Table Speech

How Can We Respond to Challenges of the Japanese Economy?

May 16, 2012

Ms. Yuko Kawamoto
Waseda Graduate School of Finance, Professor

1. Challenges of the Japanese economy
Japanese political situation has entered a crucial phase this month with the debate over tax increases. Financial difficulties in Japan have attracted a relatively mild market reaction, compared with European countries, because 95% of our governmental bonds are sold domestically. Yet, situation remains precarious and Japan cannot afford to look at the situation in Greece with indifference.

 Japan continues to seek how its economy should function after the Great East Japan Earthquake last year. Many advocate that economic growth is a prerequisite to restore fiscal health and formulate a sustainable social security mechanism. The actual growth policies, however, are proving otherwise. Stringent fiscal and monetary macroeconomic policies could hamper growth and reduce tax revenue. Considering how high the accumulated official debt is in Japan, albeit, there is little room for economic gambits.

 We must seek policies that stimulate growth at a microeconomic level, which could include deregulation in various sectors, attracting inward investments as well as easing tax restrictions over business activities.

 We cannot overlook how business activities are intertwined with profits. Some argue that “irresponsible capitalism” has undermined safety or triggered financial crisis, but I believe companies that don’t abide by safety regulations cannot enjoy sustainable profitability
It is true that Japanese companies have failed to make growth-oriented management efforts, thus have long tolerated low profit margins compared with other countries. Economic growth is a necessity, not a luxury in Japan for growth and sound social security.

 We have started to see early signs of self-sustained economic recovery from the Earthquake. Companies that managed to survive economic slowdown right after the disaster have come to see brighter future, backed by expanding capital investment. Newly-listed companies are also increasing investment. Investors around the world are focusing on Japanese companies that have started to take self-reliant measures towards business growth, without relying on its government.

 There are new big business opportunities for companies that have embarked on fundamental restructuring of operations. It became evident that companies cannot survive the post-crisis economic hardships through the conventional lukewarm approach. Let me emphasize that revitalizing the private sector, through sound flow of financial and human resources, will promise economic growth and a brighter future for Japan.

2. Issues concerning governance in Japan: Emotional mass media

 A certain problem becomes an issue only when it is recognized problematic. Products that don’t meet customer needs or miscommunications within an organization can give fatal impact on business, yet they become serious issues only when those concerned recognize them as being “problematic.”

 Such cognitive criteria are diversified, as they are defined by values and lifestyles of each. In this context, the media gives a significant impact on how we interpret a certain issue. This is why media is often said to be a mirror that reflects ourselves. We, the media audience, must take a critical view and screen the information carefully.

 I have attended various meetings of governmental commissions and councils and was surprised to see some meetings received extensive media coverage, while other equally important ones were hardly reported. The media sometimes gives minimum information on essential issues. In this time of globalization, I feel frustrated to find most Japanese newspapers allocate only few pages on overseas news.

 The Japanese media tends to send out simplified views based on stereotyped classification of what is presumably “normal” and what is “extraordinary.” For example, the term “nejire kokkai (twisted Diet)” were often found in the media in 2007, to describe the “extraordinary” situation where the ruling party failed to have majority in both houses. I feel uncomfortable to find this term still in use after 4 years, which could somehow connote the “extraordinariness” of the current political situation.

 Various statistical figures and survey results are used in newspaper articles to make a persuasive argument. Yet, we must pay scrupulous attention to the impact such figures can give to the readers.

3. What can each one of us do in the current system?
 I am troubled by so many simplified opinions that describe events with only a short history of 50 years to be the Japanese culture or tradition. I believe Japan can achieve sustainable prosperity by passing down objective historical facts, going beyond stereotyped ideas and making new challenges.

 We must give due consideration on making better use of our assets in the future. Motivating and encouraging the younger generation is important, and the new “Angel Tax System (to promote investments to ‘venture business angels’)” can be one option.

 Lastly, the Japanese people tend to think and act in uniformity, which leads to less objective and less diversified operation of an organization. In the past, we might have excluded females, foreigners or the handicapped and failed to take a wider perspective. I believe when we become more open-minded and receptive to new ideas, the problems of organizational governance or economic issues will be solved.