Japan Watching: Society, Politics, Culture, Economy, Environment, And the World

In his 1998 book, “Japan: the system that soured”, Richard Katz concluded that “In all likelihood, Japan will not reform within five years; within twenty, it almost certainly will”.  Let’s hope that we don’t have to wait much longer than that.  Japan’s system remains decidedly sour some 12 years later.

Toyota's President, Akio Toyoda, has now testified and apologised to the US Congress for all the faults in Toyota cars which have necessitated record recalls (being dragged before the Congress was almost a humiliation in the eyes of the Japanese public).  He gave a tearful apology to his US-based staff (in Japan, tears mean both sincerity and forgiveness).  He even went to China and made an apology, with a deep bow, which until then he had not made during this affair.  He has of course promised to rectify all the many problems.

But, how is Toyota really faring?  Not so well, methinks.  This is no longer a normal case of a carmaker with isolated problems.  What we see is that the "Toyota Way" now has deep systemic failures.

The recent travails of Toyota make you wonder how well educated Japan businessmen really are. 

Let’s take a look at some of the evidence and arguments.

It seems unbelievable what is happening to Toyota, the world’s largest car maker.  I have lost count of the number of problems in its motor vehicles and the number of model recalls. 

It is just one year ago that we were all celebrating Japan’s longest post-war economic recovery -- not the strongest, but the longest.  But Japan has since taken a mega-hit with the financial crisis.  Its GDP at the end of this year will be about the same as it was in 1992, almost two lost decades.  And what’s more China’s GDP is set to overtake Japan’s next year. 

Japan has a long history of importing new ideas from the rest of the world.  These ideas are imported, adapted and then adopted as their own -- to such a point that Japanese are often not aware of the origin of their own "unique" culture. 

When you come to think of it, it is difficult to imagine a country being more globalized than Japan.  It has showered the world in high tech exports, be they automobiles, microelectronic products or gadgets.  Japanese companies have invested all over the world.  Toyota even invested in an automobile plant in France with all of its labour laws!  And Japanese tourists are everywhere to be seen -- from the Empire State Building to the Champs Elysees and on to the golf courses of Hawaii.

I recently overheard someone say that no Japanese company has reached global standards, and that none employs global best practices.  Even the most "international" Japanese enterprises are reluctant internationalise.   

I could not believe this, so I went straight on to PriceWaterhouseCoopers Global Best Practices website to see what it had to say.   

Everyone knows that population ageing will hit Japan and Europe more than it will affect the United States.  Funny thing, it is a similar story for corporate demographics.  Both Japan and Europe have had much less births of global corporate champions than the US these past decades, according to Nicolas Veron. 

Japan's GDP per capita ranks only 16th highest out of the OECD's 30 members, and is about 25% less than that of the US.  After the current financial and economic crisis, it might be even lower again.  The US which caused this crisis seems to suffering from it less than most other countries.

Why is it so much lower?  You can of course point to many things like agricultural protection and tax policies.  But according to the OECD, the main reason is Japan's inefficient service sector.