Lessons from JapanI recently visited Japan. I wanted to see for myself if its economy has really made a comeback. From what I heard and saw, Japan seems to be back on its feet. Hope was tangible that at its current pace, Japan could finally see the light at the end of its dreary 20-year slog through the tunnel of stagnation. The streets of Tokyo were quite different from my earlier visits. Shopping malls and restaurants were brimming with shoppers and diners. The weekend traffic on the airport expressway was so bad I almost missed my plane back. My guide said that the ride, which took just one and a half hours a couple years ago, can now take more than three hours because people can afford to go out on the weekends.
There had been doubts about Abenomics, the ambitious program by Prime Minister Shinzo Abe, to shake the economy out of its decades-long deflationary slump once and for all. The government and central bank poured out easy liquidity through the first two “arrows” of the program, a combination of fiscal and monetary stimuli. The third arrow was supposed to be significant structural reforms to the Japanese economy, and progress on them has been admittedly slow. But before skeptics claimed victory, the private sector accelerated its own reforms and transformed their business models. The government and parliament moved as one to make changes to industrial policies and regulations in collaboration with the corporate sector. Once the Trans-Pacific Partnership led by the U.S. and Japan takes off, Japan’s retail market is expected to undergo sweeping changes.
The biggest byproduct of Abenomics is that it has helped revive hope and confidence in the Japanese people and companies. That led to corporate investment and consumer spending as well as new hiring of young people. Anyone looking for a job - both college and high school graduates - can get one these days. The share of the non-salaried irregular workforce is declining, helping to improve the quality of jobs. There are a smaller number of job seekers due to Japan’s aging population and low birth rate, but new jobs would not be possible if companies were not hiring. But they are.
Japanese companies are enjoying a boom and not just because of the cheap yen. They underwent a rigorous restructuring. A rebound by Panasonic, which was on the brink of bankruptcy three years ago, is a good example. The company, whose brand is a household name, incurred net losses of 700 billion yen ($5.65 billion) in 2011 and 2012 due to failed products and competition from Korean rivals. Its credit rating was downgraded and its stock hit the bottom. Many expected it would go under. Last year, the company reported an operating profit of 380 billion yen. It closed its consumer businesses and concentrated on industrial parts and materials for automobiles, aerospace, housing and energy manufacturers. It shed unprofitable businesses to become better at what it does.
Hitachi is another case. It surrendered the semiconductor and electronics businesses, which it once dominated, to become a powerhouse in electronic materials, railway systems and power plants. It reversed a net loss of 780 billion yen in 2008 to a net profit of 600 billion yen last year. Fuji Film realigned its business line to cosmetics, pharmaceuticals, printing and electronic materials. Some 90 companies have turned themselves around and the number is expected to reach 100 this year. Thanks to those performances, the Tokyo stock market gained more than 100 percent over the last two years.
Japan has always been our teacher. It has taught us what to do and what not to do. Without ideas borrowed from Japan, we could not have achieved industrialization. The road it has been stuck on over the last two decades is one we should avoid. But now Japan is on a different path. But our government, politicians, companies and households all seem to be heading down the path that should not be taken. Do we really want to pay the same price Japan has paid?
JoongAng Ilbo, July 16, page 32
*The author is the head of JoongAng Ilbo Sisa Media.
by Kim Kwang-ki