Economist Conference: Japan’s Strength and Weakness


On March 5th, 8.00AM, I attended the first “Conference of global warming issues” at the Prime Minister’s Office.  It may be a little too late to kick off at this timing, but as we can see from the Prime Minister’s speech in Davos, he is beginning to take a step forward.  It’s a good thing.  But the Diet is facing full of issues such as the budget committee, funding for road, gasoline tax, nomination of BOJ governor etc.

The world’s most read economic media, “The Economist” featured “JAPAIN” (not “JAPAN”) in their recent edition.  It reports that despite Japan being the 2nd largest economic power in the world, there is little political leadership even under this critical situation.  Today there was a conference hosted by “The Economist” and I attended the afternoon panel.  I joined part of the session before lunch where Minister Yoshimi Watanabe and Matsui-san from Matsui Securities Co. Ltd., both known as polemists were talking about “Agony of socialist nation, Japan.”  In the afternoon, a Vice Minister (of course a politician) showed up.  Vice Minister is a role to support the Minister, but that Vice Minister, he seems a good man, was just reading a draft written by a bureaucrat.  This is strange.  It’s not consistent with democracy.  Is this a joke?  That’s why they are called “reader,” not “leader.”  More than half of the audience was not Japanese, thus this situation was a little awkward.  I understand that it is difficult to distinguish the “R” and “L” pronunciation for Japanese, but it is a little too ironic.  Anyway, the relationship between Japan’s bureaucrats and Ministers are completely incomprehensible for the world.

During lunch, there was a lecture from Tetsundo Iwakuni, member of DPJ. I took part in the first panel in the afternoon.  Please refer to Yoko Ishikura’s blog for details.  There were 4 panelists and each did a 10 minute presentation.  To wrap up, I talked about 4 things.  (1) First, I started by saying “We ‘eated’ lunch next room and enjoyed a lecture by Iwakuni-san.”  “We eated lunch” is grammatically wrong, but no one got on it nor anyone laughed at it.  It makes sense in English.  Of course it is correct to say that it’s not “We eated,” but “We ate,” but “eated” is enough to pass on the meaning.  It’s a good thing to pay attention to grammar, but I just want to point out that this is one example of “starting to talk in English.”  This is the common language “broken English” in this global era.

One of the panelists, an executive from Nokia delivered an interesting speech.  He said that everyday a million cell phones are sold worldwide.  So I said (2) the share of the global cell phone market is 38% by Nokia, 14% by Motorola, 12% by Samsung, 9% by SONY-Erickson and the 10 or so Japanese cell phone companies combined all together only have 5% of share.  Some may say that the service providers like DoCoMo is too dominant, and I agree to this point.  But the quality of Japanese made components are good and 65% of the world’s cell phone components are actually “made in Japan.”  We have to precisely understand Japan’s strength and weakness to do business in the global arena.  Next (3), I pointed out the problem of Japanese cell phone industry, engineers, management and the organization itself appealing to Apple that they want to handle iPhone.  What’s more important is to look at the customers “in the world.”  Remember, back in 1997 Apple’s cash flow was only durable for 5 weeks and was rumored to be bankrupt or be merged by some other company.  Do Japanese companies have to be put in a situation like this to understand?  It’s also a problem that Japanese companies tend to run in to the government officials for help.  I would say first “Mind your own business in marketplace.”

There are unbelievably childish scandals going on by the management among big companies, bureaucracy and well-established companies.  But come to think of why these incidents occur.  It is really disgraceful that the top management doesn’t take responsibility to resign, or in some cases resign from President but remain as a board member.  It is only natural of the cold response from the society and younger generation questioning “dignity of Hin-kaku in Japanese” of people in higher positions.  Everywhere in the society, the top are corrupted.  They should owe responsible to the society. What is economic growth in such a society?!

Lastly (4), I took out my iPod and explained that the design of this shiny back side of the gadget and prototype was made in Japan, production was done by a Taiwanese company, and its factory was in China and some of the components used inside are made in Japan.  But these are all component manufacturers.  Apple doesn’t do the actual manufacturing.  They just designed the whole system and created the concept but get 50% margin out of a product.  My message was that “manufacturing” is important but what is more important is why you make it, what you make and how you seize the customer’s heart.  The instruction manual for iPod is extremely simple.  You can see it on the internet.  Compared to that, the instruction manual for Japan’s cell phone and other electrical appliances are unimaginably difficult to understand.  I assume that the engineers are writing it, but it is simply not user friendly (interesting books are written to this by Dr. Koreo Kinoshita in Japanese).  One reference related to this is “iPhone shock” (Nikkei BP, 2007, in Japanese) written by Nobuyuki Hayashi.

Japan’s strength and weakness.  We have outstanding technical capabilities but lack imagination and energy to step out to the world.  After all, it’s the management that is weak.  It is unbelievable in this world of information that a President of a company says without hesitation that he will stay in realm for “2 years for 2 period” to follow their arbitrary internal rules.  This is the basics of corporate governance of market economy.  I can’t imagine that Nissan said to Mr. Ghosn about their internal rule of “2 years for 2 period” when inviting him as president.  Let’s face the world and stop being obsessed by Japan’s original common sense.

What we need in Japan right now is a “Mr. Morita at SONY” in the 60’s.  Some may argue that time has changed, or he was special, or other reasons that we can’t do.  Those are the ones who are not fit to be the leader of an organization.