The Rich Are Getting
Richer in Abe’s Japan

Japan has an income-inequality problem, and it’s getting worse. While the country is enjoying its best stretch of growth since the mid 1990s, many are missing out.

The widening income gap—while nothing like U.S. imbalances—is making it tougher for the nation to deal with demographic challenges, as stagnant wages deter people from having children and an aging workforce hampers the government’s efforts to raise revenue to pay for the older society.

While Prime Minister Shinzo Abe is responding to the problems—officials this month are drawing up plans to help parents by making early childhood education free—the following visuals draw on tax and population data to illustrate how and where income has shifted across Japan under Abe’s watch.

The people of Tokyo have benefited the most under Abe, with average taxable incomes rising almost 7 percent over the five years through fiscal 2016, the most of any prefecture. By comparison, incomes for the 2.4 million people living in Nara and Kagawa dropped over the same period.

And while income rose in snowy Akita in the north, it’s still the poorest of the 47 prefectures, with the average person earning just 59 percent of what people get in Tokyo. The people of Fukushima have seen their incomes rise on the back of compensation and reconstruction after the 2011 earthquake, tsunami and nuclear meltdown that devastated large portions of the prefecture.

Japan’s population started shrinking in 2008 and the speed at which that is happening is picking up. That’s hitting rural Japan the hardest. With younger Japanese attracted to the cities where there are more jobs, urban areas such as Tokyo, Nagoya, and Fukuoka continue to grow. But for the places where the population is shrinking, those changes make it even harder to survive. As workers—also known as taxpayers—move away, rural areas are left struggling to pay for services for the people left behind, who are more likely to be retired, not paying tax, and using more healthcare and social services.

Within Tokyo, the income disparity is getting worse, and it’s wider than the differences among individual prefectures.

The people of Minato, which is the local government area with the highest average taxable income in Japan, have had a good five years. Rising corporate profits mean their dividend income jumped 251 percent in 2016 from 2012. Home to embassies and the local offices of Google and Goldman Sachs, the average taxpayer there had a taxable income of 11.1 million yen ($98,000) in 2016, up 23 percent since 2012.

That’s almost triple the level in Koto just to the east or in Ota to the south, where taxable incomes were about 4.2 million yen. And if you head 2 hours west to the border of Tokyo, the average incomes of the 900 or so taxpayers in the rural village of Hinohara are less than a quarter of what people in Minato receive.

Although Osaka is still seen as Japan’s second city, it’s markedly poorer than Tokyo—with an average taxable income only 77 percent what people in the capital earn. The decline of manufacturing in Osaka by such companies as Panasonic and Sharp has hurt the city, and the income of its residents.

Low-income growth for many means that the recent economic recovery is passing them by. The economy loses out when they forego consumption, and the nation loses out if they can’t afford to start a family, or pay little or no tax because they don’t earn enough. Japan faces a number of difficult economic problems—the population is shrinking, it’s highly indebted, and it’s still shaking off the effects of a burst asset bubble and the ensuing deflationary malaise. Rising inequality make it harder to deal with those problems.