Insufficient “Investment” Funds are not sustainable for new growth industries of Japan


I was invited by JASDAQ and gave a speech on the 3rd of October. There were approximately 700 people participating. The people were over flooded with enthusiasm but I thought a little more vigour could have been better.  Why it was so is hard to explain but it left a docile impression.  The host, Mr.Tsutsui, director of JASDAQ and Mr. Izuka of THine Electronics, Inc. (THine) who participated in the panel were with me at Dailian also as I introduced to you a while ago in my blog (click here for article of the interview of Mr. Izuka in Japanese).  The panel members were Mr. Eikou Harada, president of MacDonld’s Holdings Japan, Mr. Mineo Fukuda, executive vice-president of Jupiter Telecommunications (J:COM), Mr. Testuya Iidzuka, director of THein and myself under the chairmanship of Mr. Tsutsui.

Japan invests extremely small amount to new or growing industries compared to economically larger countries such as in OECD (Figure1-2: why are these graphs not widely used and get known to the media?).  I get an impression of "slackness" under the influence of the economic growth driven by more than 30 years of mass-production of standardized goods since 1960’s, cheap energy sources like oil ( until the oil shock of 1974), culture of consumption, the logic drawn from the supplier side as Freeman and Perez put it "the paradigm 4."  The feeling is especially strong for these several years since the economic recovery this time came along with the economic growth of Asia, even though the basic restructuring of Japan’s framework is still far from accomplishment.  This could be dangerous.  Books like "Company rots from its head (published in Japanese only)" or "Tenacity of one finger decided the contest (published in Japanese only)" etc. by Kazuhiko Toyama points out the same problem.  Although the world is changing rapidly, it is not able to change as the past experience of success is becoming a barrier. People with vested interests who have the old experience of success are becoming too prominent in the high social status and forming the big opposing power.  What I feel is that although the field is still strong enough, the enterprises are not utilizing it enough.

Figure1: Poor Quantity of Fund Supply for venture ?1:  Transition of VC investment balance of Japan, America and Europe


Figure2: Poor Quantity of Fund Supply for venture ?2: Venture Investments in 3 stages in various countries (GDP ratio) (1998-2001)


Source: Investigation of investment trend for the venture capital 2005
Note1: Conversion for the United States is 1 Dollar=107 Yen
Note2: Conversion for Europe is Euro= 139 Yen

Regarding its social background, I write a lot about it in my blog.  My speeches can be also used as a reference.  In these 40 years, the framework has been completed using the 3 poles of Japan, America and Europe.  However, the composition is such that with the rapid growth of Asia, Japan in Asia is chased for the success.  To seclude in pride or relief is not an option.

The "investment" is not only about the country’s money or the tax system.  They are only policies that are intended to prime the pump. In Japan the "government, industries, bureaucracy" with "big vested interests" has become too accustomed to the old experience of success and the centralized indirect finance of the mega banks, that their mentality became used to "financing" but not "investment."  Even if financing is considered, the mental make-up is becoming such that they are not able to do the investment.  The "stakes which come forth" (a Japanese idiom for "brilliant people who speak up") with spirit of great entrepreneurship are so few in the Japanese society.  The situation is not good for new industries.  It is difficult to be competitive about the industrial structure and economic growth in the paradigm of the new Global era.  Since the industrial revolution, we saw the history repeat again and again in industry and economy.  The new generation (regardless of age) must come.

In the age of speeding information, the world knows much better about the Japanese situation.  Think carefully about the above 2 graphs.  How should it be interpreted?  I am afraid that, as usual, "too little too late" policies derived from the old narrow personal experiences and logic of vertically divided thinking will probably come up.  Can’t we change after all?  Recently Japanese isolation and Japanese sinking are discussed in the media.  Maybe it is so.   There are a bunch of people in the authorities who always count reasons for not doing something, who have never experienced a serious match.

Although the economic scale is 2nd in the world, Japan gives an "indifferent" or "irrelevant" or "nothing to do with" impression among the international society.  It is predicted that China will get ahead of Japan in the GDP by 2010.

I predict that talented people with high ideals will eventually go abroad to pursue their career.  It is a shame, but this is what global era is about.

After the speech, I headed to Narita and took off to Paris by the usual night flight.