As Donald Trump and his fellow Republicans gin up another dose of trickle-down economics, they’d be wise to consider Shinzo Abe’s plight in Japan.

Since December 2012, Prime Minister Abe has borrowed many a page from Ronald Reagan, including corporate tax cuts and reduced regulations.

Five years on, the economy is enjoying its longest run of growth in 16 years, the Nikkei Stock Average is near 26-year highs, Japan Inc. is gearing up for a mergers and acquisitions tear and corporate profits are booming.

So is inequality, though. Just like the policies of the 1980s-era U.S. president, Abenomics is exacerbating Japan’s wage disparities by enriching those with large holdings of assets and land.

The 130% surge in stocks over the past five years has been a godsend to Japan’s 1%, but not so much for the other 99%.

The 130% surge in stocks over the past five years has been a godsend to Japan’s 1%, but not so much for the other 99%.

A recent Bank of Japan report is the latest dent in the veneer of egalitarianism, finding that 38% of households are very worried about affording retirement, while 44% are somewhat concerned. These findings are supported by a dearth of income growth.

As BOJ policy board member Makoto Sakurai put it recently: “From an overall perspective, despite the steady improvement evident in economic activity as a whole, wages have been slow to recover.”

Quite a paradox given a 2.8% unemployment rate and the tightest labor markets in generations. The answer, of course, is structural reform.

Japan Inc. is built around a seniority-based system of promotions and raises. Not only does that impede innovation and productivity, but it discourages job hopping, which puts less pressure on companies to boost wages.

An institutionalized bias toward job security dissuades many from demanding raises. So does a growing preference for hiring temporary staff at lower pay and fewer benefits, depressing pay particularly for women.

Abe’s Reagan-esque contention that market forces will save the day falls apart when you look at other labor-market features. Take the pitifully low 822 yen ($7.30) per hour minimum wage.

Weak unions

It’s also sad that the best the Japanese Trade Union Confederation, the nation’s biggest, can do is request a 2% base pay boost for 2018. It’s the union’s same ask for the third straight year, and some senior labor officials voiced concern that even 2% is an unrealistically high bar.

All this explains why seven straight quarters of expansion aren’t spreading the benefits of gross domestic product gains.

It’s troubling, too, that this growth spurt is looking worse for the wear –the 1.4% annualized gain in the third quarter followed a downwardly revised 2.6% pace in the second.

And it was largely an external story, owing to solid US and Chinese demand. Household consumption slid 0.5%, a reminder that years of deflation-inspired caution are still taking their toll on Japan’s 127 million people.

Trickle down, in other words, isn’t working for Japan any more than it will for Trump’s America.

Trickle down, in other words, isn’t working for Japan any more than it will for Trump’s America.

Abenomics has three parts: monetary easing, fiscal loosening and structural reform. The first has been deployed early and often, the second was botched by raising sales taxes and the third has largely focused on corporate governance tweaks.

Abenomics has been about 90% aggressive monetary easing and less than 10% structural change.

The changes that have occurred focused on governance upgrades that fill corporate coffers and enrich shareholders. What’s needed instead is a deregulatory big bang: looser labor markets, support for startups and small enterprises, empowering women and shaking up a change-averse
bureaucracy.

In a recent Reuters poll, 58% of respondents favored adjustments to the third phase of Abenomics to accelerate structural upgrades.

Only bold steps in that direction will broaden the benefits of growth to the 99% who, predictably, aren’t feeling the trickle-down magic. That’s just as true in the US as Japan.