Why Does Japan Have Less Economic Inequality?

A short video on Facebook explained why Japan has less economic inequality than the U.S. and many other countries. It notes three main points that were particularly decisive in the 1960s.

1. High and highly progressive incomes taxes that persisted later than comparable high taxes in the U.S. in the post-war period.

2. High estate taxes that persisted later than comparable high taxes in the U.S. in the post-war period.

3. Massive land reform in 1946 coupled with inflation that undermined creditors.

Under Japan's 1946 land reform, landlords who owned more than the permitted amount had to sell the excess land to the government at a fixed price. The government then sold it at the same price, giving first preference to any tenant who had been farming the land. 

Japan’s land reform succeeded for two reasons. 

The first reason is that the Occupation had the power to impose and enforce a law that hurt the interests of a very powerful class of people, wealthy landlords, in order to bring about social and economic change. 

The second reason is more complex. At the time the land reform law was passed in October, 1946, it provided reasonable compensation to the landlords who had to sell their land to the government. But from 1946-48 Japan experienced rampant inflation, which reduced the value of the yen. As a result, while most of the buyers were able to pay off their loans within two or three years after they purchased the land, the money landlords received for their land was worth much less.

These aren't the only factors, of course. 

* The wealthy took a huge hit from the destruction of World War II.

* Urbanization gradually divorced income from land ownership.

* Japan's manufacturing based economy lasted longer than in the U.S. where deindustrialization became by the mid-1970s. 

* A mostly ethnically homogeneous society increased empathy that crossed social class lines and reduced resistance to reforms like universal health care that deep racial and cultural divides in the U.S. undermined. So did the bonding that arose from shared experiences of World War II, defeat in that war, and U.S. occupation.

* Loose land use regulation prevented the best from being the enemy of the good in the process of making affordable living possible, so that very few people were in a state of privation as extreme as now found in the U.S.