Where is Japan Heading?
I was lucky enough to visit Tokyo in February, to get a glimpse at one of the world’s most developed cities, in country that was the onetime contender for the biggest economy in the world. The common perception is that the glory days of Japan are maturing. The economy posted yet another year of not-so great numbers and has officially become a net borrower; a far cry from its powerful net-lender stance at the height of its prosperity. Yet Tokyo still retains most of its power and prestige, and the Japanese people are still relentlessly hardworking.
So what’s going wrong?
Japan never seems to have completely recovered from the stock market and real estate crash that sent it tumbling into the much touted ‘lost decade’ of the nineties. The Japanese asset price bubble was a result of long years of trade surpluses, consequent appreciation of the Yen and a savings fueled credit boom. The heightened optimism, financial deregulation and monetary easing implemented by the Bank of Japan in the late eighties resulted in aggressive speculation. Prices in Tokyo’s Ginza district were as much as 30 million yen per square foot, prices in most areas have plummeted to less than one percent of peak values by the 2000s.
Tokyo itself slightly betrays its past-its-prime status. Despite construction booms in districts like Rippongi, most of the rest of the city seems slightly faded. The subway is immaculately maintained but still looks a little old. The roads are clean and well maintained but don’t look new. Most of the hotels and high rise buildings are ones that have been there for ages.
The cars on the streets aren’t as shiny as you’d expect. Most people drive practical cars, whereas in cities like Beijing the novae riche are out in force with their luxury European sedans. Cost of living is high, but so are income levels. Most Japanese are heavily dependent on their corporations for work.
The Japanese economic crisis is explained by some as a crisis of the Japanese people; they are too insulated and happy that way. They only consume Japanese culture and are oblivious to the rest of the world. Their former prowess in manufacturing has diminished as the world looked to cheaper and more creative countries. The more developed you get the richer you get and then the only way you can compete is through ideas and innovation. And this is where Japan has failed in the last two decades.
Most young people desire to work for established organizations. Entrepreneurial spirits are pretty low in Japan. The job security, fringe benefits and apprehension about making it on your own make most of them opt for jobs with companies. The Japanese work really hard. Most of them will work twelve hour shifts on a daily basis. This is culturally enforced in most organizations, and it is seen as bad for your prospects if you don’t follow everyone in doing this.
A lot of Japanese speak only their own language. Their exposure to foreign ideas and ways of thinking are almost nil. And so the tendency has been to continue doing things the same way they have been in the past, a formula that will obviously not yield positive results. To pick itself up again, Japan needs to innovate, it needs to once again become the innovator of the world and take back that mantle from encroachers like the Samsungs, LGs and Apples of the world.
Tokyo is an expensive city, and Japan is an expensive country. But people are compensated accordingly and income levels are pretty high. I hear that to live above-subsistence life in the city, you need a minimum income of about one hundred thousand yen, a month. That amounts up to one and a half lakhs in rupees.
Japan is still one of the world’s most developed countries, but it is fast losing its competitive edge to many newer and more innovative firms from the region itself. They have looked up to Japan over the long years of its success and now think that they can surpass it in its own game. Manufacturing is not a competitive edge anymore and indeed, a lot of Japanese companies manufacture goods elsewhere, where it is cheaper. Japan needs to think in new ways and do so fast, because it still has the clout it needs to start moving forward in a big way.