While western-style shareholder capitalism is dominant in many countries, there is a growing interest in “public interest capitalism” in Japan. Different from shareholder capitalism and Chinese-style state capitalism, this is a new form of capitalism as advocated by Mr. George Hara, a venture capitalist and special adviser to the Japanese Cabinet Office, in his 2007 book, A New Inquiry 2.0 into the Nature and Causes of the Wealth of the Nations.
Unlike shareholder capitalism, which is focused on maximizing shareholder returns, public interest capitalism is the idea that a company’s role within society is to benefit all stakeholders, including not only shareholders, employees, customers and suppliers, but also communities and the nation where they do business.
Such an idea is deeply embedded in Japanese commercial traditions. The philosophy of sampo-yoshi (three-way satisfaction) means good for the buyer, good for the seller, and good for the community. By espousing the principle of sampo-yoshi, Japanese companies could go a long way toward practicing public interest capitalism.
Companies’ Internal Reserves Hit All-Time Highs
But at a time when globalism enjoys currency across the world, companies in Japan are apt to follow shareholder capitalism, resulting in a rapidly widening social gap. This is clearly reflected in the relation between companies’ internal reserves and employees’ wages.
According to statistics compiled by the Ministry of Finance, internal reserves of Japanese corporations in fiscal 2018 stood at 463 trillion yen, registering an all-time high for seven years in a row.
On the other hand, the Organization for Economic Cooperation and Development (OECD) reported that Japanese workers’ average per-hour wage declined 8.2% from 1997, and that the average real per-hour wage, after adjusting for inflation, fell 10%, making Japan the only country among advanced nations that saw wages decrease. This is a factor causing a persistent contraction of private consumption expenditure in the third largest economy in the world.
Besides, Tokyo Shoko Research said that there were a record 280 Japanese companies where executives earned 100 million yen or more in fiscal 2019, with the total number of such executives coming to 570, also a record. Meanwhile, the gap between executive compensation and workers’ wages increased for four straight years through fiscal 2018, when the pay gap ratio stood at 4.2 to 1.
As a result of repeated amendments to the 1986 Temporary Staffing Services Law, many more Japanese industries can now hire non-regular workers with lower wages than full-time workers. According to the Ministry of Internal Affairs and Communications, Japan’s non-regular workers in fiscal 2019 totaled 21.65 million, accounting for 38.3% of the nation’s total labor force, a sharp rise of 15 percentage points over 23.2% in 1997.
This has resulted in a wider gap between the wages of regular and non-regular workers, putting a lid on growth in the nation’s overall wages.
(To be continued)