1. Reasons for Stagnant Wages in Japan

The first image clearly illustrates a stark trend: while real wages in the UK, France, the US, Germany, and Italy have increased significantly since 1997, Japan's real wages have been on a continuous decline. Japan's index value has dropped to 90.1 from the 100 baseline in 1997, while other countries have seen their values rise to well over 100. This phenomenon is often referred to as Japan's "Lost Decades" and is attributed to a combination of long-term structural and economic factors.

  • The Burst of the Economic Bubble and Deflation: The Japanese economic bubble burst in the early 1990s, leading to a long period of economic stagnation and deflation. Companies, facing low demand and fierce price competition, prioritized cost-cutting measures, including wage freezes and reductions. This created a deflationary mindset where both businesses and consumers expected prices and wages to remain low.

  • Rise of Non-Regular Employment: In response to economic uncertainty, companies shifted from the traditional lifetime employment system to hiring more "non-regular" employees. These part-time, temporary, and contract workers are paid significantly less and have fewer benefits than regular employees. The number of non-regular workers has increased substantially, which has dragged down the overall average wage.

  • Seniority-Based Wage System: Japan's traditional wage system is based on seniority, where an employee's salary increases with their tenure at a company. While this provides stability, it can discourage job mobility and innovation. It also means that younger workers' salaries are often suppressed, and older workers' wages may not reflect their true productivity, particularly in a rapidly aging society. This system, combined with a decline in training investments by companies, has contributed to a flattening of wage growth.

  • Low Productivity Growth: While Japan has a highly educated and skilled workforce, its overall labor productivity growth has lagged behind other G7 nations. This can be attributed to low private investment in capital and innovation, as many large Japanese firms have moved their operations abroad. Without significant productivity gains, companies find it difficult to justify raising wages.

  • Demographic Challenges: Japan has a rapidly aging and declining population. This demographic shift leads to a shrinking workforce and a higher proportion of older workers who are often less productive and command higher salaries under the seniority system. While a shrinking labor supply should theoretically lead to higher wages, the other structural factors and the prevalence of low-wage non-regular work have prevented this from happening on a broad scale.

  • Weakened Yen and Stagnant Prices: For many years, the Bank of Japan's ultra-loose monetary policy was aimed at stimulating the economy and achieving a 2% inflation target. However, this policy has also contributed to a significant depreciation of the yen. A weaker yen makes imports more expensive, which, in turn, can reduce the real value of wages, as households' purchasing power decreases.

2. Do Politicians' High Salaries Explain Low Average Wages?

The second image compares the average annual income of Diet members (Japanese politicians) with that of the average salaried worker in several countries. It shows that in Japan, the average politician's salary is ¥30.14 million, while the average salaried worker's income is only ¥4.43 million, a massive disparity. In contrast, in the US, the disparity is much smaller, with politicians earning ¥19.14 million and the average worker earning ¥13.19 million.

While the images suggest a correlation, it's important to be careful about concluding a direct causal relationship.

  • No Direct Causal Link: The high salaries of politicians in Japan do not directly cause the low average wage of the general population. The total amount paid to a relatively small group of politicians, even at a high rate, is a minuscule fraction of the country's total payroll. The economic forces driving wage stagnation—deflation, a rigid labor market, an aging population, and corporate practices—are far more significant and pervasive.

  • Symptom, not Cause: The large wage gap between politicians and the average worker is better understood as a symptom of a broader societal and economic issue, rather than a cause. It highlights the significant income inequality that has been growing in Japan. It can also be a source of public frustration and a sign that the political class may be disconnected from the economic realities faced by the majority of the population.

In conclusion, Japan's wage stagnation is a complex issue rooted in decades of economic stagnation, deflation, and structural labor market challenges. While the high salaries of politicians may be seen as a symbol of inequality and a point of public dissatisfaction, they are not the fundamental cause of the low average wage. The real drivers are the large-scale economic and demographic trends that have reshaped Japan's economy since the 1990s.