Fumio Kishida, Japan’s new prime minister, has marketed his proposal to redistribute wealth as “new capitalism.”
However, some detractors on social media have compared the plan to socialism, labeling it “Japan’s common prosperity,” a reference to a core aim of the Chinese Communist Party.
Hiroshi Mikitani, the CEO of Rakuten, Japan’s major online store and response to Amazon, tweeted, “Does he even understand how capitalism works?”
Mr Mikitani was particularly enraged by Prime Minister Narendra Modi’s intention to increase capital gains tax (CGT), the government’s levy on investment income, which he described as “double taxation.”
Many anticipated that the contentious new idea would quickly kill off a recent wave of new interest in the stock market from small, retail investors, since the Rakuten CEO wasn’t alone in expressing his displeasure with it.
The election of a new prime minister in Japan usually kicks off a stock market rise, but Mr Kishida’s arrival in October (before of lower house elections) saw the Nikkei 225 drop immediately.
The index dropped for eight days in a row, a dip that has been dubbed “the Kishida shock.”
Mr Kishida quickly backtracked on his CGT suggestion, stating that, for the time being, he would not attempt to modify the country’s capital gains and income taxes.
Putting aside Mr Kishida’s embarrassing policy U-turn, there is already a clear divergence between his economic policy approach and those of his predecessors, Yoshihide Suga and Shinzo Abe.
Both advocated Abenomics, Japan’s now-famous economic policy characterized by its “three arrows” of strong monetary easing, fiscal consolidation, and growth plan. Their goal was to exploit these three levers to shake the Japanese economy out of decades of stagnation.
The stock market in the country has more than doubled in value under the term of these two presidents. The Nikkei 225 index fell below 10,000 yen when Mr Abe was elected Prime Minister for the second time in December 2012. For the first time since 1990, it surpassed 30,000 in February of this year.
The Nikkei has taken three decades to recover from the late 1980s stock market meltdown, which led to decades of economic deterioration in Japan.