[OPE-L] Makoto Itoh, The Japanese Economy in Structural Difficulties

From: glevy@PRATT.EDU
Date: Mon May 23 2005 - 16:53:29 EDT

This article by our fellow OPE-L member appeared in the April,
2005 (Vol. 56, #11) issue of _Monthly Review_.
In solidarity, Jerry

The Japanese Economy in Structural Difficulties
by Makoto Itoh

Makoto Itoh teaches economics at Kokugakuin University, Tokyo, and is
professor emeritus of the University of Tokyo. For a more detailed
analysis of the Japanese economy by the author, see The Japanese
Economy Reconsidered (Palgrave, 2000) and "Assessing Neoliberalism in
Japan" in A. Saad-Filho and D. Johnston, eds., Neoliberalism: A
Critical Reader (Pluto Press, 2005).


A Feeble and Unstable Recovery

According to The Annual Economic Fiscal Report (July 2004) prepared  by
the Ministry of Economic and Fiscal Policy, the Japanese economy  is
recovering from the prolonged stagnation that began with the
bursting of the financial bubble in 1990-91. This recovery started at  the
beginning of 2002. It is characterized by the restored increase  of both
profitability and spending on plant and equipment in the
private business sector and an increase in demand from abroad, while
public spending (like public works) has been rather held down. In the
fiscal year 2003 (up through March 2004) for instance, the Japanese  real
Gross Domestic Product (GDP) was said to have grown by 3.2
percent. Contributions to this growth rate came from the growth of
domestic demand in the private sector (2.9 percent) and the growth of
foreign demand (0.8 percent), offset by a mild decline in government
spending (minus 0.6 percent). The annualized rate of GDP growth in  the
quarter January-March 2004 was said to have reached 5.6 percent  and
especially encouraged the official expectation of a strong
economic recovery.

The Economic Outlook for the Fiscal Year 2005, a document approved by  a
cabinet meeting on December 20, 2004, similarly emphasized the
continuous economic recovery, mainly driven by spending in the
private sector. However, estimates of annual economic growth rates  (by
fiscal years) were sharply marked down. The real GDP growth rate  in 2003
was revised from 3.2 to 1.9 percent, so as to give the
impression that the growth rate in 2004 had risen. Nevertheless, the
projected growth rate in 2004 was reduced from 3.5 percent in July to  2.1
percent. And the growth rate in 2005 was projected to be just 1.6

It is amazing to see such a wide revision of the most basic estimates  of
macroeconomic data in a short five month period. Does it not
reveal the irresponsibility of the Japanese government in regard to
economic management? Indeed, when the government announced in July  2004
figures showing a rather strong economic recovery-no doubt
expecting a favorable effect for the governing Liberal Democratic  Party
(LDP) in the July 2004 Upper House election-Japanese business  managers
and people in general were taken aback. The announcement was  very remote
from what their actual experiences in business and
economic life were telling them. The revised downward estimation of
growth rates confirmed people's day-to-day sense of their economic  lives.

These revisions in government data show that the Japanese economic
recovery is still far from full-fledged, and in fact, remains feeble  and
unstable. Even a reversal of the recovery may be at hand. On
February 16, 2005, data revealed by the Japanese government showed  GDP
declining by 0.1 percent in the three-month period ending in
December 2004 as compared to a forecast of 0.1 percent growth. The
government also revised its July-September figures to show a 0.3
percent decline in the country's GDP, versus the earlier declared 0.1
percent growth. The Japanese economy had contracted by 0.2 percent in  the
April-June quarter. Following these data, eight private research
institutes revised their growth rate projections for 2005 downward,  to
predict, on average, a rate of 1.1 percent instead of the 1.6
percent forecast by the government. There are four aspects, as we  shall
examine in the following sections, which make the Japanese
economic recovery (if it has indeed not already ended) structurally
restrictive, unpredictable, and difficult.

International Environments

A substantial part of the Japanese economic recovery has been
assisted by foreign demand. Its contribution to the 2003 growth rate,  as
we have seen, was assessed to be 0.8 percent, or a quarter of the  total
3.2 percent growth. In fiscal year 2004, Japanese exports are  estimated
to reach 59.4 trillion yen, or 11.8 percent of GDP,
resulting in a 13.4 trillion yen trade surplus as well as an 18.4
trillion yen international current account surplus.

A major portion of foreign demand in this recovery phase came from  China
and other Asian countries. Their share in the Japanese total  export in
2000-03 reached 45.5 percent, doubling from 23.4 percent in  1984-87.
During the same period, the U.S. share declined from 37.5  percent to 28.1
percent. If Hong Kong is added to China, their share  in Japanese total
foreign trade (exports plus imports) in 2004 was  more than 20 percent,
greater than the share of the United States. It  is apparent that the high
rate of economic growth in China and other  Asian countries made the
largest contribution to the expansion of  Japanese exports.

Although growth of manufacturing industries in China and other Asian
countries tends to increase their exports to both each others'
domestic markets and overseas, including Japan, it simultaneously  expands
demand for Japanese industrial machinery, cars, and the more
sophisticated models and parts of electric appliances. Multinational-
ization of Japanese corporations with direct investment in these
Asian countries has been effective in inducing such expansion of
Japanese exports, including intra-firm international trade.

The expanded demand for digital home appliances and cars in the
United States and other advanced economies also benefited Japanese  export
industries. Although its relative share has been reduced, the  U.S. market
is still important in this regard, as it remains the
biggest single-country export market, still absorbing more than 22
percent of Japanese exports in 2004. The demand of the U.S. market,
however, has been maintained by three categories of mounting debt: in  the
international account, in households, and the state. It is clear  that a
huge amount of Japanese portfolio investment and other forms  of lending,
as well as increased foreign currency reserve assets,  have directly or
indirectly supported the U.S. economy's swelling  debt. At the end of
September 2004, the cumulative amount of Japanese  portfolio investment
reached 207.9 trillion yen, and the foreign currency reserve assets
amounted to 92.1 trillion yen, large parts of  both of which were in U.S.
dollars and in great part lent to the
United States.

The international environment that has facilitated the Japanese
economic recovery is full of uncertainty. It is now turning into a
serious source of worry for the Japanese economy in at least three  ways.

First, as domestic and international concern has intensified about  the
twin U.S. deficits (both in the federal budget and in the
international current account), the exchange rates of the dollar
against other major currencies have begun to decline. The dollar,  which
cost more than 130 yen at one point in 2002, and around 120 yen  through
most of 2003, declined widely last year and went below 102  yen at the
beginning of 2005. It is feared that the dollar may decline still further.
Needless to say, a fall of the dollar, or appreciation of the yen, hits
Japanese exporting industries. For example, a certain model of Japanese
car, which had been exported and  sold in the U.S. market for 10,000
dollars to earn 1,200,000 yen with  about 20 percent of profit in 2003,
can earn almost no profit at the  same dollar price if it yields just
1,020,000 yen. Since the exchange  rates of most of the Asian currencies,
including the Chinese yuan,  are tied to the U.S. dollar, such difficulty
for Japanese exporting  industries occurs not just in the U.S. market, but
also in the Asian  markets. In addition, the U.S. economy seems likely to
subside into a  depressive phase as a result of rising interest rates (and
therefore  falling share prices), largely the result of the massive
borrowing  needs of the state. This likely U.S. slowdown would surely
affect  directly and indirectly (via other Asian economies) the Japanese

In theory, Japan can compensate for some part of the loss in the U.S.  and
Asian markets by expanding exports to the EU, where the
appreciated euro should facilitate Japanese exports. However, since
Japanese industries have tended to concentrate on the United States  and
Asian countries, sending more than 70 percent of their exports  there, the
EU market is not yet so familiar to them and not easy to  access for a
rapid expansion of their business. Though they will surely endeavor to
shift their business activity toward the expanding  EU, it will take some
time and may be obstructed structurally by the  excessively strong
politico-economic relationship with the United  States.

Therefore, a major Japanese political reaction to the consequences of  the
falling dollar for the faltering Japanese economic recovery will  not
necessarily have an immediate bearing on Japan's classic postwar  stance.
Rather, it is more likely that Japan will continue to try to  mitigate the
shock by buying dollars so as to increase dollar foreign  currency
reserves (as well as encouraging dollar portfolio investment), in effect
tying the yen to the dollar in order to (at  least) slow the yen's
appreciation. In
a December 2003 interview,  Hiroshi Watanabe, Director General of the
International Bureau at  Japan's Ministry of Finance, said even Toyota
might struggle with  less than 100 yen to the dollar, and for medium-sized
enterprises and  the service sector any further appreciation in the yen
would be painful. He confessed he was "somewhat puzzled" by the European
Central Bank's apparent willingness to tolerate the steady appreciation of
the euro against the dollar. Like Japan, he said, the  core European
economies need lower interest rates and a depreciating  currency (The
Independent, December 8, 2003).

Japanese banks and other financial institutions also would not dare  to
sell their dollar assets so massively as to ignite a global
monetary crisis, in fear of yet greater capital loss. Another
possible reaction would be to cooperate with the United States to
persuade China to allow the yuan to appreciate by pushing it into the
floating exchange rate system.

Second, a further fall of the dollar must cause a huge amount of
capital loss in terms of yen value. Since in September 2004 Japan had
438.5 trillion yen of estimated assets in various forms invested
internationally, devaluation of the dollar and other currencies tied  to
the dollar by, say, 20 percent would easily cause the loss of
assets valued in several tens of trillion yen. This would be the same  as
if a huge amount (probably more than 10 percent of Japanese GDP)  of value
produced by Japanese working people were given as a free  gift to the
United States and other countries, initially being lent  and then made
exempt from repayment. I am afraid that the loss would  actually diminish
the savings not just of wealthy persons and firms  but also of Japanese
working people, who have been advised to deposit  their retirement savings
in dollar-denominated saving accounts (so as  to avoid the almost zero
domestic interest rate), as well as into  investment trust funds, pension
funds, and insurance funds invested  largely in dollar-denominated assets.
Japanese banks and other financial institutions have already been
seriously affected by capital loss in their dollar-denominated loans and
investments. They  have only just recently recovered profitability after
more than a  decade of struggling to cope with bad loans following the
collapse of  the gigantic bubble. Overcoming additional capital loss would
put  them in a tight and inflexible financial position. The result is that
 a credit crunch similar to that in the 1990s may reoccur, harming in
particular medium and small businesses. Working people would then  greatly
suffer, since more than two-thirds of Japanese workers are  employed by
medium and small businesses.

Third, a strong tendency for the price of oil to rise also threatens
Japanese economic recovery. From the middle of the 1980s toward the  end
of the 1990s, the price of crude oil remained stable and relatively low.
It started to rise from a little more than 10 dollars  a barrel at the end
of 1998, accelerated with the U.S. military invasion of Iraq in the spring
of 2003, and now has reached over 48  dollars a barrel, or nearly four
times the 1998 level, at the beginning of 2005. Thus we may be witnessing
the third oil crisis  following the first in 1973, and the second in
1979-80. Combined with  the restricted supply of oil from the Middle East
due to the war, the  continuous expansion of demand for oil caused by the
high rate of  economic growth in China and other Asian countries serves as
powerful background for the rise in price. And the rise in the price  of
oil has already tended to induce an increase of prices for other  raw
materials. The Japanese economy is particularly vulnerable to  these oil
shocks, as its energy import-dependency rate approaches 80  percent, by
far the highest among major capitalist countries (excepting only Italy).
In comparison with the previous two oil shocks, the current rise in oil
price is more prolonged, but it has  not yet induced general inflation. It
has so far been offset in Japan  by the deflationary tendency in prices of
consumption goods and services caused by stagnant income among working
people, global overcapacity preventing price increases by the
multinationals, and  the pressure of cheap (primarily Chinese) imports.
Thus the rising  prices of oil and other raw materials make Japanese firms
fear for  their profits, threatening the reversal of their profit
recovery, a  precious and hard won result of many years of

Since the Japanese economic recovery has depended on a degree of
export expansion, the restored flexibility of banks and other
financial institutions achieved by the reduction of bad loans, and  the
return to profitability and new investment by private firms, the  worries
that affect each element in turn naturally cloud the process  of recovery
itself. If the concerns turn real, basic internal structural difficulties
in Japanese capitalism will resurface to cause a renewed phase of

Neoliberalism and the Deepening Fiscal Crisis of the State

Three major actors compose the contemporary Japanese economy: private
firms; the state; and working people. The first has obviously gained
disproportionately in the recent recovery process. Indeed, while
profits of not a few big businesses in the first section of the Tokyo
stock exchange (firms with the largest capitalization) have reported
historic highs for the 2004 fiscal year, the fiscal crisis of the  state
has continuously worsened, and living conditions for working  people
remain hard and stagnant.

According to the government budget for the 2005 fiscal year, despite  an
increase of corporate and consumption (sales) taxes, the amount of  new
state bond issues (including those that roll over maturing bonds)  will
reach 169.5 trillion yen, the largest in history. At the end of  the 2005
fiscal year, the amount of outstanding national bonds will  go up to 538.4
trillion yen, for the first time more than annual GDP.  If we add the debt
of local governments, the total amount of Japanese  public debt will swell
to 774 trillion yen, 1.9 times bigger than in  1995. This amount is per
capita 6 million yen (about 60 thousand dollars), and 151.2 percent of
GDP, which is by far the highest among  the seven major advanced
countries. The second highest proportion of  public debt to GDP is 119
percent in Italy, while the proportions in  the other five countries
remain within the range of 40-70 percent.  Even in the United States, the
proportion of government debt to annual GDP will be 64.9 percent in 2005
(see OECD, Economic Outlook,  no. 76, December 2004).

It is quite ironic to see how Japanese neoliberal policy, supposedly
targeting the fiscal deficit of the state since the beginning of the
1980s, has continuously increased the outstanding public debt and
deepened the fiscal crisis of the state. Just before Japanese economic
policy turned to neoliberalism under the name of administrative reform,
outstanding government bonds totaled 70.5 trillion yen in 1980. By 2005
this debt has increased more than seven- fold.

Such an enormous increase of the state debt is a result of confused
economic policies. On the one hand the state budget suffers from the
so-called hollowing out of tax revenue by tax-rate reductions for the
rich, in addition to overall lowered tax revenue due to the
continuous stagnation of the Japanese economy through the 1990s. By
following U.S. neoliberal policies since the 1980s, the Japanese
corporate tax rate was reduced gradually from 42 percent to 30
percent, and the highest marginal income tax rate was cut down from  75
percent to 37 percent together with a substantial reduction of the
inheritance tax rate, favoring the wealthy. This was done in the name  of
meeting global rivalry by reactivating competitive market
principles for the economy. In contrast, a consumption tax of 3
percent was introduced in 1989 and raised to 5 percent in 1997,
shifting the burden of the fiscal crisis of the state to the
shoulders of working people in general. The consumption tax revenue  is
now projected to go beyond 10 trillion yen in the 2005 fiscal
year, almost as much as corporate tax revenue, but it is still well  short
of solving the problem of the hollowing out of tax revenue.

On the other hand, the government annual expenditure has been hard to
reduce. Public expenditure for social security and general education  has
indeed been widely cut pursuant to neoliberal policies. But so- called
additional emergency economic policies, mainly public
investment to construct highways, public buildings, and new bullet  train
line projects, have been repeatedly undertaken in order to
mitigate the difficulties of banks suffering from bad mortgages based  on
inflated land prices and bad loans to construction companies. For
example, the sum of such public spending in 1992-2000 amounted to 120
trillion yen. Japan has thus rightly been called a "construction
state," and in the face of its official neoliberal policy her
government has ironically followed a Keynesian-like spending policy,
creating huge budget deficits. In addition, about 30 trillion yen of
public money was directly injected into banks since 1998. Military
expenditure has been also hard to cut down, including the costs of
supporting the U.S. military bases in Japan, the purchase of
sophisticated weapons from the United States, and cooperation with  the
U.S. wars in the Middle East. For Japanese business circles, such
military spending tends to be seen as a necessary cost in order to  sell
their products and carry on their activities in the U.S. market.

In addition, the rapid transition to an "aged society" makes it
difficult to reduce the total budget for welfare policies even though  the
level of public service for individual persons has been severely  reduced.
For instance, the share to be paid by individual persons for  their
medical expenses under the public health insurance system was
successively raised from 10 percent to 20 percent in 1997 and further  to
30 percent in 2003.

As a result of the deepening fiscal crisis, in the 2005 state budget
debt-servicing expenditure for the swelling sum of government bonds
reached 18.4 trillion yen, or more than three times the total public
outlay for education and promotion of science and technology. Income
almost matching the sum of welfare spending is thus redistributed to
owners of state bonds, in large part banks and wealthier persons. It  is
an evident concern that if the currently extremely low rates of  interest
paid by these bonds (achieved by setting the official discount rate of the
Bank of Japan at
0.1 percent since 2001) rise  even a little, the fiscal crisis of the
state will become acute with  the consequent massive increase of the cost
of debt service.

It is clear that such a structural fiscal crisis of the state in both
revenue and expenditure demonstrates an obvious failure of
neoliberalism to reconstruct a sound budget or to reactivate the
Japanese economy. The policy measures chosen to cope with the
deepening fiscal crisis, while confused and inconsistent, nonetheless
show a constant invariable pattern-in favor of capitalist firms and
wealthier people and against working people in general and especially  the
weakest persons in society. Such policies expand inequality in  the
economic life of the Japanese people, and must by now remind even
non-Marxists of the old notion of a class society.

Deteriorating Conditions for Workers

In pace with the economic recovery, Japanese official unemployment in
November 2004 fell to 2.9 million, below three million for the first  time
in three years and eleven months. The unemployment rate improved  to 4.5
percent from 5.7 percent (with 3.75 million in real numbers)  in 2002.
Although this official data may give an impression of a strong recovery
of employment, the impression is deceptive for several reasons.

It is commonly accepted among political economists that the official
Japanese unemployment statistics should be doubled if they are to be
comparable with data in the advanced Western countries. The
definition of unemployment is too narrow, for example, it excludes a
person who did just one hour of paid work in the last week of a
researched month. If doubled, a 4.5 percent unemployment rate becomes  9
percent and thus remains quite high even when compared to European

Reduction in the real number of unemployed and in the rate of
unemployment has not in fact resulted in a proportional increase in
employment. The number of employed persons remained almost at the  same
level in 2002 and 2003, and increased but a little from 53.4  million in
2003 to 54.6 million in 2004. Even The Annual Economic and  Fiscal Report
(July 2004) recognizes that Japanese employment has  probably become
structurally stagnant since the latter half of the  1990s, even in the
phase of recovery of private firms. In particular,  employment in
manufacturing industries has been continuously
decreasing since 1993. The reduction in unemployment is thus rather  due
to an increase in the number of persons who left the labor market  and
gave up the search for work, either due to advanced age or due to  the
difficulty of finding suitable jobs.

At the same time, so-called NEET persons (not in education,
employment or training) are increasing. They are already graduated  from
schools, colleges or universities, not married, not engaged in  housework
or education, and not attempting to seek jobs. According to  The White
Paper on Labor Economy 2004 by the Ministry of Health,
Labor and Welfare, the number of NEET among the generation between 15  and
34 years old is 520 thousand in 2003 and increased 40 thousand in  a year.
This largely reflects the severe difficulty of finding proper  jobs. The
rate of unemployment in the young generation indeed tends  to be high. At
the end of 2003, the official rate of unemployment of  persons 21-24 years
old was as high as 9.8 percent. It is estimated  that the number of NEET,
who are not counted as unemployed, equals  about half of the unemployed
persons in the same generation.

Despite the slight quantitative increase in employment, the quality  of
employment has deteriorated. In 2002-04, part-time employment
increased by about 1.5 million, while regular workers decreased more  than
that number. As a result wages have decreased. Compensation for
employment in nominal national income account has decreased both in  total
amount and per capita during the recovery phase in 2001-04.  Labor's
relative share in the national account has thus fallen and  has been
pushed back to the level of the early 1990s. It follows that  consumption
demand as a whole continues to remain stagnant in
comparison with investment demand in the private sector, even in the
recovery phase.

It should be noted as an important background factor that the power  of
Japanese trade unions has greatly declined. Their organization  rate among
employed workers fell from 35.4 percent in 1970 to 19.6  percent in 2003.
In particular, neoliberal policy in 1985 privatized  three state-owned
enterprises-Japan National Railways (JNR), Nippon  Telegram and Telephone
Public Corporation (NTT), and Japan Tobacco  and Salt Public
Corporation-dealing a heavy blow to the most militant  wing of the labor
movement. The General Council of Trade Unions in  Japan (Sohyo), which had
been the national center of the left labor  movement and was largely based
on the public sector, as a result
dissolved and united with the Japanese Confederation of Labor (Domei)-
forming a new national organization of trade unions, the
Confederation of All Japan Trade Unions (Rengo) in 1989.

This development also delivered a shock to the Japanese Socialist  Party
(JSP), added to by the collapse of the Soviet Union. The JSP,  which with
Sohyo's support used to occupy around one-third of
parliamentary seats, has steadily lost its seats. It changed its name
(and character) to the Social Democratic Party of Japan (SDPJ) in  1996
and has now shrunk to a small party getting just 6 out of 480  seats in
the House of Representatives in the 2003 election. The
Japanese Communist Party (JCP), which had strengthened and thus
managed to compensate for a small part of the losses of the JSP in  the
1990s, also suffered a loss of 11 seats to get just 9 in the 2003

Thus, Japanese working people have to a considerable degree lost
their collective bargaining power through trade unions, as well as  the
representative power of their political parties. As cheaper part- timers
and other types of irregular workers have increased, average  wage rates
have tended to fall. In 1998, protective labor laws were  generally
relaxed. The employment agency business was liberalized,  and the range of
jobs open to such business was expanded. Overtime  work was deregulated.
Limits on discretionary payments and the time  limit of one year for
part-time employment were abolished, in order  to give private firms more
"flexibility" to utilize cheaper (usually  female) part-timers for longer
periods of time. Stressful overtime  work and other sorts of hard working
conditions under competitive and  unstable market pressure have clearly

In the very process of economic recovery, cases of work-related death
increased to 317, including 160 cases of notorious karoshi (death  from
overwork), in 2002. The number of annual suicides increased
beyond thirty thousand for the first time in 1998, and reached 34,427  in
2003. The Japanese suicide rate is the highest among major
advanced countries, and more than twice as much as that in the United
States. Among the causes of suicides, economic and livelihood
problems account for 26 percent, failures in work 6 percent, and
disease 45 percent, in which mental and physical diseases more or  less
related to work are also included. Such increases in karoshi and  suicides
symbolize the uneven, deteriorating, and hard working-and- living
conditions faced by the majority of Japanese workers, and
stand in sharp contrast to the recovery in the profitability of
capitalist firms.

The Threat of Declining Population

Another important symptom of deteriorating social conditions for
Japanese working people is a sharp decline in the average birth rate.
Needless to say, the average birth rate needs to be more than two per
woman if population is not to decrease. It remained above two for
Japanese women at the beginning of the 1970s, but thereafter fell
continuously to 1.29 in 2003. Thus it is estimated that the Japanese
population will begin to decline after 2006. Speculative long-term
extension of this trend shows Japan's population halved by the end of
this century and back to the size of the feudal Edo period toward the  end
of the next century.

A fall in birth rate is more or less common in many advanced
countries (excepting a few such as the United States), but Japan is  among
those with the highest rapidity of change. A prompt shift to an  aged
society upsets all the relatively stable proportions of Japan's  postwar
economy. The shift threatens to undermine accustomed
expectations for pension plans, medical public insurance, and
educational institutions; the budget crisis of the state; and
national economic vitality in relation to prospects for the growth of
both consumption demand and the supply of labor-power. Thus, this  aspect
completes a vicious circle of the Japanese economy in
structural difficulties.

Marx in Capital (vol. 1, chap. 25, sec. 4) formulates as "a law of
capitalist society" that "not only the number of births and deaths,  but
the absolute size of families, stands in inverse proportion to  the level
of wages, and therefore to the amount of the means of
subsistence at the disposal of different categories of workers." He
quotes Adam Smith's statement "Poverty seems favorable to
generation," as well as Samuel Laing's prediction that "If the people
were all in easy circumstances, the world would soon be depopulated."
This law may well apply to the pressure of population explosion in  many
of the developing countries in the contemporary world. However,  the
depopulation trend in Japan and other advanced countries is not a  result
of easy circumstances among working people.

On the contrary, marriage has been delayed by the massive
mobilization of relatively cheap female workers into automated
workplaces equipped with various information technologies (IT) in the
process of capitalist restructuring under the pressure of continuous
depressions and neoliberal ideology. Social care systems such as
access for young people to reasonably priced dwellings, guarantees  for
child-bearing leave, and public child-care centers, have remained  quite
insufficient and unimproved by neoliberal "reforms." Under the  pressure
of long hours and poor wages in not very promising jobs (or  the greater
pressure of unemployment) the traditional pattern of
raising a family in a home of one's own has become harder for a large
portion of the younger generation.

Capitalism has developed on the ground of commodification of human
labor-power by disintegrating communal social units and formations.
Starting with the destruction of communal feudal social orders,
Japanese capitalism mobilized more and more workers into the urban  labor
market. The total population quadrupled since the Meiji
Restoration in 1868, as a result of the abolition of feudal
demographic restrictions. Especially in the postwar period of high
economic growth until 1973, large families (typically with three
generations) were broadly divided into nuclear families with two
generations as the younger generation moved into urban capitalist  work
places. Thereafter under the influence of both IT in a
capitalist firms-centered society and the pressure of neoliberal
initiatives to meet global competition, nuclear families seem to have
been further fragmented so as to expand the supply of single workers'
cheaper labor-power, as well as the demand for those highly
profitable consumer goods and services-such as cell phones, personal
music players, and computer games-which, by their nature, are not  sold to
the whole family, but to individuals.

Thus, in a sense, contemporary advanced capitalist societies like  Japan
are paradoxically undermining their own social foundation in  the
reproduction of human beings, as a result of the excessive
success of the commodification of labor-power, by the formation of an
extremely individualistic market society. Depopulation in Japan thus  does
not at all signify the easy circumstances of working people, but  it is
rather a symptom of a deep structural disease rooted in the  basic
historical tendency of a capitalist market economy,
tendentiously driving societies toward atomistic individualism.

The structural difficulties in the Japanese economy, as we have seen,
will be impossible to resolve through the current dominant neoliberal
political stance. The capitalist firm-centered economic order
unleashed by neoliberalism has deepened instability, inequality,
stressful individualism, the fiscal crisis of the state, and a social
crisis of generational reproduction. The relevance of Marxist
political economy is surely shown in its ability to present objective
analyses of the serious problems of our age in relation to the basic
workings and the historical character of the capitalist market
economy. Though still tragically uncertain, the restoration of
democratic socialism is globally both desirable and necessary for a
future worthy of all that working people have dreamed, suffered, and
sacrificed. We can hope to build such a future through projects for  local
collaboration among people, movements against war and
militarism, movements demanding improved welfare policies, trade
union movements, and other forms of broad struggle against capitalist
oppression of working people. For such practical responses to grow  more
unified and confident, they will need to be grounded in a
critical understanding of contemporary capitalism. Socialist
intellectuals cooperating across borders can help build that

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