Poverty in Japan: The structure of modern Japanese capitalism and its future

Justin Aukema
11 April 2024

In this essay I discuss the origins of modern Japanese poverty and the structure of Japanese capitalism in three historical stages. Poverty is not an anomaly of capitalism but rather one of its inherent and necessary features. The basis of capitalist wealth is the exploited and underpaid labor of the working classes. In the case of Japan this is abundantly clear from the country’s modern founding during the Meiji period and although it has undergone changes in ‘form’ has continued unchanged in ‘structure’ to the present day.

(I) 1868 to 1945

Poverty of course did not begin with capitalism. The wealth of the ruling classes has always been based on the surplus labor of the exploited underclasses. Yet what changed with capitalism was the unprecedented amount of surplus that could be extracted and accordingly the degree of capital accumulation that it enabled.

The basis of wealth for the feudal Tokugawa regime was rice farmers’ annual tributes paid through their villages, to local daimyo lords, and finally to central government coffers where part of the stocks were changed into gold. The only way to increase wealth therefore was through direct exploitation and specifically by getting peasants to work longer and harder to produce more (i.e. absolute surplus value). That’s why one Tokugawa official famously commented that ‘sesame seeds and peasants are very much alike. The more you squeeze them, the more you can extract from them’ (Hane 2016: 8).

Japan’s 1868 Meiji Restoration ended the feudal era and ushered in the modern capitalist one. Whereas Tokugawa-era peasants had been ‘tied’ to the land and were generally forbidden even from moving, a necessity to ensure stable flows of rice produce for the government, in Meiji they were now ‘freed’ from this responsibility and their ancestral ties. Yet land ownership in fact dramatically declined while tenant farming, basically wage-labor farming, greatly rose. The marketization of land and the monetization of taxes meant that many small scale farmers could no longer profitably farm their plots and so they ceded their land and in many cases their labor to their larger landowning neighbors. This gave rise to powerful and in many cases absentee landlords in this period.

Meanwhile the Meiji government needed rapid capital accumulation to modernize and industrialize. Yet it couldn’t do this all at once or right away, so it started instead to produce labor-intensive textiles for export to western markets and produced with the exploited labor of underpaid and exploited, in many cases physically abused and even unfree, labor of young girls (jokō). This was the basis for the capital accumulation that was eventually used to buy more fixed/constant capital, e.g. machinery etc., which was later used to mechanize and move to heavy industry post WWI.

Yet Japan’s urban industrialization couldn’t keep pace with the amount of rural peasants newly ‘freed’ from the land. Unable to absorb this group of relative surplus labor as wage laborers, and with nowhere else for them to go, poverty became rampant in the Japanese countryside. Incidentally it’s important to remember that it was not until the 1960s that the secondary sector (manufacturing) overtook the primary sector (agriculture). Especially in the prewar period, therefore, the Japanese ‘working class’ was still very small and the majority of the population were peasants or former peasants.

At the same time the industry that did grow under the heavy patronage of the central government was highly centralized around giant zaibatsu e.g. Mitsubishi, Mitsui. These groups like Mitsui especially got their start in fabrics and textiles and quickly moved into heavy industry and finance. They accumulated massive amounts of capital from the cheap and exploited labor of Japanese workers and exports but, since Japanese workers were so poor and the domestic market still underdeveloped, they could not reinvest it at home. So the zaibatsu instead began to export capital abroad, for example into mines in Manchuria or ‘development’ banks in Taiwan. This situation of uneven development therefore in other words, and the highly centralized and rapid accumulation of large corporations, directly led to and progressed in tandem with Japanese and global imperialism.

As for the wartime period, I will just make a quick comment even though it really deserves a whole paper. Most Japanese soldiers and especially those in the Army were poor peasants since this was the majority of the population overall. Needless to say, this includes many of the 3 million Japanese victims of the war, not to mention the many more Asian victims as well.

(II) 1945 to 1970s

During the war there was a huge destruction of capital. Buildings were bombed, ships and homes destroyed, savings lost and so on. All of this just disappeared into thin air or sunk many times literally to the bottom of the sea. Yet this was in fact ironically a boon to Japanese capitalism. I have explained elsewhere the importance of the destruction of capital for capitalism. Basically it is periodically required in times of overproduction (including of capital itself) to preserve capital’s value and to create more room for growth. In a word, it is needed to preserve the capitalist system itself. That’s why the wartime period was followed shortly thereafter by the ‘high growth’ period (kōdo keizai seichōki).

Meanwhile Japan tied its postwar fate to the global capitalist order led by the US. The US set a fixed exchange rate of 360¥ to 1USD under the Bretton Woods system. From this basis, Japan developed an export-led economy based on cheap domestic labor and cheap yen with exports going mostly to America. Similarly, a ‘Japanese model’ of profit-making emerged wherein the country imported cheap raw materials then utilized its highly educated but underpaid workforce to use these to make manufactured goods like electronics which it exported abroad. Especially the petrochemical and heavy industries e.g. steel came to form the backbone of Japanese manufacturing and the economy.

Major changes happened in the agricultural sector as well. In the 1950s and 60s and at America’s behest Japan transformed its agricultural sector, choosing to focus almost entirely on large-scale rice farming while importing other products from the US to absorb the US food and grain surplus. This hurt small-scale farmers who had previously engaged in multi-crop farming, and the practice of growing wheat in rice paddies during the winter months disappeared almost entirely. The negative effects of this import reliance and monoculture farming were heavily felt through a rapidly declining food self-sufficiency rate which now stands at around a measly 37%. There was also a massive turn toward part-time farming since farmers were unable to earn a decent income from full-time farming. With the combination of part-time farming and outside wage labor, Japanese farmers in the postwar era eventually achieved incomes on par with the lowest scale blue collar industrial workers.

Thus there were many internal contradictions of the postwar ‘high growth’ period which fostered a latent tendency toward poverty, decline, and crisis. These things came to a head during the large decline in profitability from the late 1960s. The reasons for this are too complex to fully explain here. But Japan’s model of ‘growth’ already created the tendency for poverty among many sectors of the working class as we have seen. This relates to one of the greatest inherent contradictions of capitalism itself since the entire basis for capitalist wealth is the increasing poverty of the working class. This results in an inability to sell products and thus realize their contained surplus value leading to crisis and stagnation. Growth therefore must always be predicated on at least some level of worker betterment if it is to be maintained. Yet conversely wages can never be allowed to rise beyond a certain level or productivity rises in general since this would threaten the overall rate of profit. This is partly also what happened during the 1960s in Japan as powerful labor movements won consistent yearly wage increases. Added to this, we could also mention higher energy costs associated with the Oil Shocks of the 1970s which raised firms’ input and constant capital costs.

The cumulative effects of these things pushed Japan along with the rest of the advanced capitalist world toward a new ‘neoliberal’ regime of profit making and capital accumulation. This meant among other things a switch from full-time to part-time or ‘flexible’ labor force, liberalization and deregulation, and increased government austerity. The overall effects of neoliberalism have been and continue to be devastating for the global working class. Meanwhile with the signing of the 1985 Plaza Accord the US forced Japan to strengthen the yen and devalue the dollar to make American exports more competitive. The US also pushed Japan to privatize its national industries and liberalize its markets to which Japan obliged by privatizing Japan Rail, Japan Tobacco and Salt, and the Japan Post. The effects of this and other neoliberal strategies have been massive layoffs, a huge blow to unions, falling wages and declining work conditions on the one hand, while corporations saw a massive rise in profits on the other.

The rising price of the yen under the Plaza Accord as well as increasing financialization were also big reasons for Japan’s speculative ‘bubble economy’ of 1989/90. Namely, firms used their large capital gains especially from investments abroad to invest in land domestically which boosted land and stock prices even though most of these firms never had any intent of developing or expanding their operations.

(III) 1990s to present

So now we come to the 1990s and early 2000s. Prime Minister Junichiro Koizumi and others in his faction further privatized the Japan Post and financialized people’s savings in the early 2000s. Ozawa Ichirō and others meanwhile formed a new neoliberal ‘opposition’, the DPJ, which supported Koizumi in his efforts. The two parties basically worked toward the same ends while putting on the show of a ‘political struggle’.

Another notable period was ‘Abenomics’ from 2009 in the fallout of the 2008 financial crash. Abenomics pushed for quantitative easing (QE), the reform of the main agricultural unions (JA) and especially the development of corporate agribusiness, and financialization and privatization. Let’s quickly touch on just the negative effects of each of these. First QE, which is the massive printing of currency by the central government, devalued the yen and ruined investor and speculator trust which, incidentally, is a large part of the reason we have the weak yen today. Second, Abe gutted the agricultural coops JA and paved the way for corporate agribusiness. The effects of this for small, part-time farmers have been grim with increased centralization. Now, some critics have praised Abe’s agricultural reform saying that more corporate agribusiness is a ‘good’ thing because of cheaper and more consumer products. But as others have also pointed out the downsides greatly outweigh the positive elements. Namely, the quality of agricultural and food products for market is and already has suffered dramatically through mass production and the weakening of regulatory food standards. Moreover, a large part of the increased agricultural product is not meant for the domestic market anyway and thus will likely have little effect on raising Japan’s meager food self-sufficiency rate. Abe’s agricultural reforms were mostly about switching to export-led farming. So there’s going to be more people pushed out of farming and less of the benefits felt at home.

Third, we need to critically touch on the effects of ‘financialization’. This really deserves a whole book or paper in itself. And it’s been advocated not just by Abe but by his successors and in fact most major politicians from Tokyo Governor Koike Yuriko to current Prime Minister Kishida Fumio. Here’s the gist of the new financialized model of Japanese capitalism. Basically firms can’t turn a profit. The rate of profit has drastically declined and the only way they can maintain it is if the government props them up with preferential tax treatment or subsidies. And most of these subsidies are in turn coming from average citizens’ privatized and financialized savings accounts. In fact Kishida’s ‘New Capitalism’ (Atarashii shihonshugi) planning documents even explicitly state that most funding for new ‘preferred’ industries – I’ll get to this in a moment – will come from privatized savings in the form of NISA accounts. So that’s what those are being used for. Basically if you look at this pessimistically in and in historical context, the government is telling people ‘look, you’re too poor, your wages are too low to have savings anyway. And by the way, we blew all your pension funds on the stock market, so you don’t have those to rely on anymore either. So, if you can’t save in the first place why not try to make a few extra dollars on the stock market’. That’s pretty much what NISA is in short.

Ok, but what are ‘preferred’ industries? Well, these are the areas that the state-corporate enterprise deems to be the most ‘profitable’. And that’s basically three things: one, the drug companies, pharmaceutical companies; two, high value-added tech like semiconductors; and three, so-called ‘green tech’ or ‘GX’ as ‘new capitalism’ calls it. Now the drug companies already made a killing during COVID which incidentally was also an incredibly damaging time for the working class as I’ve written about elsewhere. The tech firms also got a big boost during COVID as governments funneled money to them to issue mandatory tablets in schools and so on. And this brings us to ‘green tech’ which in many respects combines all these other things and is the most important ‘new’ form of capital accumulation. Elsewhere I’ve also referred to this as the ‘Green Mode of Accumulation’ (GMA). Now for the most part ‘green tech’ is a total scam. It’s entirely predicated first of all on ‘climate change’ scare-mongering in the mass media. And governments funnel this fear, and also the fear of ‘pandemics’ and diseases and so on which they also conveniently claim are being made worse by ‘climate change’, into financial support for tech companies making ‘green tech’. And it’s really strange by the way how lots of this ‘green tech’ also includes us as citizens mandatorily turning over our privacy and liberties to big tech companies, the increased use of ‘surveillance capitalism’ in other words and the advance of digital currencies and so forth. But ‘green tech’ is also a scam because much of it doesn’t even do what it purports to do. A prime example of this is ‘mega solar’ which I’ve written about elsewhere and which is incredibly damaging for the environment, which brings almost no benefits to local people, and most of which moreover is funded by outside or foreign capital. The former gov of Osaka, Hashimoto Tōru, for instance has drawn fire for taking money from Shanghai Electric Power, a Chinese company with links to the CCP, to build ‘mega solar’.

Moreover, all of this is being funded by taxpayer money. And I’m not just talking about NISA here. I mean real hard cash. If you live in Japan, go home and check your energy bills for this month. There should be something like ‘renewable energy promotion’ or something listed on there to the factor of one tenth. that means you’re paying 1,000 yen for every 10,000, for GX, for mega solar basically.

(IV) The future of Japanese capitalism

Now lastly I want to speculate on the future of Japanese capitalism. None of what I’ve described above sounds very positive or hopeful. I basically said that A) poverty is built into the capitalist system and that B) it doesn’t show many signs of getting any better in Japan. So what are we headed for? More immiseration? Marx said that capitalism would ultimately eat itself from the inside because of its own internal contradictions. And I already highlighted some of those, namely the falling rate of profit etc., both really generally but also with some slightly more specific examples. But Marx never specified whether this process would take ten years or a thousand years. And ultimately it really comes down to a number of factors like how 'productive forces' develop, how the working class is organized, and so on. Personally I think, I hope, that it’s going to be sooner rather than later.

The overall trend of advanced capitalist nations in general has synthesized and grown out of the old postwar and neoliberal models and developed to basically favor a kind of state capitalism under the state-corporate enterprise. This is where governments resort to increasingly draconian and feudalistic (i.e. ‘extra-economic’) means to prop up the declining profitability of capitalism. So, extending from neoliberalism, there’s going to be an even greater blurring of the lines between what corporations do and what governments do. In other words, corporations are going to or at least going to try to keep doing more and more things, providing more and more ‘services’ that governments used to do. It’s going to be endemic and it already basically does extend to health care, public services, infrastructure, and so on. It’s going to be private companies running your digitized ‘My Number Card’ and social credit score in other words. And they already basically do control money and finance – I mean not just credit like they did in the past – but the actual creation of currency itself, formerly the jobs of central banks. So, governments I think are going to really take a back seat and maybe even become sort of like the ‘hall monitor’ which polices us to make sure our tax dollars and private data keep flowing to Big Tech.

Now, that’s the bad news. There is good news too though I think. Because basically all of these in the long run are bound to fail. A totally policed, regulated, and beaten-down working class with an almost total transition to forms of unproductive service work are just going to keep worsening the already terrible rate of profit. The crisis of capitalist value creation is not going to resolve itself. Because it fundamentally can’t resolve itself. And I think at some point the working class, the Japanese working class, is going to become even more painfully aware of this through the glaring contradictions of their own material circumstances.

I do at the same time think this means that workers also need to organize. To prepare for what comes next and to help push it in that direction. It also means we need to shift our thinking about who constitutes a ‘worker’ or a ‘workers’ movement’. Because in many cases these are going to be maybe even populist rural movements who don’t share the same social values of big city dwellers and academic and media elites. People who are fed up with the degradation and immiseration of the countryside, who do actual labor, and who are acutely aware of or resistant to many of the things that contemporary capitalism is trying so hard to deprive them of including owning a home, having a family, driving a car, and so forth. And I don’t think lastly that the future is set in stone or that the road to worker emancipation is dystopian accelerationism with ever increasing immiseration. Instead we need to be acutely aware of what we have gained and what we have lost under capitalism. Because it’s always a two way street, a trade-off. The future, in my view communism, is not going to be simply more capitalism, capitalism on steroids nor a complete return to the ‘idyllic’ past. Rather, it’s going to be, and in dialectical terms it must be a ‘sublation’, a better synthesis of both the past and capitalist society. And that’s why we need to understand our past, where we’ve come from and how we got here, and our present quagmire under capitalism, so that we can fully understand these things and better overcome them.

Popular Posts