Japan’s Leadership Vacuum: Is It Time to Bring Back Koizumi?

As a communalistic society built on consensus-based decision making, mutual agreement and compromise, strong & decisive leadership has never been strongly encouraged by Japanese society as a whole. In the West, the most successful companies are oftentimes founded on a meritocratic basis, and are led by strong and competent CEOs with sound business acumen (see Steve Jobs, Rupert Murdoch and Warren Buffett). By contrast, Japanese corporations are managed by a wide board of directors chosen based on seniority and his/her dedication toward the company over the course of each individual’s career.

Now, this difference is one that many are already aware of, and one that has already been mentioned on several occasions, notably here, here and here. There are also many books comparing and contrasting the differences and similarities between Japanese and Western-style executive management, sometimes to a degree of near-incomprehensibility. No; today’s entry is not intended to fully understand the intricacies between both, but rather note its significance to and application in Japanese politics in the larger scheme of things; and why I think Koizumi should be brought out of retirement and back into the political spectrum – to shake things up as he was so adept at doing during his tenure.

Now, to understand why the leadership situation in Japan is the way it is, it is important for observers to first understand the way things are done in the Land of the Rising Sun. And to understand the way things are done in Japan, we must first look at the root of humanity and what makes society tick: education.

There’s no question that the pre-university education received by most Japanese is one of the hardest in the world. Though the standard has been relaxed in recent years, the Japanese curriculum outlines course material a year ahead of its Western-taught equivalent. The result is a highly educated workforce capable of the most infinitesimal of calculations, and that is able to take (and in many cases, pass) difficult entrance examinations that predetermine one’s future career and prospects.

The problem and unfortunate downside to this systematic approach to learning are students who are able to memorize and spit out formulas, but are unable to apply these concepts practically and in an analytical manner. By the time they hit working age, such skills become absolutely useless to the majority of graduates anyway. In Japan, you see, jobs prospects and advancement up the corporate and public ladder are based more on loyalty to his/her organization and who you know rather than your ability to solve an issue using said skills. Students – now adults – never develop the ability to think critically, and approach every problem in the same way that they have done in the past.

This lack of analytical thinking, compounded with the societal push for conformity & group-based management, has led the country to use the same approach in its attempt to tackle every problem. If consumer demand plummets, pump money into the system in the form of incentives and tax breaks. To fight deflation, lower the interest rates. To curb the appreciation of the yen, print more money. To promote local industry, build more civil infrastructure and random, superficial tourist “attractions”.  This has led Japan to its current state of economic malaise, and has had its leaders come up with band-aid, symptomatic solutions to the country’s equivalent of needing a triple-bypass surgery.

The only exception to this rule was Koizumi. Though public opinion on the man’s legacy remains split, it is difficult to argue against the work Koizumi put into reforming Japan from inside-out. By the time the now-69 year old veteran politician left office, the fiscal reforms that he had pushed during his five year tenure resulted in 3.2% economic growth in FY 2006, in addition to a 66% rise in the TSE’s stock market index. He was also noted for being the first Japanese prime minister to force lenders to cut bad loans, slashed public spending by 33% and sent corporate profits through the roof (profit margins rose to levels unheard of since Japan pre-bubble). Unemployment during his tenure fell, and wages under his administration rose.

Koizumi, in effect, left Japan better off economically than the Japan he was faced with in 2001. That’s something that (to this day) no Japanese prime minister can say his administration has achieved.

But what made Koizumi work? What made him different from the rest?

Koizumi, you see, was an outlier. Unlike the systematic, robotic approach taken by his predecessors and successors, Junichiro Koizumi stood out as a  leader who stood for reform; a politician who wasn’t so much concerned about his popularity and approval in the party (in fact, he was anything but), but was focused on resolving the core issues that were and continue to plague Japan. Koizumi was not a populist – though he was popular – and did not try to appease everyone (as his successors were so adept at doing), but took a firm stance to most issues and tackled them from a critical and analytic point of view. Koizumi was the anti-stereotype of the Japanese politician, and that served Japan well while he was still in power.

Fast forward 5 years, and Japan is now faced with a political power crisis. Naoto Kan is being pressured to resign, and there are currently few viable candidates for the seat of Prime Minister. Faced with the highest debt to GDP ratio of any country in the developed world; an aging population; deflation and apathy from its youth, what Japan needs now is to wake from its slumber, and to revive the country in the same way that it was during the Meiji Restoration or post-WWII. What Japan needs now is sweeping reform. Who better to bring about said reform than the maverick leader himself?

We should really start a petition. Come back, Koizumi. Japan needs you.

In Entertainment Today…JE’s Morimoto Ryutaro Suspended for Underage Smoking

I usually don’t write about the various happenings in Japanese entertainment, but I found this article (and the image above) to relate especially well to my entry on smoking early last week. And here’s what I have to say about it.

He was stupid to have posed for a picture knowing full well the potential implications such behaviour could have on his star status (reference: 陳冠希/Edison Chen, Kago Ai or Hironori Kusano).

He cannot be excused simply because he’s underage. Let’s get real: at fourteen to fifteen years of ago,  you already have a reasonable sense of judgment and can make decisions for yourself.

He was punished accordingly for breaking the law. If only the same could be said of other underage youth smoking in Japan…

Will this single event have massive implications on the future and direction of Japan’s tobacco industry? Of course not. The point of this entry is to illustrate the prevalence of smoking throughout Japanese society, and to show that smoking is a tattoo that not even the squeakiest of squeaky-clean idols are immune from.

Time to introduce new anti-smoking legislation.

Japanese Mind Control? Not Exactly…

Who says the Japanese are losing their innovative touch?  Researchers from the University of Tokyo and Sony Computer Science Laboratories have teamed up at Rekimoto Labs to create PossessedHand, a mechanism that allows scientists to program the movements of the hand “without the user’s mind.”  Although the name “PossessedHand” may come off as sketchy, scientists have very practical uses in mind for this technology, including helping stroke victims regain mobility and, as seen above, endowing amateur musicians with the skills of a pro.  And, notably, using PossessedHand is a completely non-invasive procedure.

As the science behind all this is beyond my high school education, I invite you to learn about it from the Rekimoto researchers themselves here.  A less technical explanation of PossessedHand and a video of how it works is available from New Scientist.

Though not the first breakthrough of its kind, “what’s novel about [PossessedHand] is they can control finger movement at multiple joints at the same time, and then program when those movements occur,” one specialist told ABC News.

It has already been proven that similar devices can help patients overcome paralysis, but some already doubt the potential of PossessedHand as a musical training tool.  In the same ABC News article, a  guitar teacher explained, “While it looks very innovative, and I’m a big fan of science, music really is a human experience and there’s no way around that.  Making music is a mindset that goes beyond putting your fingers in the right place.”

Either way, don’t expect to be playing the koto like a pro tomorrow: PossessedHand is still in the developmental stages.

The Financial Risk of Tokyo Hosting the 2020 Olympics

Most of us love global sporting events. Although many individuals stay only to watch the elaborate opening ceremonies (the 2008 Summer Olympics being a prime example thereof), a sense of patriotic fervour and global unity keep international competitions like the World Cup or the Olympics going year after year. Countries are also attracted by the prospects of potential revenue from the associated influx of tourists, and put much effort into bidding for the right to host said events.

It comes as no surprise, then, that Japan is looking to do the same. Though it has yet to become official, a recent article published by JapanToday revealed Tokyo’s interest in hosting the 2020 Summer Olympics. The catch? According to the Japanese Olympic Committee’s Chief Tsunekazu Takeda, areas hard-hit by the earthquake would be included as venues for various sporting events.

It sounds like a formula for reconstruction, and one that the JOC may hope to capitalize on to recoup reconstruction expenses. But will it really assist in the long-term reconstruction of the region through positive economic growth?

Here’s an excerpt from an economics paper published by Canada’s Queen’s University, which did a cost-benefit analysis on the economic impact of the Vancouver 2010 Olympics:

“Even the most generous measure of net benefit of the Olympics – Event Benefits minus Event Costs – is negative (-$101m). This figure is “helped” by fully evaluating the extra surplus from the spectacle and the Halo. However, there are a number of factors which push the actual net benefit of this much-celebrated project even further into the red. The first, of course, are the infrastructure costs discussed in section 1. While this paper did not rigorously assess these, a casual perusal of the Infrastructure Costs and the non-Olympic Infrastructure Benefits which might be expected reveals that the net contribution of Infrastructure to the Olympic “bottom line” will be negative by hundreds of millions of dollars. While these costs are obvious, the standard counter-argument is that they will be offset by the “economic impact” of the Games. However, section 4 of this paper revealed that “economic impact”, when correctly accounted for, is not nearly as large as is generally assumed. When combined with the substantial upside risks inherent in costs of public works projects, the expected overall net benefit of hosting an Olympic Games is substantially negative.”

This message is further reinforced in a piece published by the CBS Interactive Business Network, which stated the following in response to the economic effects of the 2008 Beijing Olympics.

“Ex-post studies have consistently failed to find evidence of any economic benefits related to sports teams and facilities. In examining recent retrospective studies, Coates and Humphreys (2003, p. 6) concluded “building new sports facilities and attracting new professional sports teams did not raise income per capita or total employment in any US city.” A closer look at the methodology of such studies reveals an appealing but fundamentally flawed line of economic reasoning that virtually guarantees a forecast of large economic benefits.

The simple elegance of economic impact studies, injections of money circulating over and over in an economy to create a multiplier effect, has an alluring “somethingfor-nothing” quality that is hard to refute. The mistakes made in economic impact studies are so numerous that making a lucid counter-argument can be difficult. Critics have focused primarily on the following areas of misapplication: treating costs as benefits, ignoring opportunity costs, using gross spending instead of net changes, and using multipliers that are too large.”

Even if Japan were to generate a profit in hosting the Olympics, the immediate financial burden – in combination with its existing debt, reconstruction costs unrelated to sporting events and anaemic growth – would break the back of the economy before the games even get started. From a layman’s perspective, it’s akin to buying real estate for investment purposes (or taking out a second mortgage) when the mortgage on your existing home hasn’t even been paid off yet. It doesn’t make sound financial sense. The same applies to Japan.

Article Recommendation: 諦めない, Japan Based Bloggers (Don’t Give Up)

A couple months back, I interviewed Mike Rogers – a down-to-earth, Tokyo-based marketing executive who also happens to run a daily blog entitled ModernMarketingJapan. Personally, I find his no-nonsense style to be quite refreshing and at times very entertaining, and I highly recommend a visit if you haven’t done so already.

Over the last few days, Mr. Rogers (or more casually, Mike) wrote two entries I think are pertinent to many readers on this site, who also have their own blogs about Japan or based in Japan: As Japan’s Nuke Troubles Deflate, So Does a Japan Blogger and Suicide Blogger. Both discuss what it really means to blog, why individuals blog  about Japan and the importance of readers to the blogger himself/herself. Here are a couple of excerpts from both entries.

“I ‘m talking about the drop in readership to blogs about Japan that are culturally, economically or politically focused have all seen recent drops in interest…Fellow bloggers who do not see quickly great fruits of their works do not despair! Keep up the blogging and keep up the good work! I didn’t write that post to be popular, I wrote it because I wanted to tell people what I thought. Don’t forget, bloggers, to ask yourself, who do we do this labor of love for? It’s not for other people. It’s for ourselves. It’s because this is what we want to say. Bloggers! Do not be influenced by outside factors! Write your hearts out. Give it your all. Remember that blogging is not something you do for three months and then get thousands of readers! Think about getting a few thousand readers a day after two or three years solid effort. That’s the way to approach the very rewarding effort of blogging.”

Coming from my own personal experience, blogging is a very difficult task to maintain on a day-to-day basis. Not only do you have to post something daily (or attempt to, anyway), but you also have to come up with content that people would be interested in reading. It makes sense, but at times can be hard when I’m down on inspiration or simply too tired from school or other extracurricular activities. The number of readers, however, can be encouraging to even the most exhausted of individuals, and over time becomes a source of encouragement that many bloggers can’t do without.

What bloggers have to realize, however, is what Mike so correctly pointed out: that we are not so much doing it to keep the reader count high, but to voice our opinions, to vent and to get our thoughts out to the world. Whether the world wants to hear our thoughts or not is a different story entirely, but the fact remains that our thoughts shouldn’t be swayed so easily by the number of people interested in hearing them.

In his second piece, Mike points out that sensationalist blogs – more often than not – gain a greater readership than those that aren’t. But is that something that we really want our blogs to be defined by – shallow articles that make exaggerated claims? Besides, most blogs that follow that train of thought have to come up with wilder and wilder claims to keep readers engaged without much lasting value. It is better to blog about the truth – as boring, depressing or sad as reality may be.

In the political world, individuals should not be influenced by populist policies if they don’t make sense. Politicians who do so eventually end up backtracking on their words, and become liked by no one in their attempt to appease everyone. In the same way, bloggers should not blog to simply follow or increase their numbers, but should stick to what they believe in and continue to persist in blogging even if numbers drop precipituously.

This blog is lucky to have been blessed with a relatively stable readership (though readership did spike in March). It is important, however, for both others and myself to remember their roots: that we started blogging not because we wanted to be popular, but for the love of writing and expressing our thoughts to an audience regardless of its size.

Thanks, Mike, for reminding us of this fact.

[JFT Press Release] Shikinen Sengu, Ceremonial Rebuilding for Over 1300 Years

July 11, 2011 (Monday), 6:30-8:30 P.M. Booksigning to follow.

The Japan Foundation, Toronto, 131 Bloor Street West, Suite 213

Free admission

Reservation Required: 416.966.1600 x.103 www.jftor.org/whatson/rsvp.php

 

For over 1300 years the Grand Shrine has kept a precious tradition of renewals. In spite of several interruptions during times of war, the Grand Shrine has been dismantled and rebuilt every 20 years. For each of the 126 shrines exactly the same structure is constructed just beside each existing one, and the old buildings are demolished. Not only the physical buildings of the shrines, but also the wooden bridges leading towards the shrines and the treasures to be stored in the shrines are freshly made, retaining the exact same designs and crafting methods. The whole construction is a spiritual process of rebirth to obtain freshness and purity, far more profound than simply a physical renewal. The 62nd rebuilding project, which started in 2005, will be celebrating its completion in 2013. Haruo Nakano is a native and current resident of the city of Ise. As an official photographer, he has been witnessing and documenting all ceremonies and rituals of this rebirth. Images which are not included in the exhibition will be projected during this talk.

Complementing exhibition

<The Grand Shrine of Ise: Photography by Haruo Nakano>

March 15 ~ July 29 [EXTENDED], 2011

at The Japan Foundation, Toronto http://www.jftor.org

The artist will be present at the Special Saturday opening on July 9th.

Smoker Nation: Japan’s Tobacco Addiction

If you’re an avid smoker and absolutely love to light it up, Japan is the place to be. The average price of a pack of cigarettes, for instance, can range anywhere from 320 to 550 yen – a mere fraction of its cost in the rest of the industrialized world. Cigarettes can be purchased from vending machines, and non-smoking areas are few and far in between. It’s little wonder, then, that smoking is taken up by nearly three out of every ten Japanese, and is perceived by some to be a way to “relieve stress” in the hectic Japanese workplace.

Japan’s tobacco addiction, however, has had a devastating yet silent impact on the well-being of the nation and its people. According to the World Health Organization, one in every eight deaths in Japan can be attributed to smoking itself, and is the cause of up to four out of the five leading causes of deaths in the nation. 50 000 of said deaths were caused by lung cancer. Beside the emotional distress death and sickness inflict upon these individuals and their respective families, direct medical costs (inpatient and outpatient care, drugs, equipment); indirect morbidity costs and indirect mortality costs are putting an enormous burden on social security in Japan – a system already strained by the large (and growing) number of elderly in the country.

With the expense of reconstruction and its massive public debt already on its shoulders, whether Japan can afford to take on the cost of caring for the self-inflicted is already out of the question. Reducing the number of smokers in Japan will be an essential component in managing the country’s ongoing healthcare costs – the only concern that remains is how.

The easy answer to that question and the layman’s average response is taxes. In following the average layman’s train of thought, higher taxes would imply more expensive cigarettes, which would in turn exert a financial pressure on regular smokers to quit their increasingly expensive habit. Sounds logical, doesn’t it?

Forbes Magazine’s Reuven Brenner – a chair at McGill University’s Desautels Faculty of Managementdisagrees, and tells the publication in this piece with what could possibly go wrong in imposing a heavy sin tax (on cigarettes and other tobacco products):

“Seventeen years ago I was asked to debate the issue of smoking in Quebec and specifically was asked why the imposition of taxes did not and could never be a solution.  The large tax imposed at the time neither reduced smoking, increased government revenues or diminished smoking among the young. As is happening today, it led to a great deal of smuggling and the inevitable undesirable side-effects of such actions…taxes or no taxes, Canadians did not seem to change their smoking habits.  Cigarette consumption gradually declined only 3.4%.   The habit remained.  And the numbers are similar today.”

Brenner, however, did offer a solution to the problem, and proposed taxing the habit of smoking instead of the tobacco products themselves.

“A carton of cigarettes might cost $20.  But the difference between a smoker’s and a non-smoker’s medical insurance might be $2,000 a year or more.  This would be a serious disincentive for smokers.  And enforcement would be much more certain. And what about the teenagers, you may ask?  The answer is easy: Tell them that if they smoke, they cannot drive.  Most parents cannot pay both the additional $2,000 car-insurance fee for their thrill-seeking teenagers and higher fees for medical insurance.   Better to give the teen-agers choices than orders. A 2008 poll in the U.S. by the Society for Human Resource Management revealed that only 5% of companies charge smokers more for health-care premiums.  That’s surprising since this, combined with higher life and home insurance, would do the trick of reducing smokers.”

If the same were to be applied to Japan, Japan may see its first significant decrease in the number of smokers since it raised cigarette prices back in 2009. But is it possible? A 2007 article run by Al-Jazeera notes that it will be a difficult task:

“The (finance) ministry controls 50.2 per cent of Japan Tobacco, the world’s third biggest tobacco company, turning over a profit of nearly $3 bn a year.  The anti-smoking lobby says the Japanese parliament is filled with MPs who have interests in the tobacco industry and that is why nothing is done.  Sakuta says implementing a national law against smoking is vital, ‘but with 300 MPs out of 500 with interests in the tobacco industry, it is impossible’.”

Given the intertwined nature of government and industry in Japan, there anything that can be done to reduce the number of smokers? The answer to that question is yes, but is highly dependent on several factors. The government, its politicians and its constituents must realize the enormous financial burden smoking places on its healthcare system, and the cruciality of finding a solution in order to preserve Japan’s economic health. It must also build an effective anti-smoking policy that would incorporate higher premiums for smokers and reduce availability to the general public, yet make concessions to the tobacco industry to ensure its passage through the Diet. Whether it can be done or not remains a point of contention, but it’s an issue that cannot remain in the dark forever – one that must be resolved to ensure the solvency of social security programmes and the economic health of the Land of the Rising Sun.

[Video Gallery] Mother Nature vs. Japan: New Videos of the March 11th Earthquake/Tsunami

[Video Gallery] Japanese Scientist Extracts Meat from Feces

It actually doesn’t look half bad and could be (as the title of the video alluded to) the “solution to the global food crisis”. What do you think?

The Pauper of the Developed World: Japan, The Disaster and Taxation

Editor’s Note: I do apologize if this post is a bit rough around the edges. Exams are finally over, and I have to get back to writing on a regular basis again.

Recognize this place? Chances are, you probably don’t. This is Nara Dreamland: a theme park built in the ’60s near Nara, Japan (home to the former Heijō Imperial Palace). Though the park enjoyed moderate success in the first few years of its existence, Nara Dreamworld eventually fell into obscurity after Universal Studios in neighbouring Osaka opened shop. The park shut its doors in 2006, and the abandoned site has since become a treasure for haikyo hunters and adventurers alike.

Now, you may be thinking that this has absolutely nothing to do with the title of this post. In reality, however, it does – as an analogy.

You see, Nara Dreamland is a lot like the Tohoku region in Japan. With tourism as a major source of income, Tohoku region – like Nara Dreamland – is wholly dependent on visitors for its survival. Similar to the theme park’s relation to Universal Studios, Tohoku region does not have anything going for it from a commercial point of view, and many see starting a business in the neighbouring mega-capital of Tokyo as a more viable alternative in the long term. The fact that the disaster has destroyed what little infrastructure was present in the region only exacerbates the bad position Tohoku region was already in.

If you want to read about what I think should be done to revive the economy of Tohoku region, you can do so here. This entry, however, isn’t so much about reconstruction itself, but how the government plans to pay for the reconstruction efforts currently underway. How this relates to the Nara Dreamland analogy will become evident later in this post.

My source of inspiration for this particular entry came after reading about Japan’s plan to hike taxes on Reuters.com. Here’s a short excerpt to give you some sense of what they’re planning to do:

“Japan’s ruling party aims to raise corporate and income taxes to repay new government bonds for funding massive reconstruction needed after the March 11 earthquake and tsunami…is considering raising both taxes by around 10 percent, generating 1-2 trillion yen ($12-24 billion) in annual revenue to pay back borrowing for reconstruction over a decade…the party will not use revenue from the sales tax to cover the reconstruction bonds, as it wants to use that tax for growing social security costs and is already considering doubling it to 10 percent.”

Now, to say that hiking the sales tax is unavoidable is somewhat of an understatement. For a developed nation, Japan’s sales tax is already ridiculously low (Canadian sales tax, for instance, is more than double Japan’s 5 percent), and can certainly be brought up to speed to reduce the growing financial burden of social services. But to hike both the income tax and corporate tax on a population increasingly strapped of funds and in a country with one of the highest corporate tax rates in the world would be beyond absurd. Why?

Point 1: Corporate income taxes. A raise in corporate income tax rates would  discourage entrepreneurship and foreign investment, and would undo all the work they’ve put into creating a favourable investment climate in Japan. As noted in one of my earliest posts, there’s also no point cutting the corporate income tax to stimulate investment and consumption if consumer demand is depressed via by taxing other areas more heavily. Raising the corporate income tax would just make a bad situation much worse, and may result in anemic job growth (if not firings) as companies try to find solutions to keep the people already on payroll paid.

Point 2: Personal income taxes. Japanese workers are, on average, paid much lower than their counterparts in the West considering the amount of work they put in. To tax them more than they already are being taxed would not only be harsh, but would lead to a plunge in consumer demand the Japanese government itself tried to prevent with massive stimulus packages. If you’re planning to hike taxes to raise revenue, only to dole massive amounts of money to get people to spend again, what would be the point?

Now, reconstruction is all well and good, and is necessary for the continued survival of the region and for the people living in it. But to raise taxes in the name of reconstruction, ones that would hinder economic growth; fire thousands of people and limit what little people can already spend, sounds like a plan counter-intuitive to rebuilding a region dependent on people’s willingness to relax (tourism) when they have greater socioeconomic problems to deal with. And that sounds like a Nara Dreamland situation to me.

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