In June this year, I published a book with the title Defure no shōtai: Keizai wa jinkō no nami de ugoku (The True Character of Deflation: How Population Trends Shape the Economy). A major factor behind Japan’s stagnant economy and the crunch in the country’s public finances in recent years has been the decline in absolute terms of the working-age population and the increase in the population of elderly retirees. Drawing on figures from several comprehensive studies, my book highlighted this fact and discussed the serious impact it was having. I have written this article for a readership of people working in finance who are interested in the vicissitudes of Japan’s domestic economy. As well as sketching out the main points of the argument in my book, I also look at the present and future effects of recent population trends on the economy and ... ... [Read more]

The ruling Democratic Party of Japan is compiling a supplementary budget in excess of ¥4 trillion to head off the growing risk of a slowdown in the recovery. The plan is, however, a prime example of “too little, too late.” If the DPJ had had its act together, it would have had the supplementary budget ready by July, before it began preparing for the September 2010 election of the party’s president. That would have enabled the administration to get the measure passed by the National Diet in August, and implementation of the required stimulus would already have begun by now. As a result of its overly rosy view of the economy’s prospects, the DPJ has laid itself open to the charge that it allowed the contest for party president to get in the way of action it should have taken on the economic front. ... ... [Read more]

ENDŌ ISAO Talking to executives at major Japanese corporations these days, you get a clear sense of their concern over how to position their companies in the marketplace. Ajinomoto, for example, is a leading food producer in Japan, but globally it is up against mega-corporations like Nestlé with overwhelming market shares in many product lines. Japanese companies in other sectors as well are facing off against global giants, as in the case of Kao versus Proctor & Gamble and Takeda Pharmaceutical versus Pfizer. Given the differences in corporate scale, Japanese companies may well feel that they are simply too small to compete successfully. In my view, however, the quality of Japanese companies is such that they should be fully capable of holding their own despite their smaller size, although they seem to be in a process of trial and error figuring out how to ... ... [Read more]

“The global economy is a tiger. All we can do is keep riding on its back. If we get thrown off, we’ll be eaten up.” This was the grim determination expressed by a senior South Korean official charged with directing his country’s structural reform program following the 1997-98 currency crisis. In hindsight, that East Asian currency crisis was a harbinger of the global financial crisis that struck in 2008. South Korea, facing the shock of the backwash from the global economy that hit in the wake of the earlier crisis, decided to go with the flow. Its trade dependency ratio rose from 58% in 2001 to 92% in 2008. The collapse of Lehman Brothers in September that year marked the start of a financial crisis that spread through the global economy, but despite this, South Korea’s trade dependency figure declined relatively little; the ratio ... ... [Read more]

TAHARA SŌICHIRŌ Let me begin right away by asking if you could elaborate on a comment you once made that companies sticking to the status quo are on the path to bankruptcy. What did you mean by that? YANAI TADASHI The business environment is constantly changing. Every day rival companies are coming up with innovative ideas and new technologies are being created. And consumer preferences also undergo change. So, obviously, if you just keep doing the same things, they’re going to stop working. Plans must be revised and business methods changed in light of the changing situation. And this is where the role of management is essential. Without proper management, a company will end up in self-preservation mode, where it repeats the same actions over and over. What some call “stable” management could instead be called “thoughtless” management, because it means... [Read more]

At a monetary policy meeting on October 5, the Bank of Japan approved a policy of “comprehensive monetary easing.” To hear the media tell it, this is a policy of essentially zero interest rates, and it amounts to inflation targeting and marks a return to the quantitative-easing line. When reading bureaucratese, however, it is generally a good idea to examine the footnotes even more closely than the text, as the notes and the appended material often tell the real story of what is going on. In this case, one discovers that the new policy is not one of essentially zero interest rates, or of rates “from 0% to 0.1%” as advertised, but of essentially 0.1% interest rates. As one of the footnotes indicates, it simply is not possible to move rates below 0.1% as a result of other lending systems. The claim that the... [Read more]

The International Space Station is a joint multinational project involving 15 countries: Japan, the United States, 11 European nations, Canada, and Russia. It entails the construction of an enormous facility, roughly the size of a soccer stadium, that will orbit the Earth at an altitude of around 400 kilometers and weigh approximately 420 tons in total. The space station will normally be inhabited by six astronauts, who will carry out various scientific experiments and tests of technologies, in addition to observing the Earth and outer space. A massive sum of upwards of ¥8 trillion (excluding Russia’s expenditures) has been invested in the ISS by the US, European, and Japanese partners since its construction began in 1998. This can truly be described as a colossal scientific project on a scale unprecedented in human history. In 1987 Japan decided to participate in the ISS project through ... ... [Read more]

Exactly 40 years ago Japan launched its first satellite. In 1970, after four failed launches, the Ōsumi was successfully sent into orbit, making Japan the fourth country to have its own satellite–after the former Soviet Union, the United States, and France. According to materials published by the Japan Aerospace Exploration Agency (JAXA), Japan has launched 141 rockets as of 2009, placing it fourth after Russia (3,294, including the Soviet era), the United States (1,931), and the European Space Agency (329). In this sense, Japan can be described as a “satellite superpower.” In the realm of business, however, Japanese satellite makers lag behind. There are two companies in Japan that manufacture commercial satellites: Mitsubishi Electric and NEC. Yet of the 20 telecommunication satellite models currently in use, 19 were produced outside of Japan. Mitsubishi Electric, which is Japan’s top satellite maker,... [Read more]

Japan’s satellite launch business is set to enter a new stage in 2011, when Mitsubishi Heavy Industries uses its H-IIA, a mainstay rocket produced in Japan, to launch the Korea Multipurpose Satellite-3, or Kompsat-3, of the Korea Aerospace Research Institute. This will mark the first time for a Japanese rocket to launch a non-Japanese commercial satellite. Japan’s satellite launch vehicles have been developed with an eye to having 100% of their key technologies produced in Japan. The N-I rocket, first launched in 1975, relied completely on imported technologies, but in advancing to the N-II in 1981 and the H-I in 1986, the levels of Japanese technologies used rose to 20% and 50%, respectively. By 1994, with the first flight of the H-II rocket, the goal of producing all of the key components and technologies in Japan had become a reality. An advanced version of ... ... [Read more]

These days people are talking about how Japan’s public finances are in danger of going bankrupt, but I frankly do not understand what they consider to be a state of bankruptcy. Certainly the government has gone heavily into debt, but for the most part, the outstanding government obligations are domestic in nature. That is, they are bonds held by Japanese parties, not by overseas investors. In effect, the Japanese are in debt with each other. It is like a family in which the husband has borrowed money from the wife, not from some loan shark. Under the circumstances, no problem will arise as long as inflation does not set in and interest rates do not rise too high. To be sure, the government needs to keep on meeting interest payments and rolling the debt over, but it has the financial tools for that. The ... ... [Read more]