Impressions of Japan

Initial Impression

"My first impression of Japanese business and economy is a mixed bag," says Rinaldi Rorimpandey, a January-session student at Tokyo's Sophia University. Rinaldi shared this article with us.

My first impression of Japanese business and economy is a mixed bag. Japan appears to be a rapidly growing popular destination in recent times due to the weakening of its Yen currency against American dollar. This has the effect of boosting its export competitiveness which has strategically been the main source of Japanese economic growth over the last two decades. With the announcement of Tokyo as the host of 2020 Summer Olympic, this would appear to further solidify Japan’s bid to become the ‘Tiger of Asia’.

Japan has always pride itself on quality craftsmanship using limited resources. They have revolutionised the way people did business, changed how people viewed management, and was one of the first big, non-western economies. The opening up of foreign trade with the Europeans in the 16th century represents the beginning of what is now known as one of the world’s largest economy, in terms of nominal Gross Domestic Product (GDP). The rapid economic growth in the aftermath of World War II further cement Japan’s reputation. The fact that Japan is now the only Asian country that is part of Group of Eight (G8) governmental forum is a testament to which Japanese economy has experienced unprecedented economic miracle.

Established Infrastructure

Japan’s overall infrastructure quality is among the world’s best. It is the forerunner in urban infrastructure, education, robotics, bullet trains, protecting farmlands with huge public investments, raising its ratio of debt to GDP. When World War II was over, Japan had no infrastructure nor system in place. Then, the government was determined both to rapidly boost Japanese manufacturing capacity, and to do so without relying on foreign investment. It shows that Japan has always been a self-reliant, resilient and independent nation.

The rapid capacity expansion in manufacturing in particular, consequently resulted in more goods than domestic demand could support—so Japan exported. And with the Yen consistently undervalued in the 1970's - 1980's, Japan’s exports were cheaper than their competitors overseas, allowing them take up large percentage of world market share. Although Japan’s strategy is commonly known as an “export-led” growth model, it could be more accurately described as a ”investment-led,” since exporting can be attributed to the state-funded overproduction.

It is interesting to note that conventional economics did not provide an asset side on national GDP — accounting only for this as debt — ignoring the valuable long-term infrastructure assets it created, as well as well-educated, healthy citizens, scientific research, advanced technologies. Furthermore, Japan’s public debt is owned by its citizens — not by foreign bondholders or the sovereign wealth funds of overseas countries such as China.

Japan’s lowest unemployment rate in the last 16 years of 3.5% (2014) is in no small part due to the large infrastructure projects boosting employment level. Though it may be a ‘quick-fix’ of economic stimulation, the presence of well-established infrastructure would facilitate current and potential future investment more easily thereby attracting foreign investors to channel their fund to Japan. Should Japan wish to revive its strategy of export-led growth, infrastructure expenditure is essential.

Kaizen

‘Kaizen’ is the buzz word for any organisations that practices the principle of continuous improvement in all of their line of work. They often have research and engineering units integrally linked with actual production. The main purpose is to upgrade the capabilities of their employees through both learning-by- doing and training. Investments in training are not goals in themselves but rather, they are necessary to create the means by which to improve production. The Japanese factory can be likened to a laboratory where workers exceed the concept of just "labouring" to innovate and create knowledge. Thus the firm foster the human capability to surpass previous problem-solving and create new solutions.

This principle is perhaps the catalyst to the rise of Japan. With minimum disruption in the factories production, Japan has trustworthy supply chain management system that enhance the confidence of other economies exporting and importing Japan. To name a few companies: Toyota, Sony, and Uniqlo have taken up large portion of market share abroad in their respective industries due to their reputation of having few defects.

There have been reports that the spirit of innovation is lacking in Japan yet if the Japanese have really been hurting, the most obvious indicator would be the slow adoption of expensive new high technology equipment. In contrary, the Japanese are consistently recognised among the world’s earliest adopters with its leading-edge technology. They are not afraid to invest heavily in technology to find a better way in the way they manufacture and minimise errors. All this effort is done in order to maintain its credibility as domestic and global pioneer - a feat that cannot be imitated so easily.

Inconvenient Truth

However, Japan has chronically struggle to maintain its economic growth over the last two decades. It all started when Japanese asset price bubble finally burst in 1989. The Bank of Japan did not respond swiftly which consequently plummet the confidence of the economy in what we refer to now as the “Lost Decade”.

To exacerbate the worrying growth trend, Japan is chronically “ill” in terms of its society growth state with Japan’s population growth rate is expected to decrease to a measly 0.5% per year by 2050 unless significant government incentive to increase population put in place. This may be the explanation as to why there are two “Lost Decades” (the second is from 2000-present) as oppose to only one.

Economists are at a crossroad as to the potential of Japanese economy to recover and be structurally sound again or whether the downward spiral of this economic depression will prolong for foreseeable future. Japan can no longer conceal its sluggish growth. Unless they face this inconvenient truth head on, Japan might leave it too late to recover the economy out of its recurrent depression stage.

Aging Demographic

Japan’s economy is floundering and the population is shrinking. Its neighbour China is growing at a much faster rate. Japan has stubbornly relied on the old generation and traditional method resulting in companies to have less incentive to become more efficient nor productive. The domination of old people in all sectors can be seen clearly in Japan which may explain why there are fewer young employees in high position. This has perhaps discouraged Japanese youth to aspire big things for the sake of the nation.

Japan has traditionally record current account surplus since 1989. By comparison, countries such as America and Australia tend to record current account deficit. Older generation tend to save more than they consume which has been the case in Japan. This presents a major stumbling block in the government’s bid to lift the nation out of deflation. Without an increase in demand from the population, no stimulus policy would be effective.

One reason for the ageing demographic is because of a low birth-rate. Japanese both individually and collectively have chosen their demographic fate and have good reasons for doing so.

After the winter of 1945, when Japanese empire have crumbled, the people nearly starved to death. With overseas expansion no longer an option, the leaders were determined to cut the birth-rate as their top priority. Therefore a culture of small families set in that has continued to the present day.

Japan’s motivation is clear: food security. With only approximately one-third arable land, Japan has long been the world’s largest net food importer. This may support the reason why Japan has accepted only a small number of refugees for resettlement until today on top of its restrictive migration policy. While the birth control policy is the primary cause of Japan’s aging demographics, the phenomenon also reflects improved health care and an increase of more than 20 years in life expectancy since 1950.

Furthermore, there are growing trend for Japanese families to adopt adults instead– specifically, males – into the family for two reasons: males’ ability to pass on family names as well as their priority in inheritance.

Japan, like many cultures, passes a family name through male heirs. Therefore, when a family has only female children, that family’s name is at risk of disappearing. It is accepted that women in Japan are at disadvantage. However, Japan has sidestepped this problem with adult adoption.

Adult adoption can also happen financial reason such as the ability to pass on the family business to a non-biological heir. An executive can adopt a promising executive to bring him into the family and set him up to inherit the position or business. The adopted person does not even necessarily have to be married into the family. With the competition of an adopted sibling, a biological heir may work harder and feel more pressured to perform well as a result.

Low English Proficiency

Japanese education and skills are among the best; including English. They perform adequately in their reading and writing skills. However, they perform generally poor in oral communication as its training is not emphasised as much as the other English skills. In the Test of English as a Foreign Language (TOEFL) score rankings, Japan ranks 137th among 163 countries of the world and 28th among Asia’s 30 countries. This condition is sometimes worsened by the reserved personality and indirect communication skills that typical Japanese have, thus making it much more difficult to use English on a practical basis.

Their capability of making logical explanations is notably low. Many Asian rhetorical traditions rely on implicitly talking around the topic without explicitly saying the main idea, usually following an “inductive” pattern in which they start with support and end with a main idea.

Whereas in a Western classroom this method of writing can be dismissed as redundancy or improper organization. Western rhetoric wants the main idea to be explicitly stated in the first paragraph, and everything else in support of that idea. This is traditionally used to give a direct voice of democracy and dissent, emphasising the importance of the individual speaker,

It is obvious that this school of thought is not favoured by Japanese. Historically, they have favoured the group mentality. In fact Western argumentative styles can be sometimes seen as offensively direct or arrogant to practitioners of East-Asian writing traditions. These contrasting styles provide a real challenge for some Japanese students to understand the Western culture.

In comparison, most of the top countries, require English as their first second language as it is widely spoken in Europe. Most of Europe has had English as a part of their education curriculum since the 1980s which raises the chance for most people to get through the entire program, increasing the number of adults who can speak English overall.

This has perhaps been the main factor as to why it is hard for Japan to cope with globalisation. In the modern industry world now, more and more companies are adopting the principle of "Globally Integrated Enterprise" (GIE) which involve making a shift of headquarters to overseas or making more international cooperation with foreign companies. These two examples of efforts generally need proficiency in English speaking ability.

GIE also requires a more international and open minded point of view of inside people. Japanese companies that want to catch up with globalisation must then find employees with an internationalised mind and good English speaking ability regardless of the nationality. Ironically, this attempt of internationalisation sometimes disadvantages Japanese graduate sometimes when they are looking for a job because they are not considered to be internationally-minded enough by the companies.

The hallmark of leading advanced economies is their growth in the service sector. With the world becoming increasingly globalised, much of the services require proficient English communication skills and so Japan is at risk of regressing and left behind by other developed economies.

Conclusion

There seems to be an inherent cultural weakness entrenched in Japan that makes them to be “sleep- walking” towards further economic depression. Japan is able to consistently perform at global stage but there is lingering questions as to the nation’s capability to grow in the future.

Nevertheless, Japan is presently considered an advanced economy that simply cannot be overlooked. Japan is still undergoing global transition from short-term material economic growth to a more mature, long-term, sustainable social development. The question to be asked is “will they wake up from their “slumber” in time?” Perhaps a second “Asian miracle” is needed to do so.