This article is
Japan Adrift: The Meiji Restoration, Defeat in the War against the United States, and the Lost 40 Years
Japan Adrift 2: The Invisible Occupation of the United States – At the Crossroads of Failure or Rebirth
It is a sequel to.
---------------------------------------------------------------------------------------------------------------------------------------
In the introduction, I named Japan from 2023 onward as the third period of modernization. However, even as Japan enters this period, it has yet to see any prospect of escaping its long, 30-year decline. Over the past 30 years, Japan, a supposedly economically advanced nation, has been militarily integrated into the United States while having the wealth it had accumulated from its period of high economic growth through the bubble economy usurped. This pattern will likely be remembered for generations to come as 21st-century neo-colonialism.
■ Abnormal accumulation of wealth
Following the collapse of the bubble economy in 1991 , which could be called Japan's second defeat against the United States , the United States has since invisibly occupied Japan's economy, and has been remaking Japan under the guise of deregulation and structural reform, largely in line with Wall Street's wishes . These "reforms" have led to rising living costs and stagnant real wages, resulting in a significant decline in the living standards of ordinary Japanese people.
The deep-rooted problems created by the "invisible occupation" are clearly illustrated by the massive amounts of retained earnings (retained profits) that Japanese companies have accumulated over the past 30 years . This amount, accumulated primarily by large corporations, reached an unprecedented 637.5316 trillion yen by the end of 2024, exceeding the 2024 nominal gross domestic product (GDP ) of 609.29 trillion yen. For the total amount of retained earnings to exceed annual GDP is unprecedented, and is more bizarre than abnormal. Surplus profits are the fruits of people's daily labor, and can also be seen as the accumulation of labor exploitation by global capital.
A complex combination of various factors led to the accumulation of unprecedented amounts of retained earnings. The United States converted Japan to shareholder capitalism. This meant demanding the relaxation of foreign investment regulations, which allowed foreign capital, primarily American investment funds, to acquire large amounts of stock and control Japanese companies. It also demanded the relaxation of employment regulations, dramatically increasing the number of non-regular workers, including temporary, contract, and part-time workers, suppressing total wages and allowing surplus profits to accumulate. Furthermore, while lowering corporate taxes provided preferential treatment to corporate finances, it also raised the consumption tax, sapping domestic demand and suppressing capital investment and research and development expenses.
■ Irreversible redistribution of wealth and power
As a result, Japanese companies' surplus profits, or retained earnings , have tripled in just over 20 years and are expanding at an extraordinary pace. Toyota alone is said to have 30 trillion yen, Sony about 5 trillion yen, and Nintendo about 3 trillion yen. This shows that pressure from the United States has irreversibly led to a redistribution of wealth and power in Japanese society .
Let's summarize. The deregulation of foreign investment and corporate governance reforms during the "lost 30 years" used "efficiency" as a pretext to design a system of shareholder capitalism that prioritizes short-term shareholder value. As a result, share buybacks and dividends became the primary outlets for capital allocation, while at the same time, casualization of employment and wage suppression reduced consumer power, and the consumption tax hike to 10% imposed a regressive burden on households. As a result, profits remained off the books of companies, and cash reserves were concentrated with asset holders rather than used for growth. This was not a natural outcome of the market, but a structural consequence created by the shift in power caused by the "invisible occupation."
The average annual income of workers has fallen from 4.67 million yen in 1997 to 4.43 million yen in 2022. During this time, the social security burden of the working generation has continued to increase due to the declining birthrate and aging population, and the Japanese government has raised the consumption tax from 3% to 10% in the name of social security funding. However, the burden on the working generation has not been reduced at all, and it has reached its limit.
Meanwhile, corporate tax, which exceeded 40% in the 1980s, has been reduced to 23% in the name of maintaining international competitiveness. Consumption tax revenue has grown from approximately 3.3 trillion yen when it was first introduced to around 25 trillion yen in recent years. Corporate tax revenue was around 10 trillion yen in fiscal 2009, but has grown to around 20 trillion yen in recent years due to the influence of the economic cycle . In any case, the view that "the consumption tax was meant to make up for the loss left by the corporate tax cut" has naturally arisen .
However, the Ministry of Finance and some experts explain that the introduction of the consumption tax is not "making up for the corporate tax cuts" but "making up for the income tax cuts." This is considered the textbook interpretation. However, it is an undeniable fact that consumption tax revenues have made up for the tax revenue losses caused by the corporate tax cuts, while at the same time reducing the tax burden on companies and contributing to a sharp increase in retained earnings. It is natural to assume that the significant cut in the corporate tax rate was due to indirect, if unseen, pressure from US investment funds, i.e., foreign shareholders.
This is how stock prices are rising in Japan despite the economic downturn. At the end of October 2025, the Nikkei average surpassed 50,000 yen for the first time. Everyone acknowledges that this is out of step with the actual economic situation. The main factors driving up stock prices are share buybacks and demands for shareholder returns (increased dividends) backed by huge internal reserves. The uneven distribution of wealth among the wealthy and institutional investors is becoming even more pronounced.
■ A perverse society of silence
If we were to impose an "excess profits" tax, like those in Western countries, on the abnormally large internal reserves of Japanese companies and raise the corporate tax rate by a certain amount, we could easily abolish the consumption tax. If we were to go ahead and abolish the consumption tax and boldly raise wages at a rate that exceeds inflation, personal consumption, which accounts for half of GDP, would undoubtedly expand and the economy would get back on a growth track.
However, the buds of economic recovery have been nipped in the bud. The entrenchment of shareholder capitalism and the collusion between the political and financial worlds , as seen in corporate and organizational donations, and the problem of politics and money are becoming more serious, while the power of labor unions is clearly declining. In Japan, voices of dissent by citizens are also weakening, society is becoming silent, and the "invisible occupation" is becoming even stronger.
Amid this, a perverse phenomenon occurred during the Kishida administration (2021-2014). Japan’s Liberal Democratic Party government, which has consistently shown a hostile stance toward the postwar labor movement, called on business organizations such as the Japan Business Federation (Keidanren) and labor organizations such as the national center labor union Rengo (Rengo) to raise wages and real incomes.
According to reports, on January 22, 2024, Prime Minister Fumio Kishida attended a government-labor-management meeting at the Prime Minister's Office to exchange opinions with representatives from the business community and labor unions, and called for "wage increases at a level higher than last year's" in the 2024 spring labor offensive. The Prime Minister emphasized that, in addition to a flat-rate reduction in income and resident taxes, "we will work together with the public and private sector to ensure that disposable income exceeds price increases." He called for "structural wage increases that exceed price increases."
However, the Kishida administration quickly introduced the NISA (Non-taxable Individual Savings Account) system, which allows small investments to be made without tax. This shift in policy to prioritize investment over wage increases was continued by the Ishiba administration and further strengthened by the Takaichi administration. There is no need to go into the details of what forces were at work in this shift to a focus on investment.
The real problem is that the checks and balances in Japanese society, or more simply, the power of resistance, has weakened to the point that the conservative government has to appeal to the heads of business and labor organizations on behalf of labor unions to raise disposable income. With the government, business, and labor all united, society is shrouded in silence and pro-government sentiment is on the rise.
■ Control of foreign funds
Over the past 30 years, the proportion of foreign capital in major Japanese companies has risen sharply, and by the 2020s , foreign investors now hold more than 30% of Japanese stocks. Major companies such as Sony, Nintendo, Fanuc, and Olympus have a majority of foreign shareholders, making them what could effectively be described as "foreign-led companies." Of particular note is the overwhelming presence of giant American investment funds such as BlackRock, Vanguard, State Street, and Capital Group.
In the 1970s, foreign ownership was around 5%. From the 1980s to the 1990s, capital markets were liberalized due to US demands for deregulation and market opening, and the foreign ownership ratio exceeded 20%. In the 2000s, the dissolution of cross-shareholdings had an impact, pushing the ratio to nearly 30%. In the 2020s, the foreign ownership ratio will remain around 30-32%, reaching record highs of 31.8% in fiscal 2023 and 32.4% in fiscal 2024.
Huge American investment funds are increasingly appearing among the top shareholders of major Japanese companies, exerting a strong influence on voting rights and corporate governance.
The Vanguard Group and BlackRock , Inc. are two of the world's largest asset management companies, both based in the United States. They each manage over $10 trillion in assets and are the largest shareholders of global companies such as Apple, Google, Pfizer, Coca-Cola, Disney, and J.P. Morgan. Both companies also invest widely in the stocks of major Japanese companies. Through index funds and ETFs (mutual funds), they have invested in companies such as Toyota Motor Corporation, Sony Group, Mitsubishi UFJ Financial Group, and Hitachi, Ltd. While their stakes in major Japanese companies are both less than 5%, they are known as "shareholders among shareholders" and demonstrate their presence as stable shareholders.
They rarely appear in public and are never featured in the news. However, from their position as shareholders, they can directly and indirectly influence corporate decision-making and management policies, such as shareholder returns , and ultimately the direction of Japanese society. The pressure from these foreign funds is behind the expansion of retained earnings and the establishment of shareholder capitalism. This is why it is said that " it is capital, not nations , that controls the world ." This is the reality of the "invisible occupation."
■ Collusion between foreign capital and politicians, business leaders, and government officials continues
The Japanese government does not tax retained earnings. Meanwhile, Japanese companies are increasingly prioritizing shareholder returns and dividends rather than distributing or raising wages for workers. This is because the ruling Liberal Democratic Party, which serves as a receptacle for highly bribe-prone corporate and organizational donations, works closely with bureaucrats to implement policies in line with the wishes of corporate executives and shareholders. There is no doubt that US investment funds are lurking behind the LDP's policy decisions as "silent shareholders." Japan's politics and economy continue to be significantly distorted by the combined effects of corporate donations, the growing corruption of politicians, business leaders, and bureaucrats through politics and money, and shareholder capitalism, which prioritizes increasing dividends through share buybacks and stock price hikes.
Powerful government agencies such as the Ministry of Finance and the Ministry of Economy, Trade and Industry are not "ignoring" the control of foreign funds. Rather, they are using it as "external pressure" to maintain their own authority and interests. Behind this are the profit cycle through amakudari, sympathy with international financial capital, and collusion with politics.
Let me go into some specifics. First, let's look at the consumption tax hike. Foreign funds have been pressuring the Japanese government to make "fiscal consolidation" a condition for investment. Finance Ministry bureaucrats have taken advantage of this and pushed for a consumption tax hike on the grounds of "maintaining international credibility." Because the consumption tax hike was implemented in conjunction with a corporate tax cut, corporate profits were protected and the burden on the people increased. In this way, they are using the demands of foreign capital to strengthen their own policy authority.
Foreign funds demanded a "corporate tax cut" as a condition for expanding investment in Japanese companies. The Ministry of Finance implemented a corporate tax cut under the pretext of "maintaining international competitiveness." As a result, investment profits for foreign funds increased, and the Ministry of Finance maintained its policy leadership. It explained to the public that "social security will be protected through consumption tax," balancing the interests of foreign capital with bureaucratic power.
Furthermore, public-private funds such as the Japan Investment Corporation (JIC), which was established under the initiative of the Ministry of Finance, are being made to make joint investments with foreign funds. Under the pretext of "collaboration with foreign capital," finance bureaucrats are expanding their own supervisory authority by incorporating national funds into foreign capital investment strategies. This attracts foreign capital as a "priming effect" for the public-private funds, strengthening the influence of the Ministry of Finance.
Furthermore, when foreign investors invest in important Japanese companies, the Ministry of Finance has the authority to require prior notification and review under the Foreign Exchange and Foreign Trade Act. Bureaucrats use this system to control investments by foreign funds as a "national security threat," while, when necessary, justifying domestic reforms by calling it "external pressure." The existence of foreign capital has expanded the Ministry of Finance's discretionary powers.
The sense of mission to maintain and improve the lives of ordinary people has been blown away from the minds of Japan's central bureaucrats. In fact, a distorted elitist mentality has led them to abandon any empathy for social justice and instead to strive to expand their own interests as an organization.
"Ministry interests, not national interests" is a phrase that is passed down in Kasumigaseki with a sense of self-deprecation.
■ 80 trillion yen investment in the US and the true nature of multinational corporations
The Trump administration has coerced 80 trillion yen in investment into the United States from Japan in exchange for lowering high tariffs . With domestic consumption sluggish, Japanese companies had nowhere to invest their retained earnings and surplus profits, and the outcome of the Japan-US trade negotiations has been a safe way to utilize capital in growing markets. This is a move by Japanese multinationals to avoid the Japanese market and prioritize survival and expansion in the US. In other words, this is a classic example of wealth accumulated in Japan being sucked away by the US.
At the Japan-US summit in July 2025, an agreement was reached to limit automobile tariffs to 15% by establishing an investment quota for the US totaling approximately 80 trillion yen (550 billion dollars). The target areas are areas that the US considers important for economic security, such as automobiles, semiconductors, energy, shipbuilding, AI, and quantum technology.
Japanese companies have limited investment opportunities at home due to a lack of demand and a declining population, but the US market offers vigorous consumption, a base for technological development, and attractive policy incentives (subsidies and tax systems), allowing them to use demand and surplus funds "productively." Moreover, Japanese government-affiliated financial institutions such as the Japan Bank for International Cooperation (JBIC) and the Nippon Export and Investment Insurance (NEXI) support Japanese companies' investments through loans and guarantees. It's a dream come true.
Even if the Japanese market shrinks, multinational corporations will secure profits in the US and global markets. The survival strategy of multinational corporations is to strengthen structures that will allow them to survive even if Japan collapses. A prime example of this is Toyota. With an impressive financial structure, said to have 30 trillion yen in retained earnings and 100 trillion yen in its own funds, Toyota is the leader in this 80 trillion yen investment in the US. For over 10 years, sales and operating profits in the US (North America) have exceeded those in Japan, and the company is taking this opportunity to further expand its US base.
As a result of squeezing its subcontractors like a dry towel, Toyota is no longer a company, but rather a state that manages national funds. Its accumulated surplus funds can be seen as a mass of workers' blood, sweat, and exploitation. It is a typical example of a multinational corporation striving to survive beyond national boundaries, symbolizing the structure in which "companies will survive even if Japan goes bankrupt." This is accelerating the transfer of accumulated wealth from Japan to the United States.