Income Inequality Trends and their Challenges to Redistribution Policies in Japan

Abstract

This article is an overview of income inequality trends during the 1980s and 1990s and a discussion of their challenges to redistribution policies in Japan. The key results are summarized as follows. First, a widening disparity in market income for the working-age population has been driving rising income inequality in society as a whole, while population aging has added to the uptrend. Second, wide income inequality for the aged population reflects high rates of co-residency and labor force participation among the elderly. This unique feature to the Japanese elderly explains the fact that population aging has led to a rise in overall inequality measures. Third, the current scheme of redistribution policies is less effective for reducing income inequality compared to other countries of the Organization for Economic Co-operation and Development countries (OECD), leaving distribution of disposable income relatively uneven in Japan.