＜prologue＞
I started a blog called “The Baby Boomer Generation’s Miscellaneous Blog”（Dankai-sedai no garakutatyou:団塊世代の我楽多（がらくた）帳） in July 2018, about a year before I fully retired. More than six years have passed since then, and the number of articles has increased considerably.
So, in order to make them accessible to people who don’t understand Japanese, I decided to translate my past articles into English and publish them.
It may sound a bit exaggerated, but I would like to make this my life’s work.
It should be noted that haiku and waka （Japanese short fixed form poems） are quite difficult to translate into English, so some parts are written in Japanese.
If you are interested in haiku or waka and would like to know more, please read introductory or specialized books on haiku or waka written in English.
I also write many articles about the Japanese language. I would be happy if these inspire more people to want to learn Japanese.
my blog’s URL:団塊世代の我楽多（がらくた）帳 | 団塊世代が雑学や面白い話を発信しています
my X’s URL:団塊世代の我楽多帳（@historia49) on X
(Reference) Original article in Japanese
Recently, when opposition parties attack the “failure of Abenomics,” they often say that “trickle-down economics did not materialize.”
1. What is Trickle-Down Economics (Trickle-Down Theory)?
The trickle-down theory (trickle-down effect) is an economic hypothesis that states that “if the rich become richer, wealth will naturally trickle down to the poor, improving the overall economy.” This idea first gained attention in the early 18th century with the British psychiatrist Mandeville and influenced subsequent classical economics. However, due to the significantly different historical context since its proposal, there are now many negative opinions. It is also translated as the equal distribution theory.
“Trickle” in English means “to leak out slowly, like water.”
This economic theory posits that if the wealthy prosper and the overall wealth of society increases, that wealth will trickle down to the poor, leading to a positive economic outcome for the entire economy. Due to its fundamental stance, it’s sometimes called the “scraps economy,” and it lacks realistic backing or social science proof.
It’s a similar concept to the “champagne tower principle.”
However, will things really go so smoothly?
The “trickle-down theory,” like Adam Smith’s “invisible hand” in “The Wealth of Nations” (the assertion that market prices in capitalism naturally harmonize through the balance of supply and demand and free price competition among merchants), is generally easy to understand (appealing to laypeople). However, it also leaves questions unanswered: “Will it really work as well as the ‘champagne tower principle’?” and “Isn’t it just sophistry?”
The situation envisioned by the “trickle-down theory” may have some effectiveness in limited situations, such as the economic development of developing countries. However, in large-scale economic markets with robust mass consumption, its effectiveness in economic growth is low, and it is strongly criticized for only widening social inequality.
2. What is Abenomics?
As is clear from the image above, “Abenomics” is a policy based on the “trickle-down theory.”
Through the Bank of Japan’s “unconventional monetary easing,” the policy aimed to double the monetary base from 130 trillion yen at the end of 2012 to 130 trillion yen in two years. This was a level of money supply that surprised everyone, stimulating inflation expectations and escaping deflation. The Bank of Japan then set a target of achieving a 2% inflation rate within two years.
“Abenomics” is based on reflationary policies aimed at promoting moderate inflation. Some commentators fear that the monetary easing, consumption tax increase, corporate tax cuts for large corporations, and progressive income tax easing implemented within this framework are a “re-creation of the ghost of the trickle-down theory.”
However, in reality, at the “start,” large companies with high export ratios saw a rapid recovery in performance due to increased profits from the weaker yen, while small and medium-sized enterprises (SMEs) and micro-enterprises, which are centered on domestic demand, suffered increased costs due to the weaker yen.
“Currently,” the Nikkei 225 stock index has more than doubled, and the assets of the wealthy who hold stocks and foreign currency have also doubled. However, those who do not hold stocks or foreign currency have not benefited, and the triple punch of “weak yen, inflation, and tax increases” has led to a decrease in real wages and made life difficult for them.
Due to the long-term “negative interest rate” policy, the vast majority of citizens, including pensioners, can no longer use deposit interest to supplement their living expenses, and financial institutions (especially regional banks) are struggling to earn interest rate differentials. This is discussed in detail in the article “The negative interest rate policy should be stopped immediately, and interest rates should be raised to achieve economic recovery!” Please read it.
What will happen in the “future”? Will corporate taxes be reduced or consumption taxes be increased?
3. Can Prime Minister Kishida’s “New Capitalism” Correct the Distortions of Abenomics?
Given the significant widening of the income gap and the increasing hardship of the middle class due to the failure of Abenomics, the new Kishida cabinet, inaugurated on October 4th, appears to be attempting to correct these distortions by promoting “new capitalism,” the “Reiwa-era Income Doubling Plan” to “form a robust middle class,” and “break down the 100 million yen barrier.”
I believe that unless the government directly targets the middle class and below, without relying on “scraps from above,” and implements generous preferential policies to increase their wealth, the problem will not be solved.
However, since the specific measures are not yet clear, it is impossible to judge their success or failure at this point.