Japan in the Asian Century
Japan was the first “Asian miracle” economy. It rose from the ashes of World War 2 to become the world’s second largest economy. Its development was led by exports from Japanese enterprises which conquered world markets, especially in the automobile and electronics sectors.
A financial crisis in the early 1990s led to two “lost decades” of weak economic performance. During the same period, Japan’s manufacturing industry was “hollowed out” as Japanese enterprises invested substantially in both Western and Asian countries. The total GDP of the Chinese economy has now overtaken Japan.
Today, Japan faces a vast array of challenges like its aging population, large public debt, and sluggish economy, as well as the effects of the current global financial crisis and of Japan’s “triple crisis” (earthquake, tsunami and nuclear meltdown). The Japanese experience provides many lessons to other countries, which are now confronting some similar problems, or will do so in the foreseeable future.
Japan’s leading electronics companies (like Sharp, Sony and Panasonic), which once dominated world markets, are now struggling in the face of competition from companies from America (like Apple), Korea (Samsung), Taiwan and China. But Japan’s automobile companies are still successful, with Toyota leading the world’s automobile market. A new generation of Japanese enterprises is achieving great success, such as Softbank, Uniqlo and Rakuten. And Japan has become an important exporter of “cultural products” like anime, manga and computer games.
The arrival of the “Asian Century” presents Japan with many challenges, especially competition from Asia’s rising giants of China, India and Korea. But the Asian Century also offers Japan many new opportunities in emerging Asia’s fast growing markets, including tourism from Asia’s rising middle class.
1. Introduction to Japanese business and economy.
1. Two papers -- 1000-2000 words each. Each worth 35% of total evaluation. No final exam.
Topic 1. What is your preliminary evaluation of Japanese business and economy? What are the strong and weak points? Due Monday 18 June.
Topic 2. Please examine a few major challenges confronting Japan's business and economy. Due Friday 29 June, 5 pm Tokyo time.
In both papers, feel free to highlight issues that are of greatest interest to you, and of greatest relevance to your studies.
2. One 5 minute class presentation (10% of overall evaluation). You are encouraged to do this in a group with other students.
3. Remaining 20% of evaluation based on class participation.
Topic of first class -- in search of Japan's roots:
Identify Japan's main cities and islands -- map without labels.
Japan -- out of Africa. Last major immigration over 2000 years ago through Korea. Implication -- Japan has aboriginal people, Ainu and Ryukyu who predate this immigration, who are still disadvantaged.
Japan topography. Japan is a set of mountains in sea.
This means it is poor in agricultural and other natural resources, which it must import. So Japan had to become an exporting nation to pay for imports.
This also means that Japan's population is highly clustered in two main regions -- Kanto, area around Tokyo, and Kansai, area around Osaka. Tokyo is world's largest city.
Japan is located on "ring of fire", an area where most of world's earthquakes take place. Earthquakes and tsunamis have big impacts on economy. Japan also has much experience in managing natural disasters. But reliant on nuclear energy.
Japan is part of Asia, but isolated from Asia. Like what other country?
Japan also isolated itself ("sakoku") from rest of world in early 1600s to resist Western colonialism.
Isolation and unique culture.
But Japan was forced to open up by Commodore Perry's back ships around 1850.
"Meiji Restoration", a political coup in 1868, brought down Tokugawa Shogunate, nominally restored Emperor Meiji to throne. Meiji period heralded beginning of major political, social and economic modernisation and Westernisation.
Japan developed rapidly following Meiji Restoration. Iwakura mission.
Japan always a borrowing culture. Much borrowing from China -- writing, Buddhism, Confucianism, architecture, arts, etc.
But Japan followed the West in colonising Asian countries, and competed with the West. Japan colonised Korea and China, and still has bad relations with both. Japan has free trade agreements with many countries, but not these two.
Japan was ultimately defeated in World War 2. Japan was then remade by US as a peaceful democratic country. Very close relations with US.
Following the war, Japan recovered dramatically to become Asia's leading economy. But since a financial crisis in 1990s, Japan has been stagnating. In 2010, China overtook Japan to become Asia's biggest economy, world's second biggest.
- Japan map without labels
- Japan -- out of Africa
- Japan -- topographic map
- Ring of fire
- Map of Eurasia
- Commodore Perry and the black ships
- Iwakura mission
- In search of Japan's roots. ACI.
- Uniqlo interview
- Is Japan cool? Youtube.
2. Japan's postwar resurgence
Japan was virtually destroyed by World War 2. Amazing resurgence. Benefit of backwardness.
1950-73 -- averaged 8.1% economic growth (like China more recently).
1973-90 -- solid growth of 3.0% (a slowdown, like China now).
By 1990, Japan’s GDP per capita reached 80% of US level. But Japan also transformed from low tech to high-tech, from agricultural to manufacturing to service based economy, and from rural to urban society.
Explaining Japan’s resurgence.
How do economies grow? Investment. Labour (workers). Productivity (efficiency). Governments can help foster that by creating a business friendly environment, and investing in education and infrastructure. An open and growing world economy can help too by providing markets for exports.
Role of education -- PISA data.
Role of infrastructure.
Role of demography.
Ease of doing business.
ICT Development Index.
- Angus Maddison. The World Economy : A Millennial Perspective (data)
- OECD. Programme foir International Student Assessment.
- Juku or cram school in Japan
- World Economic Forum. Global Competitiveness Report 2016-17.
- Bridges to nowhere in Japan
- Japan's working age population
- Doing Business -- economy rankings
- Democracy Index 2017, Economist Intelligence Unit
- ITU -- ICT Development Index
- Japan almost made it! Asian Century ... on a Knife-edge
3. Japan's post-war resurgence continued
Free and open trade offers many benefits:
(i) specialisation in what you are best at -- comparative advantage.
(ii) economies of scale -- production is more efficient with higher production volumes.
(iii) companies can also learn global best practices by producing for world markets.
(iv) for a country like Japan, exports finance imports of natural resources that Japan lacks.
In 1945 was a low-tech country, but wanted to become a high-tech country. So it protected its infant industries to give them the breathing space to climb the development and technology ladder.
Protection took form of restrictions on Imports and foreign investment, subsidies and privileged access to bank finance. The exchange rate was kept artificially low (manipulated).
Japan's policies were successful for the manufacturing sector, which became competitive on global markets, especially in motor vehicle and electronics industries. Companies like Toyota, Nissan, Honda, Sony, Panasonic.
Not only did Japan catch up to Western companies, it developed new management ideas like kaizen, just-in-time inventory management and lean manufacturing.
But Japan was not successful for its services and agricultural sectors which remained focussed on the domestic market.
This development strategy was engineered by the "iron triangle" of business, bureaucrats and politicians.
Japanese companies have their own "style", and played important role in Japan's rise after 1945.
Students recruited directly from university. Personality and social activities more important than grades. Companies offer in-house training to form "company men". Sempai trains kohai. Team work important.
High degree of job security, with lifetime employment common in big companies. Seniority-based pay. Regular job rotations. Relationship of loyalty between worker and company. Family-like atmosphere. “Salarymen” -- white-collar worker. Little place for professional women. Mainly “OL” doing “pink-collar” tasks. Sexual harassment (seku-hara) a problem.
Japanese business meetings ceremonial. Everything pre-cooked through "nemawashi". Work long hours, demonstration of loyalty. Japanese productivity low by Western standards.
Karoshi. Drinking with colleagues after work for team-building. Nomunication. Arranged marriages.
Retirement a drama for Japanese men. Find their family again after 30-40 years of marriage to the company. His wife calls him “industrial waste”.
Role of amakudari in iron triangle. Many corporate corruption scandals.
Overall, Japanese companies were outstanding in high-growth, catchup period. But now changing. Irregular work. Womenomics. More international and flexible. But most Japanese companies remain very Japanese.
- Death By Overwork in Japan: Karoshi & Japanese Salarymen
- Toyota’s kaizen
- Japan's electronics companies
- Carlos Ghosn on leadership
- Donald Trump Meets With SoftBank Chairman Masayoshi Son
- The Incredible Journey of Chef Nobu and His Restaurant Empire With Robert De Niro
- Japan Lean Manufacturing Trip
- Kobo in Conversation: Hiroshi Mikitani. Youtube.
- Japan's business world
4. Japan's bubble economy
What is an economic bubble? Dramatic price rise, followed by dramatic price fall. Often occurs in real estate or stock markets.
How do bubble economies occur? Easy money fuels price rises. Irrational exuberance. Can only be sure that a price rise was a bubble after crash.
Examples US real estate in 2006. Even now in some US cities. In recent years, concerns about Chinese real estate bubble. Talk of Canadian real estate bubble. Lots of talk of US stock market bubble.
Problems of bubble economy -- people can lose lots of money when the bubble pops. Can led to balance sheet recession.
Japan had a bubble economy in late 1980s in stock and real estate markets.
During 1980s, Japan's exports and economy became very strong. The US and other Western economies felt under threat. In 1985, G5 Plaza Accord pushed Japan to increase value of yen exchange rate. Adversely affected Japanese exports and economy.
Japan responded with easy money policies which fuelled bubble. Also irrational exuberance. Many Japanese and other countries thought that Japan was overtaking the US, and Japan could be number 1! Value of Tokyo's Imperial Palace was higher than the state of California.
Late 1989, the Bank of Japan was worried about bubble, and increased interest rates. The bubbles started bursting.
Japanese government slow to react. Thought prices might recover. Also, suffered five stages of grief -- denial, anger, bargaining, depression and acceptance.
In such a situation, should save the financial system, save good banks and companies, and let others go bankrupt. Japan very slow to react. Took over ten years to solve problem. Different from US in 2008.
Also suffered balance sheet recession as citizens and companies worked off debt (deleveraging).
The 1990s, the first lost decade. Slow economic growth -- just 1%. Government spending to stimulate the economy. Growing government debt. GDP per capita slipping back vis-a-vis world leaders like US and Germany. Deflation -- falling prices.
But the 1990s were not just about bubble economy. Tectonic plates shifting. Aging and declining working age population. Competition from other Asian countries. Outsourcing, hollowing-out of manufacturing sector. Old protectionist model no longer useful. Should give more opportunity to women.
Some consequences. Increasing non-regular employment. Rising inequality and poverty.
China's total GDP overtook Japan's in 2010. The 2011 triple crisis highlighted Japan's vulnerability to natural disasters. And now Japan is within easy firing range for North Korea's missiles.
Japan has been changing slowly. Old Japan and new Japan co-existing. Old companies -- Toyota and Sony -- and new companies -- Uniqlo and Softbank. Japan now a leader in high-tech components for global value chains, eg Murata manufactures ceramic passive electronic components, primarily capacitors.
Conservative Japan and youth culture, otaku.
- Japan almost made it! Asian Century ... on a Knife-edge
- Banking Crises and "Japanization": Origins and Implications. Asian Development Bank Institute Working Paper No. 430 -- see page 8.
- Japan's economic bubble distant memory 20 years later
- Tadashi Yanai owner of UNIQLO "Rules to Success"
- CNN: Uniqlo boss, Tadashi Yanai - Government lied to us
- What Does Otaku Mean?
- Maid cafe @home cafe - Kawaii and fun in Tokyo | One Minute Japan Travel Guide
- Japanese medical tech for the World
- Global value chains -- Asian Century ... on a Knife-edge
-- Shinzo Abe's LDP elected in December 2012. Determined to solve Japan's deep problems -- deflation; big public debt; and weak economy. Also to strengthen Japan in light China threat.
-- Abenomics programme. "Three arrows". Monetary easing. Fiscal (budget) stimulus. Structural reform. Thanks to Abenomics, some increase in economic growth.
-- Monetary easing to kill deflation. Bank of Japan's goal was 2% inflation within 2 years.
-- Kuroda Bazooka's massive monetary easing. Pushed down yen exchange rate. Improved profits for big exporting companies. Workers' incomes not increased very much.
-- Inflation has increased a bit. But monetary easing has not succeeded in achieving 2% inflation.
-- Yen exchange rate depreciated -- helped boost massive rise in foreign tourists.
-- Second arrow. Fiscal stimulus (more infrastructure!), to be followed by increased consumption taxes. Consumption tax increased from 5% to 8% in April 2014. But pushed economy into recession. Another increase to 10% scheduled for October 2015. But postponed until April 2017, and postponed again until October 2019.
-- No serious plan to bring debt under control. Public debt could equal 600% of GDP by 2060. Government has continued with stimulus packages. Challenges -- silver democracy and weak economy.
-- Third arrow. Structural reform. Means deregulation and liberalisation of markets. Necessary to boost productivity and potential growth.
-- TPP -- US withdrew. Abe successfully negotiations with TPP11.
-- Japan has also negotiated a free trade agreement with the EU.
-- Womenomics -- more talk than action.
-- Foreign direct investment -- goal to double it. Limited progress.
-- Migration -- some limited progress.
-- Corporate governance -- opening up iron triangle to transparency and accountability, outside directors -- limited progress.
-- Labour market reform. Break down labour market dualism by improving social insurance and training for non-regular workers and reducing protection for permanent workers
- Japan, EU seal landmark trade deal in challenge to Donald Trump
- Assessing Abenomics 5 years along
- Wharton's Garrett Says Abenomics Alone Won't Transform Japanese Economy
- Japan Goes With Another Round of Abenomics
- Has Abenomics Been Good for Japan?
- Further Evidence of Abenomics Failing
- Do Tourists in Japan Experience Culture Shock?
- Japan’s Silver Democracy
- EU and Japan finalise Economic Partnership Agreement
- What is the TPP 11?
6. Japan and Trumpnomics
During Cold War period, Japan key ally in battle with communism. During Obama presidency, US and Japan closest of allies. US/Japan Alliance necessary in light of North Korea, and China's challenge to US position in Asia.
Donald Trump critical of Japan during election campaign. Trump complained Japan not paying enough for Alliance. Japan spends 1% of GDP on military, US spends 3 1/2%.
Abe happy to be first foreign leader to meet Trump following his election victory. Stressed importance of security alliance. Disappointed US withdrawal from TPP.
Trump's trade policy motivated by bilateral trade deficits. US trade deficit with Japan nearly $70 billion, third highest after China and Mexico. US still Japan's most important export destination. Trump argues for "free, fair and reciprocal" trade. China more exposed to Trump protectionism. Japan indirectly affected, because of Japan exports to China. Trump criticised Japanese companies like Toyota for investing in Mexico, and using NAFTA to export back to US.
With US withdrawal from TPP, Abe and Trump agreed to new framework for economic dialog. US wants bilateral free trade agreement. Japan resisting, does not want to further open its agricultural sector. Abe pushing Trump to rejoin TPP, but he won't buy it.
Japan hit by Trump's tariffs on steel and aluminium. Could not negotiate an exemption, despite Abe/Trump friendship. Trump threatening tariffs on Japan's motor vehicle exports. Trump pressuring Japan to import more from US to reduce trade deficit.
Japan argues its companies have massive investments in US, create 800,000 jobs. Already two-thirds of Japanese cars sold in US are produced in North America. Trump asking for more investments.
Softbank promises investment of $50b in US.
If Trump successful in denuclearisation Korean peninsula, improve security environment in NE Asia, and bring new economic opportunities. But Trump would expect Japan to provide financial assistance to North Korea. And Trump seems to be sidelining Japan's interests with North Korea.
Over the longer term, it is easy to imagine Japan switching sides, and aligning itself with China, rather than Japan.
- Burger Shop in Japan Releases New Trump Burger
- Why Masayoshi Son Invested $20 Million in a Young Jack Ma
- Donald Trump meets with Japanese PM Shinzo Abe for first foreign meeting
- Trump, Abe Play a Round of Golf
- Japan’s PM falls into a golf bunker
- Trump to meet with Japanese prime minister, with North Korea summit a possibility
- North Korea: Abe and Trump meet amid peace talks
- SoftBank's Masayoshi Son speaks about the exclusivity on iPhone in Japan
- Donald Trump Meets With SoftBank Chairman Masayoshi Son
- Softbank weaves its worldwide web
7. Populism and cultural factors
Could Japan be vulnerable to Trumpian populist revolution?
Populism is about supporting masses/people against privileged elites. Trump portrays himself as representative of forgotten, poor Americans against “liberal elites”.
At this stage, Japan seems not vulnerable to populism, even though victims of globalisation, technological change, financial crisis, badly managed natural disasters, and decline relative to China.
Low level of migration? Virtually no refugees? Low imports? Suicide? Passivity? Hierarchical society? Abe’s nationalism? Safe society? Government control of public opinion through press controls?
Although inequality is a problem, CEOs are not extremely rich as in US. No liberal, progressive, international elites, like US. Still conservative society.
Cultural factors may explain Japan's vulnerability to populism and other aspects of Japanese business and economy.
According to social psychologist Geert Hofstede, culture is defined as the collective mental programming of the human mind which distinguishes one group of people from another. He analyses six aspects of culture:
At an intermediate score of 54, Japan is a borderline hierarchical society. Japanese are always conscious of their hierarchical position. But not as hierarchical as most of the other Asian cultures.
Japanese society shows many of the characteristics of a collectivistic society: such as putting harmony of group above the expression of individual opinions and people have a strong sense of shame for losing face. However, it is not as collectivistic as most of her Asian neighbours.
Japan is one of the most Masculine societies in the world.
Japan is one of the most uncertainty avoiding countries on earth.
Japan is one of the most Long Term Orientation oriented societies.
Japan has a culture of Restraint. Societies with a low score in this dimension have a tendency to cynicism and pessimism.
- Hofstede Insights
- Doing Business in Japan- Hofstede Cultural analysis
8. Student seminar on Japanese companies
Students made presentations on their favourite Japanese companies.
Mama Square -- aTokyo-based company that employs mothers who are raising children is pioneering a way to make it easier for such women to stay in the workforce.
Zebra specialises in ball-point pens.
A Bathing Ape (ア・ベイジング・エイプ A Beijingu Eipu) (or BAPE) is a Japanese clothing brand founded by Nigo (Tomoaki Nagao) in Ura-Harajuku in 1993.
Kao Corporation is a chemical and cosmetics company headquartered in Nihonbashi-Kayabacho, Chūō, Tokyo.
Bandai Co., Ltd. is a Japanese toy maker and a producer of a large number of plastic model kits as well as a former video game company. It was the world's third-largest producer of toys in 2008 after Mattel and Hasbro.
PILOT ballpoint pens combine technology, comfort, and longevity. Retractable, comfortable, environmentally-friendly, slick.
- Tokyo firm to offer places of employment with kids close at hand for working moms
- A Bathing Ape
- Pilot ball-point pens
- Confucian ethics and Japanese management practices
10. Japan's demographic time bomb
Japan is dying off. It is in state of demographic decline. Falling workforce and population. Super-aging society. Hitting economy. In 1990, Japan's potential economic growth over 3%. Now below 1%. Also hitting GDP per capita as declining share of population is working. Labor shortages. Some companies cutting back operations.
Health, long-term care and pensions eating a large share of public budget. Decline in national GDP also results in decline in national power, at a time when China's power rising.
Japan experienced, like all countries, demographic transitions.
In pre-modern world, high birth and death rates, with little change in population.
First transition, decline in death rates for children, led to population explosion, due to improvements in nutrition, sanitation, education and health care.
Second transition is the increase in life expectancy for similar reasons. Still continuing.
Third transition -- fall in fertility rates due changes in status of women, education, industrialization, urbanization and advent of contraception. Japan's fertility rate fell from 3 children per woman in 1950 to around 2 in 1970. Today, fertility is around 1.4, well below "replacement rate" of 2.1 children per woman. Ultimately, Japan's population began falling in recent years.
Japan not alone in having low fertility rate -- other advanced countries like Germany, Italy, Spain, and Poland do too. Other East Asian countries like Hong Kong, Korea, Singapore and Taiwan also have very low fertility. But fertility rates are close to replacement in Australia, France, Norway, Sweden and US.
For evolutionary biologists, low fertility is strange. Normally natural selection produces individuals who are good at converting their resources into lots of fertile descendants.
Why is Japan's fertility rate so low?
-- in the 1940s and 50s, Japan’s fertility rate fell sharply to around 2.1, like many countries, as married couples chose to have less children, arguably focussing the quality of children, more than quantity..
-- but then from the 1970s, fertility fell even further, below replacement rate, with falling rates of marriage. Japanese women now more educated, and more interested in working, especially in services sector. But in Japan, it is difficult to combine work and family life, with traditional gender roles and work culture. So some choose career, and forego marriage and family. Some postpone marriage and settle for one child. Japanese women rejecting traditional gender division of labor.
-- Weak economy, and rise of irregular employment and poverty means it is hard for some men to find wife. Hypergamy by Japanese women.
-- Other factors pushing down birth rate -- cost of housing, education (night school), shadow of earthquakes, overwork (Japanese men are tired). According to surveys, most Japanese would prefer 2-3 children, but these factors militate against fertility.
- World population
- Japan's fertility
- OECD. Economic Survey of Japan 2015. See pages 4 and 13.
- Japan's life expectancy
- Japan's demographic trends
- World Population Prospects 2017. Volume II: Demographic Profiles
- The Japanese Celibacy Syndrome
- Japan: Looking For Love - #AsiaLive -- from 2.30
- 8 Reasons Why Japanese Men are Becoming Herbivores
- Japan's demographic drama, ACI
11. Japan's demographic time -- bomb Part 2
Sociologists talk of Japan's celibacy syndrome, decline of arranged marriages, womb strike, changes in Japan's younger generation.
Fertility varies in Japan. Okinawa has highest fertility at 2.0, while Tokyo has 1.2. Okinawan women marry younger, have children younger, workforce participation similar to Tokyo. But Okinanwans have better work/life balance, as work less hours.
Benefits of demographic decline -- Good for environment. Reduce crowding. Help cope with AI and robots. Silver economy. Possible geriatric peace in East Asia.
Demographic decline makes Japan poorer.
What to do?
Increase fertility rate. Many efforts in past, to little effect. Even if effective, that won't solve immediate economic effects of demographic decline. Abe set target fertility rate of 1.8 for year 2025, providing assistance -- child care, cheaper education.
Increase labor -- migration, womenomics, youth, seniors, second jobs.
Increase investment technology -- robots, AI
Increase productivity -- Abenomics 3rd arrow, especially trade liberalisation and deregulation.
12. Japan's womenomics solution
Increased participation in the work of work by Japanese women, and the decline in marriage, have been factors driving down fertility. Womenomics seek to improve the opportunity for women to work, and at the same time improve fertility through "family-friendly" policies. Why womenomics? It is both a human rights issue, and an economic issue.
All countries are transitioning from traditional gender-based divisions of labor to more equal opportunity. In the past, some countries had very strict divisions of labor, like Japan, while others were less strict. But even today, no country offers equal opportunity to women -- even in Scandinavia.
According to the global gender gap index (GGGI), the average global gaps between women and men are quite small for Educational Attainment, and Health and Survival. But the gap is large for Economic Participation and Opportunity, and enormous for Political Empowerment. But Japan is way behind global leaders, being ranked 114 out of the 144 countries surveyed. Some estimate that women participated in economy as much as men, this could lift Japan's GDP per capita by over 15%.
But Japanese women are not powerless in Japanese society. After all, Japanese women run the household finances.
Womenomics has been on the Japanese agenda since at least 1999. There has been some progress, especially since 2012, as womenomics is one element of Abenomcs. Female participation in work force has grown substantially, and now exceeds US. But much growth of female work has been for part-time jobs.
What is necessary to achieve great success in womenomics?
Need comprehensive change in business, society and government. Japanese companies need to adopt a family-friendly environment. In families, men need to become more active. And government needs to provide more adequate childcare facilities and neutral tax policies.
Key elements of Abe's womenomics:
-- Establishing new targets for the participation and advancement of women in the workforce.
-- Increasing the availability of daycare and after-school care.
-- Encouraging the private sector to promote more women and provide data on the advancement of women.
-- Recruiting and promoting women in government.
-- Expanding child care leave benefits.
-- Reviewing the tax and social security system.
-- Allow foreign housekeepers in special economic zones.
Targets not being achieved and being revised down. The goal was to fill 30% of senior positions in both the public and private sectors with women by 2020. However, within two years this target has been cut to just 7% for senior government jobs and 15% at companies.
Fundamentally, we need: New mentalities and mindsets. Role models. Leadership. Fundamentally, women must fight for womenomics. Foreign investment can help, if foreign companies hire Japan's talented women.
- The Global Gender Gap Report 2017. World Economic Forum.
- The Pursuit of Gender Equality. OECD
- Why male Japanese wage-earners have only 'pocket money'
- Trading Success Stories - Japan's Forex Trader housewives Mrs Watanabe
- OECD. Economic Survey of Japan 2015 -- pages 15 and 16.
- Womenomics 4.0. Time to walk the talk.
- Japan's womenomics isn't working
- WAW!2016 Interview w/ Ms. Kathy Matsui, Vice Chiar of Goldman Sachs Japan Co., Ltd. (EN)
- The New Japan Inc: One woman’s burden, another’s opportunity
- Female entrepreneurs: Different options and different styles
13. Some great Japanese companies
1. Carlos Ghosn and Nissan.
- The Foreigner Who Saved Nissan
- Nissan CEO Carlos Ghosn: How I Work
- Carlos Ghosn on leadership
- The Man Behind the Nobu Name: 3 Things You Don't Know About Nobu Empire
- The Right Way To Eat Sushi, According To Renowned Japanese Chef Nobu Matsuhisa
- Chef Nobu: How To Make Sushi
14. Youth and the NEET issue
At a time when Japan needs more workers, many youth are "NEETs", not in Employment, Education or Training.
Some 1.7 million or 10% of Japanese youth aged 15 to 29 are NEETs. The number of Japanese NEETs has declined over past decade. And Japan's NEET problem is not as bad as some other OECD countries. In fact, it is lower than the OECD average of 14.7%, and the NEET problem is greater in countries like Italy, Greece, Spain, France, Korea, US and Canada. But it is a waste of human potential.
About two-thirds of NEETs are women, who may be looking after children. Many women NEETs cannot find or afford child care for their children.
An estimated 320 000 young people below the age of 30 years (about 1.8% of this age group) live in a state of acute social withdrawal – the so-called hikikomori. They are mainly boys. Hikikomori require intensive and better assistance.
Government, and families are already working to solve the NEET problem. But there is much more that can be done to identify NEETs, and help them find a way back.
- Investing in Youth: Japan. OECD
- Japanese men locked in their bedrooms for years
- Society at a Glance 2016. OECD
15. Migration and Japan
Long recognised immigrants can make an important contribution to solving Japan's demographic dilemmas.
How can immigration help Japan?
-- Fill labor market shortages.
-- Doing "3-D" work -- dirty, difficult and dangerous.
-- Migrant caregivers can support womenomics.
-- Filling other skill gaps, like IT workers.
-- Improve soft power with neighbours like SE Asia.
-- Accepting refugees can be a demonstration of global leadership.
What has been Japan's record in accepting migrants? Due to beliefs about its cultural homogeneity and uniqueness, Japan has been reluctant to accept many migrants. One reason Japan has escaped populism may be the low level of migration.
PM Abe once said, “... before accepting immigrants or refugees, we need to have more activities by women, elderly people and we must raise our birth rate. There are many things that we should do before accepting immigrants”. “In countries that have accepted immigration, there has been a lot of friction, a lot of unhappiness both for the newcomers and the people who already lived there”.
Economic pressures gradually forcing the migration door open over the past years. One element of Abenomics is utilising foreign human resources. It is not an immigration policy.
What have been the main trends?
-- From 1990, Japanese ethnic people from Latin America.
-- Marriage migration.
-- Skilled migrants have relatively easy access. Can gain permanent residency, and ultimately nationality. But Japan having trouble attracting skilled migrants -- language, culture, work-life balance, low pay. Many prefer Singapore.
-- A "Trainee" program officially enables foreign workers to learn about Japanese business practices and technology, and bring those insights back home. In reality, it is a de facto guest worker program -- contracts can now be extended from 3 to 5 years. (230,000+)
-- Foreign students can also work in Japan (280,000 foreign students in Japan).
-- When they graduate, foreign students well placed to find a permanent job.
-- But Japan accepts very few refugees. In 2017, received 19,628 asylum applications, but accepted only 20. Europe's experience with refugees is but one factor discouraging the acceptance of refugees.
-- Low number of illegals -- 65,000.
Japan's foreign-born population risen from 1 million or 1%, 2 1/2 million or 2% past couple of decades. Biggest sources -- China, Korea, Philippines, Vietnam, Brazil, Nepal. Over 700,000 from China, becoming very important group of skilled and entrepreneurial migrants.
Unfortunate dark side to Japan's immigration experience, as UN Human Rights Council has noted. There is "widespread racist discourse against members of minority groups, such as Koreans, Chinese or Burakumin, inciting hatred and discrimination against them". Foreign trainees and technical interns are the subject of "a large number of reports of sexual abuse, labour-related deaths and conditions that could amount to forced labour".
- Japan's immigration imperative
- Towards a multicultural Korea?
- Japan's experiment in ethnic immigration
- Polite Japan's dark underbelly
- The Worst Internship Ever: Japan’s Labor Pains
- Do Japanese Want Immigrants in Japan?
- Is Japan's Immigration Policy Really Strict?
16. Japan and robotics
Japan long been a world leader in industrial robots. Enabled its manufacturing sector to be very efficient. Supported by large government investments in R&D.
Still today, Japan supplies half world's robots, and is major robot exporter. Japan's motor vehicle and electronics industries most important buyers of robots. (1)
As part of Abenomics, Japan has adopted a new robot strategy. Robots are part of policies to deal with ageing population. (2) (3) Robots in service sector. Social robots.
Robots have great potential in services, agriculture, and providing assistance to ageing populations. (4), (5), (6), (7), (8).
Today's robotics are now part of the 4th industrial revolution (Industry 4.0). This refers to a set of highly disruptive technologies, such as artificial intelligence (AI), robotics, blockchain and 3D printing, that are transforming social, economic and political systems.
Industry 4.0 has the potential to improve productivity, lower production costs. But repetitive and routine tasks are increasingly replaced by robots, machines, and automation. Such technologies will also solve many problems facing countries like Japan, with its ageing and declining population. While new technologies will destroy many jobs, other new jobs will be created. There is much debate about the net balance. All countries will be challenged.
What is necessary is for governments to invest more seriously in education, skills and training, and lifelong learning, both to optimise the benefits of digitalisation, and to enable displaced workers to find new employment. They must also develop innovation policies to be part of this technological revolution.
- J-TECH - Industrial Robots - A Company's Quest
- Japan battles population decline with robots
- Here's why Japan is obsessed with robots
- See how this Japanese robot makes sushi
- This Robot Is Greeting Tourists in Japan
- World's first 'robot run' farm to open in Japan
- Aging Japan: Robots may have role in future of elder care
- DRIVERLESS CARS COULD TRANSFORM RURAL JAPAN
- What is the Fourth Industrial Revolution?
- The Fourth Industrial Revolution | At a glance
17. Japan's fracturing middle class society
Why look at social/cultural issues in a Japanese business and economy (JBE) class? Quite simply, JBE has important social and cultural impacts, and Japanese society and culture affect JBE.
Japanese society is fracturing. What are the symptoms? Poverty, inequality, productivity growth not reflecting in wage growth, irregular employment, karoshi, suicide, hikikomori.
Why does this matter? Social justice/fairness. Inequality and poverty can weaken the economy by weakening economic demand, by reducing investment in education. It can lead to social instability and populist politics like Trump in US, Brexit in UK, and extreme right parties in Germany. It can undermine support for globalisation, like the lack of support for TPP in the US.
What are the main causes of social fracturing?
Technology can reduce the demand for low-skilled workers and increase the demand for high skilled workers. Japan's outsourcing of lower business to China and elsewhere in East Asia has the same effect. In Japan, deregulation in the 1990s, undermined life-time employment, encouraged irregular employment, and made hiring and firing easier.
Japan's trade unions seem weak and too cooperative with big business. More generally, Japan's work environment and society are very high pressure and competitive thereby contributing to social problems.
How can we solve these problems?
Prime Minister Abe has been pressuring companies to increase wages, but with little success. The government could increase the very low minimum wage. It could also provide more assistance to poor people (while cutting benefits to seniors). It could provide greater education and training to workers who have lost their jobs..
Trade unions and the general public need to become stronger in fighting for social justice.
- OECD. Inequality
- How Should Japan Address Socio-economic Inequality and Poverty?
- Japan's poverty rate hits record high
- Living Below The Poverty Line | Get Real | Channel NewsAsia
- One in three single working Japanese women living in poverty - Press TV News
- Working Poor In Japan
- Homeless in Japan
- How Japan’s Economy Is Destroying Its Youth
- Suicide. Take time to listen: Rene Duignan at TEDxTokyo
- SAVING 10,000 - Winning a War on Suicide in Japan
18. Japan's corporate scandals
Corporate scandals occur everywhere. But Japan has special problems.
Recall iron triangle -- big business, politicians and government officials -- cosy, non-transparent relationships. One role of government, regulate business. But in Japan, government officials have close friendly relationship.
Corporate governance -- the way companies are governed and managed -- in Japan always different from other advanced countries, not up to international standards.
One aspect is corporate board, supposed to supervise company's management on behalf of shareholders. But in Japan, boards are stacked with insiders, like representatives from the main bank, and former corporate staff members. Results in cosy club, management weakly supervised, blocks mergers and acquisitions, especially from overseas. Corporate decisions on golf course, not boardroom. External auditors don’t always do serious job. Mainstream media often silent -- advertising revenues.
As part of Abenomics, government implementing corporate governance reforms. But change slow.
Olympus scandal. Big losses through bad investments over 20 years ago. Covered up by creative accounting, and shady deals, some involving organised crime. New CEO, Michael Woodford, discovers it. Launches investigation. Board members and senior staff obstruct. Woodford exposes to international media. Japanese domestic media silent. Woodford gets fired. Ultimately, government acted, and ex-chairman and others prosecuted.
Toshiba scandal. Toshiba guilty of accounting scandal of $1.2 billion in overstated profits. Improper accounting, over seven years, started following global financial crisis. Toshiba's corporate leadership handed down strict profit targets, "Challenges", to business unit presidents, often with implication failure unacceptable. Only way to achieve Challenges was cooking the books. Toshiba's corporate culture, obedience to superiors, an important factor enabling fraudulent accounting practices. Culture operated on every level of authority down to accountants who cooked the books. Investigation recommends robust whistleblower system.
Kobe Steel admitted data fraud for nearly five decades. Japan’s third-biggest steelmaker supplies steel parts to manufacturers of cars, planes and trains around world, admitted supplying products with falsified specifications to over 600 customers, , including 222 customers overseas, throwing global supply chains into turmoil. What caused Kobe's problems -- greed, insular corporate culture, dishonesty and negligence.
Yakuza members of organized crime syndicates originating in Japan. Traditionally, Japanese government tolerated yakusa, because crime is inevitable, better be organized. Yakuza acts like second police force, tolerating their existence helps keep petty crimes like theft and robberies to an absolute minimum. More recently, government been cracking down, and yakusa membership declining.
- Ex-CEO of Olympus blows the Whistle on Fraud and a Culture of Dysfunction in Japan. Start 1.50 -- 9.00.
- Toshiba scandal: Why did the boss resign? BBC
- Toshiba's accounting scandal
- Toshiba boss resigns over accounting scandal
- Toshiba scandal shakes corporate Japan
- New head of scandal-hit Kobe Steel may seek mergers for some business units
- Who are Japan's Yakuza? In 60 seconds - BBC News
- Japan's Yakuza: Inside the syndicate
- Japan calls its corporates to account
19. Japan and China parallels
Chinese President Xi Jinping is worried. China could be turning Japanese!
China shares Japan’s three big problems -- low productivity, poor demography, and big debt. China needs more reform and opening of economy to boost productivity, but Xi is worried about possible instability of reform. China fertility rate has been below 2.1 since 1993. China’s working age population has been falling since 2014. China is becoming old before it becomes rich! In contrast, Japan became rich before it became old.
China’s debt has exploded over past decade. Many are worried that China could have a debt crisis, or lost decades like Japan. How did China get into debt problem.
When US caused the global financial crisis in 2008, Chinese government became worried. Chinese economy had long been dependent on exports to US and other Western markets. And it was concerned about possible unemployment, and social and political stability.
So Chinese government launched a massive economic stimulus program. This program involved increasing spending on infrastructure and housing, encouraging companies to increase production, and easy money. It was largely financed by money from state-owned banks, which was loaned to state-owned enterprises and local governments.
This stimulus was very effective in maintaining growth in the Chinese economy. It was also very helpful to world economy, especially to China’s Asian neighbors, and natural resource exporters like Australia.
This stimulus program did, however, have adverse side effects:
-- not all infrastructure was efficient -- some white elephants, and ghost cities.
-- excess capacity in many industries like steel, cement and aluminium.
-- asset bubbles. Following a rise in stock prices, in 2015 there was a crash. In some cities, housing prices rose sharply, and today there are concerns about housing prices in China's large cities.
-- China's total debt has risen dramatically, from 150% of GDP to over 250%, and could rise over 300% in coming years. Much of this is corporate debt debt, not government debt. But it is still in the public sphere because much is state-owned enterprise debt owed to state-owned banks. Debt in shadow-banking sector also very high.
-- And much of this debt is held by inefficient zombie companies.
Some are worried that China is headed towards a debt crisis. IMF says China’s “credit growth is on a dangerous trajectory, with increasing risks of a disruptive adjustment and/or a marked growth slowdown”.
Others argue that China is safe. It has high foreign exchange reserves, low government debt, and the Communist government has a great capacity to control the economy. Against that, the government seems more concerned about preventing unemployment than its debt, and more concerned about achieving its economic growth targets.
One thing is certain now that China needs to improve its productivity, much of its debt and investment are increasingly inefficient, raising is spectre of stagnation
- Is China’s economy turning Japanese? Financial Times.
- The Vapors - Turning Japanese - 1.10
- Credit Booms—Is China Different? Sally Chen ; Joong Shik Kang. IMF Working Paper
- Resolving China's Zombies: Tackling Debt and Raising Productivity. W. Raphael Lam ; Alfred Schipke ; Yuyan Tan ; Zhibo Tan. IMF Working Paper.
- China's eerie ghost cities a 'symptom' of the country's economic troubles and housing bubble
- A look at China's debt issues
- China's Central Bank Chief Warns Corporate Debt Is Too High
- Xi Jinping, Barack Obama, Winnie the Pooh
- Xi Jinping, Shinzo Abe, Winnie the Pooh
- China’s Great Wall of Debt
20. Japan and China, peace and prosperity
China and Japan have experienced political ups-and downs in recent decades. But economic ties keep getting stronger. And today, political ties are becoming positive.
Deng Xiaoping's visit to Japan in 1978, above all his visit to the Panasonic factory in Osaka, instigated Japan's colossal business investment in China.
Following 1985 Plaza Accord, and rising yen, Japan offshored labour-intensive parts of its manufacturing sector to its Asian neighbours, especially China and Southeast Asia. This "hollowed out" Japan's manufacturing sector at home. Laid the foundations of global value chains that now criss-cross Asia, and which have driven Asia's development these past few decades.
Japan has a stock of $427 billion outward foreign investment in Asia, with $118 billion in China. In more recent years, Japanese companies have lower investment in China, as its wages have increased and as political tensions have arisen between the two countries. They have been switching to Southeast Asia (JETRO chart).
China is also undertaking some investments in Japan, although amounts are still small. Chinese companies are motivated by the desire to acquire Japanese technology and brands.
China is a leading trade partner for Japan -- accounting for 25% of imports, 18% of exports.
Japan has experienced dramatic increase in inbound tourists these past years. In 2017, 29 million people visited Japan, a record high, up from 8 million in 2012. Factors driving increased tourism have been the depreciation in the yen exchange rate, easier visa requirements, and Asia's rising middle class. Over 7 million from China, the leading source of tourists.
Japan also has a growing number of international students. In 2017, international students numbered 267,042, of which 107,260 came from China (40% of total).
Japan's foreign-born population risen from 1 million or 1%, to 2 1/2 million or 2% past couple of decades. Biggest sources -- China, Korea, Philippines, Vietnam, Brazil, Nepal. Over 700,000 from China (30% of total), becoming very important group of skilled and entrepreneurial migrants.
- Deng Xiaoping visits Japan Shinkansen
- On October 28, 1978, Konosuke Matsushita welcoming Vice Premier Deng Xiaoping at the TV Division
- FDI stock (Based on International Investment Position, net)
- Investment builds bridges between China and Japan. ACI
- Japan and China -- a valuable economic partnership
- Japanese tourism statistics.
- International Students in Japan 2017
- Japanese migration data at end
- OECD Japan Economic Survey, 2017 -- see trade data, page 15
- ‘Wise diplomacy’ embraced in China-Japan ties
21. Happiness in Japan
Japan is ranked the 54th most happy nation in the world, according to the World Happiness Report. In contrast, Japan's GDP per capita in PPP terms would be the 22nd highest in the world, according to the World Bank.
Taiwan, Singapore, Malaysia and Thailand are all ranked as happier nations than Japan.
The OECD's Better Life Index provides interesting insights into Japan's wellbeing. As the OECD says, there is more to life than the cold numbers of GDP and economic statistics. This Index allows you to compare well-being across countries, based on 11 topics the OECD has identified as essential, namely housing, income, jobs, community, education, environment, civic engagement, health, life satisfaction, safety, and work-life balance.
Japan scores quite well for income, education, very low unemployment rate, very low murder rate.
But Japan scores poorly for housing quality, civic engagement (very low voter turnout), self-reported health (despite high life expectancy), life satisfaction, work-life balance (working very long hours), and gender equality.
Suicide is a widely publicised phenomenon in Japan. In recent years, it has been falling. But it is still is the second highest among the OECD countries after South Korea.
- World Happiness Report 2018
- List of countries by GDP (PPP) per capita
- OECD Better Life Index, Japan
- Suicide in Japan is dropping.
- Suicides down, but Japan still second highest among major industrialized nations, report says