Thomas Piketty’s Japanese Tour

TOKYO – Six months after Thomas Piketty's book Capital in the Twenty-First Century generated so much buzz in the United States and Europe, it has become a bestseller in Japan. But vast differences between Japan and its developed counterparts in the West, mean that, like so many other Western exports, Piketty's argument has taken on unique characteristics.

Piketty's main assertion is that the leading driver of increased inequality in the developed world is the accumulation of wealth by those who are already wealthy, driven by a rate of return on capital that consistently exceeds the rate of GDP growth. Japan, however, has lower levels of inequality than almost every other developed country. Indeed, though it has long been an industrial powerhouse, Japan is frequently called the world's most successful communist country.

Japan has a high income-tax rate for the rich (45%), and the inheritance tax rate recently was raised to 55%. This makes it difficult to accumulate capital over generations – a trend that Piketty cites as a significant driver of inequality.

As a result, Japan's richest families typically lose their wealth within three generations. This is driving a growing number of wealthy Japanese to move to Singapore or Australia, where inheritance taxes are lower. The familiarity of Japan, it seems, is no longer sufficient to compel the wealthy to endure the high taxes imposed upon them.