Economist Conference

by Julian Ryall
Economist Conference Generation Change in Japan: New Leaders, New Outlook

The challenges that confront Japan are numerous, complicated and shifting but the message that came out of a symposium organized by Economist Conferences in mid- December is that many of the key problems have been identified and steps are being taken to deal with them. Domestic politics may be stalemated, the national economy clearly needs attention, and education and the role of women can benefit from new thinking— but none of these problems are insurmountable, the delegates indicated.

What is needed is a willingness to think—and act— outside Japan’s existing parameters, to learn from other nations’ experiences, and a more decisive attitude to achieving change. This is, after all, the country that rebuilt itself so spectacularly after the ravages of World War II; it must be hoped that the descendants of that generation of Japanese have inherited some of their drive to regenerate after what some are describing as two lost economic decades.

The symposium—Generation Change in Japan: New Leaders, New Outlook—was held at the Hotel New Otani and brought together both experienced and up-and-coming leaders in the realms of politics, business, academia and civil society to discuss ways in which Japan can be reenergized.

The daylong event began with an interview with Kevin Turner, the chief operating officer of Microsoft, who pointed out that even though it is one of the most technologically advanced nations on the planet, the utilization of that know-how is startlingly uneven in smaller Japanese firms. Cloud-computing technology is one clear example, he said.

“The functionality that you can get via your laptop and mobile phone in this country is very advanced in comparison with the rest of the world, but investment in that by small companies pales in comparison,” he said. “Small and medium-sized enterprises need to unlock their ability to do digital advertising and marketing, for example.”

Another area that would benefit the nation as a whole would be to encourage a new generation of young leaders, he said.

“The system that Japan has at present is very successful in its own right, but there is the opportunity to unlock some of the potential and give people with good ideas—regardless of their age or background—a chance.

“They may fail occasionally, but it’s about allowing the growth of new ideas,” he said. “Some will be winners and some will be losers, but without trying you will never know.”

The first panel session of the day considered potential growth industries of the future, how the government might support those nascent industries and how Japan might become more competitive internationally, with David Line, senior editor for Asia, Industry and Management at the Economist, underlining that 99 percent of all firms here can be considered small or medium-sized and that Japan requires that they be strong for the nation to prosper. They have been hit hard by the recession, however, and are having problems raising funding and finding skilled employees.

“Japan’s future relies on redeveloping its economic might,” said Yasuchika Hasegawa, president and CEO of Takeda Pharmaceutical. “Our politicians have to have a clear vision of the kind of Japan they want in 20 years’ time and what needs to be done now to fill the gap.”

Firms here may no longer be able to rely on domestic demand and will need to look overseas for new markets, but there are few policies at the national level in place to support that, he said.

“A long-term plan has to be put in place. Japan has to be more diverse in its outlook and respond with more diversity in its workforce or we will not be able to go out into the world and respond to different ways of doing business.”

Another resource that is not being fully tapped is Japan’s female workers, pointed out Mitsuru Claire Chino, corporate counsel at Itochu, when the issue of human resources came up.

“Japanese people are inward-looking, companies’ approaches to human resources are inward-looking and business opportunities are being lost,” she said, adding that the pattern remains for Japanese firms to hire young men straight out of university. “We need more women, more non-Japanese and more mid-career hires,” Chino said.

Turning to the state of Japanese politics, moderator Henry Tricks, the Tokyo bureau chief of The Economist, suggested that it is in a state of crisis and the average citizen feels disenfranchised and helpless.

Tobias Harris, an expert on Japanese politics at the Massachusetts Institute of Technology, put the issue into context by identifying the good, the bad and the ugly.

On the positive side, he said, the Democratic Party of Japan deserves more credit for improving relations with South Korea, India and Australia and for bringing a new generation of people into domestic politics. In terms of the bad, there is “an ideas deficit in the government” and a lack of a sense of direction. Worst of all—the “ugly”—Harris predicts the political situation will get worse before it gets better, institutional change cannot be forced and will therefore take time and the DPJ is still looking for a way out of its present quagmire.

Later panels considered the problem of demographics that Japan faces and ways in which the national economy might be altered to work hand-in-hand with an ageing population, as well as ways of reforming the tax system to recover the “buried treasure” of funds that are not in circulation.

The final keynote address was delivered by Yoshito Sengoku, then serving as chief cabinet secretary, who explained the government’s thinking on some of the issues that had been discussed during the day and indicated the measures that are being implemented to tackle them.

In an increasingly globalized world after a particularly nasty economic downturn, he suggested, there has been too much fiscal easing and interest rates have sunk too low, making it difficult for companies to turn a profit.

Innovations in green technology and healthcare have been identified as growth areas for Japan; the nation’s workers—when revitalized—have the potential to contribute to strong economic growth; overseas markets will be explored; women will be promoted, and potential will be tapped, wherever it may lie.

“Japan is now in the era of the third opening of the country, after the Meiji era and 1945,” Sengoku said. “We will open up the public sector and the future. We should not look at this from the perspective of just one country; we should cross borders and take advantage of other markets. The technologies and motivation of Japan can assure growth here in Japan and abroad as well.”