Kiyoshi Kurokawa's blog （en）

China Ranks 2nd, Japan Goes Down to the 3rd in the World in GDP; From the Article of The Economist

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GDP of Japan which used to be the 2nd largest in the world fell to 3rd after China.

This news itself is not so much to worry about because GDP is strongly affected by the size of the population. China with population 10 times larger than Japan to overtake her (Japan’s) position of the 2nd in the world ranking of the GDP was something that was predicted for a long time the only question being ‘when’.

What truly matters is the GDP per capita.  Japan has fallen off the position of the 2nd in GDP per capita the world and has keeping places somewhere around 18th or so for quite a while.  This is not surprising, since, to begin with, Japan’s GDP has not grown in the least for these 15 years.  I suspect that Japan is the only nation in the OECD (in Japanese) that has not achieved any growth in GDP for these 15 years.

Up to date no signs of growth are observed in Japan, and few in the world expects little sign of change from Japan, thus no investments come to Japan.  Changes in other OECD nations are obvious since the 2008 ‘Lehman Shock’ but Japan is still lingering in that terrible situation of ‘no economic growth, increasing its dept only.’ 

The Economist, as always, is pointing out the important issues clearly in its article of August 19th ‘Watching China whizz by’.　Views of Professor Ishikura, one of my friends, appear in the article, too.  As I say, larger corporations can not make decisions or is late when they do.  As the article points out, big companies are basically all the same in their conducts, our government does not dare to let incompetent companies down so it makes many ‘Zombie companies’ surviving.  This will discourage new enterprises to emerge.  Don’t they realize that the market and business of the world has changed drastically?   We are now in the age of ‘Demand-driven、Open and Disruptive Innovation.’

Anyway, as you see in the chart in The Economist the rate of growth of economy in China is extraordinary.

Not knowing your partners, not having multitudes of networks of friends of long time in growing developing nations can constitute big handicaps for our future growth.  Just to give you an idea, for example, the estimated growth rate of the whole Africa is 5.6%.  What are your business strategies?

Immersed Deep in Debt, Japan At The Brink of Default?

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In the world, especially in the ‘developed countries’, government spending is soaring up high while economy recovery is still slow (although not as slow as Japan…)  so the increase of national debt is now being a deep concern to many government leaders. 

At EU, Greece fell into insolvency, Spain and Portugal may also become excess debts and the value of Euro is facing crisis.

Economy in Japan still continues to be in bad shape.  Japan has seen hardly any significant GDP growth for these 20 years.  National budget this year consists of more government-bonds than tax revenue, and policies they come up with only demands more public spending.  Japan’s total debt (mostly government bonds) is now close to 200% of its GDP.

Nonetheless, I don’t see any self control in Japan in the way they issue national bonds, and compared to other nations Japanese experts, academics and media are being too diffident in expressing concerns on the national debt of our country.  Could it be because the volume of the dept is too huge (200% of GDP)?  I feel that it looks almost like a ‘drug addiction’ symptom.  On top of that, aging of our population is accelerating making it almost impossible to pay off the debt. The younger generation must be feeling, though vague maybe, more and more insecure and depressed.  I must say that our generation is so very irresponsible.

So-called ‘experts’ of ‘Japan Inc’ used to say until a few years ago that since Japanese people have about 1400 trillion yen in savings etc., there is really no over-debt or even possible default in Japan.  But don’t you feel that such kind of commentaries and voices have not been heard in these days?  Why is this?

In late January this year, the Standard and Poor’s (by the way, it appears to have made some illegal moves again in the ratings of financial institutions in relation to the recent Goldman-Sacks incidence….) lowered the credit of Japan by one rank.  Japanese media stangely reported this only a bit,  which is a mystery to me since this is such a big problem.

Come to think of it, the last time they lowered the rank of Japan (was it May, 2002?) the whole ‘Japan Inc’, made a big fuss out of this down-grading, media reporting on this sensationally, ministry of finance sending letter and advertisements of protests even to foreign media.  For example see this article. Do you remember?  It was very different from what we are seeing now.  Have you thought about the reason why it is so?

So, what is the current status of Japan exactly?  It seems obvious that paying back of debt (200% of GDP) of Japan is already impossible.  So the credit of this nation will inevitably deteriorate, growth in economy is hardly possible…..  Next fiscal year I see no other choice for Japan than to ask other countries to buy significant portion of our national bonds since domestic demand will not cover the whole amount (though having sold them almost entirely domestically was not normal in the first place, generally speaking.)  If this happens, then the interest rate would go up to at least about 4-5%, repaying back of the debt would be even more difficult, government debt would go skyrocket high, inflation will follow; the life of people will be more and more painful.

Japanese politics is miserable today.  ‘The Iron Triangle of Policymakers, Industry, and Government’ (‘Japan Inc’) that has dominated this country for a long time proved itself to be awfully incompetent.  It is not hard to guess what the ‘elites’ at the government and/or ministry of finance are thinking.  They are hardly likely to take responsibility to themselves, they would blame the cabinet (policy makers) for its poor work.  I can see the scenario in which the people of Japan, especially the younger generation, are forced to fall into poverty.  It is such a mess.  I think I can even foresee the steps those ‘elites’ are likely to take in the future.

Recently, Minister of Post System, Kamei raised the maximum amount of Yubin Chokin (savings at the Japan Post Office) to 20 million yen.   Isn’t this strange?  We can even interpret this as some kind of apparent conspiracy of trying to sell national bonds of next year within Japanese market only.  So is this again that same old ‘putting off of the problems’, ‘conspiracy’?  Is this their strategy to survive another one year without raising the interest rate and not causing inflation?  The decision was announced too suddenly which adds to the strangeness.   But, having this done, it is yet quite doubtful the budget of the next year (year 2011) can become toward recovery path.

In the end, the interest rate of Japanese government bond will rise, amount of repayment of the debt will increase, Japan Yen will go down, and hyper-inflation will take place.  Can you see how awful this would be?

With the election of the Upper House ahead, policy makers can not bring up the issue of raising sales tax, can not act to bring drastic changes to the government, can not decide… and the same goes with the government, media, and academics, too.  Even media seems reluctant to send out messages broadly on such a bad and painful issue; I am not sure whether they are being controlled by the government or worrying about the advertisement fees that established companies pay to them.

At any rate, after the economy bubbles burst in Japan in 1990, the interest rate sank to extreme in around 1998, causing a large bulk of our savings to flow overseas, and it is highly likely that those money worked in part as a trigger of the ‘sub prime’.  I suspect that after the sub prime burst the bubbles in the world, our savings will never come back.

Economy in Japan is very much in danger zone now (Ref.1,2). Political leadership have been unable to raise taxes because of coming election, large companies seem unable of doing good job in selecting and focusing.  They are still reluctant to offer key executive positions to non-Japanese or women so there is not much hope ahead.  It’s OK to discuss ‘this and that’, but what matters is action.  Mega companies are also low in spirit and seem to be thinking only about ‘inside’ factors.  I truly feel the necessity of more and more aggressive, positive management such as ‘M&A’.

Internationally speaking, reputation of Japan has dropped sharply, and I even sense the air of ‘not wanting to get involved with’ feelings sneaking into the minds of people outside of Japan.  ‘Weak’ is not the correct word to describe Japanese economy of today, rather it is ‘paralysed’.

I have cited articles from ‘The Economist’ again in this posting as I have done in many of my other columns. The reason for doing so is given in my column of February 15, ‘Toyota’s Problems and Sufferings: Eyes to See From Outside, Hearts to Sense Outside’ .

 

Canada: From Asahi ‘Globe’

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The Asahi Shinbun has been issuing 8 pages special features twice a month for several years now.  Its contents, topics are quite unique, and I enjoy reading them very much.

As the title shows, each issue analyzes ‘The Globe and Japan’ from different perspectives and from a very large point of view.  They are truly nice special issues.  I imagine that this idea came from the Editor-in-Chief, Mr. Funabashi because it reflects what he has been in various global stages..
 
What makes this even more impressive is that all articles are available for reading‘On-line’ (in Japanese) After they are printed on the newspapers they will post full articles within several days.

The new April 21st issue focused on ‘Canada’.   I was also interviewed perhaps because I have broad connections with faculties and students of Canadian universities (Ref.1) (Please search by keyword of ‘Canada’ for more columns in this web site).

This feature begins like this; ‘Japan and Canada both has a risk of being overlooked because of the super-powers beside them.  How to cope with this circumstance is our challenge for the 21st century….   In meetings of Japanese and Canadian university faculties such topic was raised…..’  Please read for yourself and find out how it continues.  Canada has a population of about 10% of the U.S.A, and so do Japan which is 10% of China.  The article is of quite interest in discussing how Canada manages to collaborate with the Giant neighbor, U.S.A on one hand and keep one’s identity on the other hand.

Canada is one of my favorite countries, too.  To put it in one sentence, I might describe Canada as ‘a country that inherited the good things of Great Britain and put away with the social classes of the British society.’  ‘The good things of Great Britain’ would be; that with a bit of socialism, its functioning democratic system, quality higher education, has a number of wonderful universities.  Regarding the health care system of Canada which is run as a core public sector as Michael Moore shows in his film, the quality of care is high, co-payments are low for the patients, and is trusted from the people.  The quality of physicians and faculties are also superb.

Canada was the country least affected by the financial crisis in 2008.  The banks stayed outside sub-primes.

I came to Toronto yesterday.  At dinner, I heard that even in Calgary, a city of 1.3 million, large proportion of local residents has habit of not locking the entrance door of their homes.  A good old life style still remains.  This episode is introduced in the film of Michael Moore, too.

I have one request to the Asahi Shinbun.  Why not have such wonderful features translated in English, on its ‘On-line’ version at least?  It is very ‘mottainai (wasting good things)’ to limit the readers to Japanese only.

Learn from Korea? Why not?

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As I have mentioned in my previous posting, Nikkei newspaper published an editorial urging Japanese to learn from Korea.  Good idea.  Nuclear plants, Samsung, Hyundai, Vancouver Olympic… Korea has been giving us blows on our nose in rows these days. 

By the way, JBPress or other web news in Japan which I comment on every now and then - they are pretty ‘cool’ actually.  Just recently too I found on JBPress an article by Mr. Toru Noguchi featuring Samsung titled ‘Vancouver Olympic, the true winner was Samsung; another long term strategy on project development here, its not just about semiconductor or LCD’ (in Japanese)

How are Japanese newspapers reporting on these issues, I wonder?  The direction the world is headed is clear enough.  What can I say if Japanese newspaper publishing houses still keep on competing over the volume of circulation and stick on ‘Kisha club (Japan National Press Club) or Members Only’ policy.

On the other hand, Korean media also reports on learning from Korea.

JoongAng Daily posted an article "Japan is now learning from ‘Korea express’ " on its Japanese web site, commenting on Nikkei editorial and also commenting to the special feature of Nikkei Business which I have touched upon in my previous posting on my web site.  They also included my comments, through an interview over telephone to me in Paris.

Toyota Problems; Are They Unique to Toyota?

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Recalls of Toyota cars spread and accelerated its speed in late January.  This is such a regretfully serious problem not only for Toyota but Japan as a nation because the corporate ‘Toyota’  is an iconic company which represents Japanese technology and quality of manufacturing, a company which represents Japan to the world and is deeply trusted by the world.

To be frank with you, I would rather refrain from commenting further on the Toyota problems since I have brought them up in my web-site twice already (Ref.1).  I think the problem is deeply rooted and can be identified in any Japanese mega corporate; and in their background you will find characteristics such as ‘Tate Shakai (Hierarchical Society)’, ‘Male chauvinistic society’, ‘Seniority-based promotions’, ‘Difficulty in sliding sideways (difficulty in changing job)’, ‘Permanent employment and big severance package’, or ‘Monozukuri shinko (Faith in manufacturing)’ – elements which reflect traditional Japanese ‘Common Sense’.

The Economist magazine points this out in its most recent issue （Ref.1） .  It is the same as what I repeatedly point out – the wrong responses of Japan (which are commonly seen in many cases) to this flattening global society.

Not only Toyota but many other big companies embrace the same problems which you see as illustrated in this Economist article.

I urge people in business sector to buckle up, too.  Political leadership faces big issues, but business sector clearly needs a drastic reform as well.  It might be a beginning of 'The Third Lost Decade', I fear.  I don’t think we have much time left for CHANGE.

Toyota’s Problems and Sufferings: Eyes to See From Outside, Hearts to Sense Outside

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Although Toyota announced the recall of a huge number of its cars, problems are still likely to continue for a while.  The news coverage has been pretty in U.S. including the news of President Toyoda’s possible visit to the U.S. very soon.  Toyota hearings expected at the U.S. Congress, responses of the US legislators, reports and articles,…… there are plenty of overseas media coverage open to public in this internet age – news coverage in Japan are not the only source of information to us.  All you have to do is just ‘Google’ Toyota.  It is important to follow news from various aspects.  Especially, in this case, it is about the leading company of Japan and the problems were identified mainly at overseas, mainly US, the largest market of Toyota.  Relying only on Japanese media will be misleading.  Quite many good source of information is available via internet, the media of web age, including internet newspapers and magazines.

I would say that the newspaper most read by business persons of the world is Financial Times  (circulation of 420 thousands is pretty modest compared to that of major Japanese newspapers, but its impact to the world is incomparably huge compared to Japanese newspapers), and a weekly magazine most read by business persons of the world is The Economist. What do you think?  Articles in Financial Times and The Economist report news of the wide world, they do not particularly take U.S. side, is often critical to U.K, too, the reports they write are high quality, and their views are well balanced as well as objective.  These characters are what you might call ‘the British style’, but I feel that many articles are indeed the ‘works of professionals’, i.e. they grasp good timing, and has very good focus.  Personally I am a fan of these two and have them in my ‘Kindle’.

For Japanese readers who do not read much English, I recommend ‘JBPress’ , an On-line Press.  I read ‘Toyota Slips Up’ and ‘Toyota　Losing Its Shine’  in The Economist 2009 December 10 issue and was a bit concerned when I found President Akio Toyoda’s comment saying that he thought ‘Toyota is already at a dangerous point’ after he read ‘How the Mighty Falls’ by Jim Collins.  A large part of these articles in The Economist is available in Japanese at JBPress.

The Financial Times also has some coverage on Toyota issue recently, and some of them are translated into Japanese, again at JBPress.  (These articles include ‘Toyota By Itself Invited The Fall Of Its Reputation’ , ‘Staggering Sons Of Toyota’, ‘Toyota Messes Up With Customer Service, Its Damage Control Is Not Working’, ‘Safety Crises Threatens Toyota; The Price It Has To Pay For Going Too Far in Spreading Its Market Share’ ）  I feel that these two newspaper and magazine are musts for business persons.

What happened to Toyota – a company known for its technological excellence?  Mr. Reizen who is sending out messages from U.S. gives us good insights into the brake and accelerator of electric car.  (this web-site is run by Mr. Ryu Murakami).  His information made several things clear to me.  In this new system of electric control, the mechanism of brakes and accelerators are very different from traditional ones.  However, this is no excuse to end users, i.e. the drivers.  Brakes and accelerators are particularly important components for drivers, and if anything goes wrong with them, it may directly cause accidents which will risk the lives of drivers or other persons in the car, or people involved in the accident. Automobile makers are responsible for being strategically prepared to provide cutting edge technologies, create market value of their products, and build good customer satisfaction/social relations.

In other words, the point is whether you are capable of telling customer-oriented ‘stories’ of cars, of driving.  It’s not just about developing great technologies.  Securing good control of parts that directly connect to safety of human life must be a top priority.

The press meeting of Toyota was, as I have written in my previous column, a big problem.  What kind of attitude/meeting is good to the eyes of the public?  To answer this question, a team of professionals is critically needed.  All Toyota members, I expect a lot from you.  Please keep on working hard.

Closer Ties Between India and South Korea

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I have strongly appealed (Ref.1), more than few times, Japan’s low presence in India, a country with 1 billion people with expected economic growth for decades to come.

As you see in my recent series of five blog postings on a victory by the South Korean team on the bid of nuclear energy plants of the United Arab Emirates (UAE), South Korean business sector has been very aggressive in ‘Go Global’, eg, Samsung, LG, Hyundai and many others.

Another big surprise (Ref.1) of the last few days was press coverage that Indian government honored South Korean President, Lee Myung-bak as the chief guest of the Republic Day of India, January 26th, perhaps one of two major days of India (another one is August 15th, Independence Day from British Colonization); it is apparently the first time head of state of Asia received this honor. President Nicolas Sarkozy of France received this honor- though Indians were not happy with his being with his new girl friend.

What I was a bit worried in my blog posting part 2 of Korean victory in UAE, Japan has not been, in my view, aggressive enough to pursue our various missions to the world partners with strategic vision.

A press of January 20th, explained why India is keen to further its relation with Korea. Of course, nuclear technology is one of them.

A series of aggressive global campaign of President Lee is to show the world his nation particularly at this time, hosting later this year G20.  Is there any attempt by the Japanese government to show its leadership in various global stages, for example, World Economic Forum in this month, G8 Summit in June, and its presence in hosting APEC in November this year?

I wish you try to learn lessons what is going on in the world with your eyes wide open trying to develop ‘Vision’ and Strategy toward Vision.

Still a Long Way to Go for Women

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In my previous posting, I commented on ‘fear or prejudice against women’ in Japanese companies seen in the event of globalization.  However, such feelings against woman empowerment are shared largely in Japan as I have often pointed out in this web-site.  Please search within this site for keywords such as ‘women’, ‘men and women’, ‘gender empowerment’, etc.

One reason for this is that men, especially those in higher rank of social ladder, oppose mentally to changes of a men-centered chauvinistic social structure.  Don’t they have enough confidence in themselves for being compared to women?

However, it is a fact that more than 50% of the economy and buying power belong to women. Besides, given the fact that Japan’s population is shrinking, we cannot miss the opportunity of inviting women’s participation and their power in society just as we do with senior people’s power.  From my point of view it is just prejudice to say that doing so will turn the country to ordinary ‘domestic oriented’ thinking where economic and business growth will be hindered.

Kathy Matsui proposes on‘Womanomics’  a detailed  analysis of relations between women participation in the workforce and economic growth.  The most important element is change in social structure, i.e. social innovation, conducive to gender empower..

I would also like to point out that basically men and women have different views and values.  With more women in the workforce, what would this world be like?  Certainly it would change to a different society compared to historical men-centered one.  Like it or not, this is a world trend and it is not only bad as some of you may think otherwise.  Many good examples are also known.

In global enterprises, outstanding female CEOs are increasing;K. Nooyi of Pepsi is one example. At Xerox Ms Mulcahy who led a major change retired as chairman, and the succeeding CEO is again female; Ms U Burns. And Avon and so on.  These companies all appear to be in good shape.  Female participation in social workforce is expected to expand in Middle East as well.

By the way, in relation to my recent 4 postings on the victory of Korea in the bidding of nuclear power plants in Abu Dhabi, Ann Leuvergeon (Ref.1), the CEO of Areva, a French company which was the strongest candidate, is also woman. 

In Japan, although the number of female senators have increased after the recent election of the House of Representatives - that ended in the victory of Democratic Party of Japan -  its proportion is still less then 15% of the whole.

Japan, a country of ‘soshokukei danshi’ or "herbivorous men" and ‘nikushokukei joshi’ or "carnivorous women" with high ability who are being hindered from working actively….  I wonder where this country is headed to…

Nomura Securities and Lehman: Eyes to See Japan from ‘Outside’, Senses to Feel ‘Self’

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Since the ‘Lehman shock’ of September, 2008 (though this is now a hackneyed phrase), the world economy is struggling.  How terrible the ‘Greed of Elites’ flocking at the Wall Street could have done to the global world, but now, I think positively of the movements of past one year in which people started to discuss the essence of ‘Capitalism’.

It was around this timing, I trust that you all remember, that the news of Nomura Securities having succeeded in buying the Asia & European division of Lehman was reported.  The media basically said that Nomura made a daring move and it was a good decision for Nomura in the context of expanding its business to the world.  I agree.

However, a question that quickly came in my mind was how well Nomura could handle its new ‘non-Japanese employees’?.  Do the managements of Nomura have such expertise and ability?  Financial market is a bit different from manufacturing industries and this has to be taken into account, too.  In financial sector, your value rests mainly on brain-power and judgements, and your ‘pay’ is determined principally based on this kind of overall performance.

Here is an article that made me convinced that I was right.  A piece from last Summer’s ‘Wall Street Journal’ .

I was of course concerned about how Nomura will cope with the difference of staff management and compensation, but what is described in this article in addition, is nothing but gender discrimination.  I suspect that Japanese do not see anything ‘wrong’ in things like these – many people would say that such policy is a part of standards in Japanese companies…, or judging from how western media reported this, if the media treat Nomura like this, then Japanese banks are more conservative, not to mention mega-companies.  ‘You call yourself a ‘global enterprise’, but in reality… far from it….’  I would say that this is Japan as seen from ‘outside’.

Such tiny things of daily actions in the management, each one so small that you might think of them as problems within the company norm, is in reality something that can become a big problem of credibility of the enterprise.  When these questions on the credibility of the enterprise spread, it will eventually lead to the decline of the power of nation.  It is a serious problem.

Do you dislike global world, then?  Do you want to close our country, then?  Do you really believe that you can do such things?  Don’t you care that our lifelines; energy, food… depend largely on import from overseas?  Are you suggesting Japan to be a ‘closed nation, Sakoku’?

Korea wins the Nuclear power plant bid at United Arab Emirates - Part4

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This January I have posted series of 3 reports on this theme.  I write this because I believe that there are many lessons to be learned from this news, its background, and in thinking how Japan should promote ‘clean energy’ - the growing industry of the future.

In my 4th report, I introduced information/reports on what requirements the UAE proposed　, and what were the points where the proposal from Korea’s was highly evaluated. They are taken from open sources, but I think you will find them informative and useful.  Don’t try to get away by saying ‘We knew it’ or ‘They are just beautiful words’, because that would make you a whining loser.  Such attitude will only lead to another defeat.

Please take time to read through carefully through these interesting materials.

A mind to learn humbly, learning from defeat, to ‘Katte Kabuto no O-wo Shimeyo (tie up the strings of your helmet after victory)’, is the universal wisdom and important attitude.  What message do you see from these materials? What lessons do you learn from this and/or my previous 3 reports?  How do you react to any request, gather information and proper connections?  Equally important is to make effort in filling the gap between our view and theirs.  This can be said about other cases too - not only the UAE.

At any rate, the renewal of oil contract with UAE (50% of UAE oil export is to Japan and 25% of the oil import into Japan is from the UAE – a very important relationship!!) is expected in 2012, and as competition for energy is becoming ever severe, our rivals must be making smart moves already. As the saying goes, ‘Yudan taiteki’ (“you can't be careless or inattentive but be alert, be observant”) and ‘Ogoru Heike wa hisashikarazu ("the moral import of the tragedy and of the swift and extreme vicissitudes of fortune").  I urge all of you in government, ministries and  business  to prepare yourself and work hard for the good of the Japanese people. Buckle Up.