balance of policies is weighed toward keeping foreigners out.
Recently, life became a bit more trying for those of us already living here. Immigration officials are fingerprinting, photographing and questioning us each time we arrive. While the US does that for visitors, it doesn’t for residents with work permits. Business groups worry Japan’s new measures, ostensibly meant to screen for terrorists, may discourage tourists and business relocations.
Japan may be the world’s second biggest economy, yet foreigners accounted for 1.6% of its 127 million population last year. Almost half of the roughly two million people that the government classifies as foreigners are people of Chinese, Korean and Brazilian descent who were born in Japan.
Competing with cheap, yet technologically savvy China and India will require more Japanese innovation, greater productivity and importing both low-cost and highly skilled labour. An influx of everything from nurses to mergers and acquisitions experts to less-skilled young adults to work in convenience stores or drive taxis would boost economic efficiency.
At this very challenging time, Japan really doesn’t need Robin Hood. A few of his merry men—and women—in the form of workers from abroad could help, though.
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First Published: Thu, Dec 20 2007. 12 09 AM IST