By: Debbie Howard
Although the proportion of Asia’s wealth that is concentrated in China and India is expanding rather quickly, the vast majority is still concentrated in Japan, where millionaires control some $3.2 trillion, or 43% of Asia’s non-property-related assets, according to a recent survey released by Bank of America Merrill Lynch (BAC) and Capgemini.
Despite this concentration of wealth, the most recent Gini coefficient (an international index measuring the degree of inequality in the distribution of family income in a country) places Japan at #23, with a Gini coefficient of 24.9.
For the sake of comparison, Hong Kong was ranked #1, with a Gini score of 43.4, while the U.S. (known for its high level of income inequality among developed nations) was ranked #3 (Gini score of 40.8). Japan was situated just between Sweden (#22, with a score of 25.0) and the Czech Republic (#24, with a score of 25.8).
Although Japan has the second-lowest gap between rich and poor among developed countries, many people are concerned about rising inequality, and Prime Minister Yukio Hatoyama has promised to make the issue one of the top priorities for his new government.
One idea for de-accelerating the rise of inequality might be found in improvements to the housing market. The Japanese government has acknowledged that improvements in housing are needed. In September of 2006, it adopted the “Basic Program for Housing,” a plan to improve government housing standards over the next 10 years, provided by the Ministry of Land, Infrastructure and Transport as part of the Basic Act for Housing.
With consideration of Japan’s challenges of a declining birthrate and aging population, along with environment concerns, and a shortage of resources and energy, the plan aims to shift society from the practice of repeated “build-and-trash” construction and demolition to a longer-life housing strategy of well-constructed and maintained housing.
The Ministry has clear targets for housing by 2015: 1) 90 percent of housing should meet present earthquake resistant standards (compared to 75% as of 2003); 2) 25 percent of apartment housing should practice universal design in common areas (10% as of 2003); 3) 40 percent of housing should have energy saving measures, for example double-paned windows (18% as of 2003); and 4) to increase the life span of housing to about 40 years (about 30 years as of 2003).
Improving the quality and affordability of housing might well encourage more interest in home ownership. However, in order to really make home ownership attractive and viable for a wider number of people, inheritance tax reform is also needed.
As it stands, with falling land and property prices, younger (and hence lower-paid) individuals and workers cannot afford to buy. Then when it comes time for younger generations to inherit property or land from their parents, the exorbitant inheritance taxes that are levied often mean that the children must sell the property (or part of it) in order to pay the taxes.
Changes in the inheritance tax system could help to finally provide younger generations with stability in form of solid assets (not only cash, but also land and homes). This would in turn help to increase consumer spending on non-household items, as well as stimulate expenditures related to home improvement, do-it-yourself projects, furnishings and entertainment.
All in all, it would really provide economy with a kick, while improving quality of life at the same time.
Debbie Howard is Chairman of CarterJMRN and President Emeritus of the American Chamber of Commerce in Japan.
Originally Published in Nikkei Weekly, 7th December2009
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