Sitting Still? Japan Is Dancing as Fast as It Can
Much of the world seems to believe that Japan is stubbornly--or complacently--unchanging. But all one hears in this country is talk of change, especially from businesspeople.
Japan’s companies, looked upon as worldbeaters a decade ago, are facing the same need to change that challenged U.S. firms in the 1980s.
Like Americans then, the Japanese may be fearful of words such as “new economy.” But they know the old economy no longer works. The Japanese government has pumped $700 billion into the economy in the last seven years--not counting the new money it pledged to spend last week--and business still is flat.
Many stocks are selling below the value of their companies’ assets, but that’s because the asset values are questionable, not that the stocks are bargains. “Prices of land and buildings have to fall more” before the stocks will be bargains, says a financial executive.
Businesspeople know that new ideas are needed. “We must move to software and use more creativity, because in hardware [South] Korea and Taiwan have caught up with us,” says Shin Kijima, a managing director of Nomura Securities.
The Japan that led the world in manufacturing--and taught valuable lessons to the U.S.--now sees the need for something more. And America, as it was in the postwar years, is once again its role model.
The talk of software, in one sense, recognizes that the Internet and multimedia have created whole new industries in America and so might bring Japan’s economy out of its doldrums.
In another sense, the talk reflects worry about Japan’s lost dynamism. If Japan fails to change, says Minoru Makihara, chairman of Mitsubishi Corp., one of the world’s largest trading and merchant banking companies, “we will deplete our foreign reserves; our population will decline. We might be a comfortable place to live in, but not a dynamic one.”
Complacent? Hardly. Truth is, Japan is ready for change. And because its economy is so critical to the rest of Asia, the U.S. and the world, we should take a look at its chances for success.
The first place to look is at a special campus of Keio University, an institution founded 140 years ago by Yukichi Fukuzawa, who wanted to open his island country to other cultures of the world.
The campus at Fujisawa, 40 miles outside Tokyo, is devoted to studies of information and environmental sciences and to foreign languages. It departs from traditional universities in Japan by offering interdisciplinary approaches, including course evaluation by students. The aim, says Professor Junichi Takahashi, organizer of the curriculum, is to provide education for the 21st century.
Students at the 8-year-old campus are required to take an Asian and a European language--along with computer languages, social sciences and art. Achiko Ohno, who started the spring semester recently, said she is taking Chinese, English, marketing and dance.
Takahashi, who did graduate work at the universities of Pennsylvania and Illinois, wants to build a research park next to the school. That would give the local area, which has seen the closure of manufacturing plants--shades of the Rust Belt--a new start with “brainpower” industry.
In other ways, the government is making “un-Japan-like” moves. It has just begun the deregulation of financial services, allowing foreign companies wider access to Japan’s market. That’s a move that will force many banks and financial houses to trim their bloated staffs and acquire expertise to cope with competition from the likes of Goldman Sachs and Merrill Lynch.
Some will fail or have to merge, while others will see increased opportunity. One survivor will be the Bank of Tokyo-Mitsubishi, which, at $700 billion in assets, is a larger institution than a combination of Citicorp and Travelers Group would be. (That merger was proposed last week.)
Tokyo-Mitsubishi, the result of a 1996 merger, already has ventures with Mellon Bank and Dreyfus Funds to help it offer mutual funds and other products. And it hopes to add insurance as well, says managing director Yutaka Hasegawa.
Last year the government came down hard on Nomura with criminal charges for compensating big clients for stock losses--a practice that everybody knew was common in Japan’s rigged stock market. The government’s move was more theatrical than judicial, a signal for Nomura, with $100 billion in assets, to get itself in shape to contend with stronger foreign competition.
Meanwhile, rival Yamaichi Securities was refused further bank loans and put out of business. Some of its people now are being hired by Merrill Lynch. “We had Yamaichi, Daiwa and Nikko as competitors; now we have Merrill, Goldman Sachs and Citigroup,” says Kijima with a shrug.
But bankruptcies of large firms such as Yamaichi strike fear in Japan’s army of white-collar workers. Layoffs have been unheard-of in a society in which people don’t even leave one company to take a job at another.
“The government will have to prepare a safety net so the relocation of people and talent can take place without destroying the economy,” says Makihara.
His own Mitsubishi Corp., a prime financial contractor and equity investor in projects as varied as steel plants in China and airports in Uzbekistan, handles $140 billion in transactions annually. It is regarded in Japan as the “establishment of establishments,” says one economist.
And it is going to make itself more international, says the Harvard-educated Makihara, 68, whose appointment as chairman in 1992 was seen as a signal that major Japanese industry would become more truly global.
Makihara has ordered that company documents be in English as well as Japanese, and hopes that within a decade, “10% to 15% of our personnel would be non-Japanese.”
The pace of such changes would not be alarming to most U.S. firms, but in Japan they are rapid. Why are they occurring?
Makihara’s answer reveals a lot about Asia and the changing world.
“The changes required of Japan are much faster than they used to be. We can’t go on at the pace we are,” he says.
“If [South] Korea, just as an example, pulls its act together and we don’t . . . if we go on like this for two years and Korea starts to take off, I think it will be very difficult for us to overcome. They are very vibrant.”
Japanese industry hears footsteps. South Korea, a rising power in global manufacturing, could be strengthened by the current crisis. So Japanese industry, and a lot of other things about Japan, are changing--just as U.S. companies had to change a decade ago. Competition, as they say, is the life of trade.
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James Flanigan can be reached by e-mail at jim.flanigan@latimes.com
