Where next for Japan?

New PM Shinzo Abe says 'Japan is back' but Dominique Turpin, president of Swiss business school IMD and one of Europe's foremost authorities on Japan, is not so sure.

by Jeremy Hazlehurst
Last Updated: 03 Jul 2013

There has been lots of noise recently about the new prime minister Shinzo Abe starting currency wars. Is this a big issue, do you think?

I think it will go away. There are different factors that contribute to the lack of competitiveness of Japanese companies, it’s not just the currency. They are caught between the low cost companies from China and companies from Europe and America that have become very innovative. They won the war back in the 80s on quality, but everybody has quality now. Look at Sony – nobody would be surprised if it disappeared. They just don’t have innovation in their DNA any more. Mr Morita, the founder of Sony, must be turning in his grave.

What are Japan’s biggest problems?

 In the last TOEFL rankings, which measures the number of English speakers, Japan ranked 136, behind North Korea. Takeda, the pharma company, has been acquiring companies overseas and so the CEO said he would make English the language of the board within a year. This is a big revolution, so for one year they had interpreters. From April this year he has said there will be no interpreters any more, but two board members went to see him and said: "Is it okay if we pay a translator from our own pocket?" They have to accept that English is the international language of business.

Does Japanese culture encourage this insular culture? 

Because it’s an island people are less curious about looking at what’s going on next door. But young people area also really resigned to decline, too. There are a couple of expressions that sum it up, sho na gai, which basically means "c’est la vie" and gambarimasu, which means "I will fight", but it’s a kind of desperate fight. They suggest a passive attitude. If you want to globalise you have to let your people be creative and be innovative, they have to be curious about the world. European companies are much more open to the outside world.  The Japanese don’t have the talent for managing non-Japanese people.

What do you mean by that?

There’s a very strong and distinctive Japanese business culture. I don’t know a single Japanese company where at the top level you have a Korean, a Taiwanese, or a Chinese person. Shiseido’s COO is Carsten Fischer, a German who is fluent in Japanese, but it’s hard to find people like that. Toyota Europe hired a Spanish former VW executive, as CEO of Toyota Europe and he started to work like a European CEO.

But you had hundreds of Japanese watching what this guy is doing, and every time he took a decision somebody would call head office and he’d get a call saying: "Ah, you know, the Toyota way, the Japanese way…" Six months later he resigned. It is very frustrating to work for a Japanese company where decisions are slow, and you should not make waves. There’s a saying: "The nail that sticks our must be hammered down". [Here at MT, we'll be interested to see whether new American director Mike Hogan can avoid the same fate].

So they tend to hire guys who are very grey and fit the mould. Then there was the Olympus affair. They were using this guy and hoping that because he was a foreigner he was not going to notice all these dirty things they were doing. That has a big impact on the international image of Japan.

Is nationalism a problem?

Yes. One of the richest guys in Japan is Masayoshi Son, the CEO of SoftBank, in a way he is the Bill Gates of Japan, but he has a Korean name. He was born in Japan, and his father was born in Japan, and when you ask the establishment about him they go: "Ah, well…" Their problem is that his grandfather was born in Korea. It’s unbelievable, he’s third generation! This strong cultural sense was an advantage when Japan had to catch up with the west but now in the era of globalisation it is a big liability.

What about entrepreneurs? Can they rescue Japan?

The prestige of an entrepreneur in Japan is not the same as working for a company like Toyota. It’s hard to count five people who have made it the way Bill Gates or Zuckerberg did it, entrepreneurs just don’t blossom like they do in California. Many people believe - and I am more and more in this camp - that Japan is going to become less and less relevant, and will be the next Ottoman Empire.

www.imd.org

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