Traditional values

Far from being a hindrance, an ageing workforce and 'jobs for life' are boosting the Japanese economy.

by Richard Donkin, the author of <em>Blood, Sweat and Tears: the evolution of work</em>, published by Texere Publishing, 2002
Last Updated: 23 Jul 2013

For much of the past 10 years, Japan has been out of the news - apart from stories of economic gloom, banking scandals and businesses struggling in a flat economy. Well, here's some news from the inside: things have not been so bad, according to James Abegglen, a retired, US-born business professor, respected consultant and now a Japanese citizen. His latest book seeks to redress what he argues have been misguided impressions about Japanese business in the media. The patient is far healthier than we have been led to believe.

Japan is a wealthy nation. With net foreign assets of $1.5 trillion, it remains the largest supplier of capital to the world. Compare its position with that of the US, which has net foreign liabilities of $2.5 trillion, growing at more than a billion dollars a day. If Japan has a problem, what hope is there for the rest of us?

In what is really a book about the Japanese economy and the changing business landscape - there is little about management despite the title - Abegglen contends that most big Japanese companies have put their problems behind them, while the manufacturing base has survived the lean years intact. So too, he writes, has the Japanese commitment to a career for life. Average job tenures at Nippon Electric Co have continued to increase from eight to 15 years for men and from five to 11 years for women from 1975 to the present.

A refusal among Japanese companies to reduce their workforces until all alternatives had been exhausted has left many in a position to compete, whereas western companies cut back employment to such an extent that they have been unprepared for the recovery. An example is Boeing, which lost ground to Airbus in commercial airline manufacture after downsizing its skilled workforce during the early 1990s; in comparison, the Anglo-French consortium retained its workers. Although this was due as much to tighter labour laws as corporate strategy, it meant that as orders returned Airbus was in a far better position to overtake Boeing as the market leader.

Yet Japanese manufacturers that held on to workers were derided in the US-dominated investment markets. Moody's Investor Service, described by Abegglen as a "stronghold of Anglo-American arrogance about finance", reduced the credit rating of Toyota Motors after criticising lifetime employment polices as a block to competitiveness.

The same policy was recognised by Canon, a persistently successful company during Japan's leaner years, as the country's "core competence to help survive global competition". Far from abandoning these traditional policies, Japanese companies appear as committed as ever to stand by their employees.

A 2003 survey of 100 large companies by Asahi Shimbun found that 88 were committed to maintaining lifetime employment against 12 that thought the system would be difficult to sustain.

In a thoughtful analysis of Japan's demographic trend where lower birth rates and longer lives are leading to a much older society, the author makes a telling comment on all the world's economies: "Something unprecedented and irreversible is happening to humanity. This year or next, the proportion of people aged 60 or over will surpass the proportion of under-fives. For the rest of history, there is unlikely ever again to be more toddlers than grey heads."

Far from worrying about the trend, however, he believes the low-growth implications of a declining labour force in Japan are likely to be offset by longer working lives, a potential for working overtime among the remaining workforce, more women in the labour force and a greater use of robotics.

Japan now houses half the world's supply of robots - nearly 400,000, about four times as many as the US. As the author says: "Robots take no holidays, seek no wage increases and provide output of exceptional quality." One machine tool-maker, Yamazaki Mazak, is installing robot assembly lines that can run continuously without supervision for up to 72 hours. Automated production at Canon will bring production back to Japan as the need for cheaper overseas labour is reduced.

With no mention of kaizen or any of the management principles that populate most books on Japanese management, but flavoured with spiky criticisms of the land of his birth, Abegglen's work is a refreshing and authoritative analysis of Japan's competitive potential in the new century. Never mind China: a new dawn is breaking in the land of the rising sun.

21st Century Japanese Management: new systems, lasting values, James C Abegglen, Palgrave Macmillan, £55 ($96), ISBN: 1-403-99876-0.

Richard Donkin is the author of Blood, Sweat and Tears: the evolution of work, published by Texere Publishing, 2002

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