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Deregulation and market-oriented policies could unlock private risk capital and entrepreneurship in Japan. In key sectors of the Japanese economy, regulations strangle growth. Specifically, policy should promote producers in sectors where Japan has natural strengths. I see at least four areas in which Japan has the potential to leverage inherent social and cultural attributes to realize substantial economic returns:
Rojin power. No country is better suited to create a network of health care facilities, retirement communities, hospices and the like that would set new global standards for how societies provide for their rojin, or seniors.
Soft power. Given the global admiration for Japanese fashion, design, new media and architecture, the country can become a magnet for firms in those fields from all over the world.
Agripower. With a shift in focus to eco-food, safe food and innovative food, even Japan's famously inefficient farmers could become world beaters.
Destination power. Since neighboring countries are generating millions of newly prosperous citizens who want to tour the world, Japan should make itself much more inviting to these travelers.
None of these activities involve significant manufacturing. Each is labor-intensive, offering reasonable pay for jobs requiring relatively high levels of education and creativity.
Poll after poll finds that Japan's citizens are anxious about the future. Among their biggest fears: uncertainty about whether the state's promises to cover graceful retirement can be honored. This uncertainty drives workers to save much of their paychecks, depresses demand and worsens the vicious deflationary cycles.
Magic bullets are rare in public policy, but in this case, one is available: Japan should pass a law that automatically raises the consumption tax from its current 5% level by an additional percentage point every year. And this law must leave unspecified how many consecutive years this step-up is supposed to happen.
Not all optimists are starry-eyed; my confidence in Japan is rooted in reality. Empowering people and entrepreneurs and enacting sensible tax increases can put Japan back on a track toward prosperity.
The More Things Change
JAPAN-BASED AUTHOR AND ESSAYIST
One Japanese individual commits suicide every 15 minutes. Perhaps a million Japanese are hikikomori, meaning that they almost never leave their houses. Even as the country is suffering through one recession after another shuttered stores seem to be as common as departing Prime Ministers the social fabric of my adopted home, sustained and refined over centuries, is beginning to crack. Some older couples are hiring young actresses to visit them on Sundays to say, "Hi, Mom! Hi, Pop!" because their own daughters no longer do.
Yet even as all the external registers suggest a society in decline, and even after the horrifying earthquake and tsunami of March 2011 literally reduced parts of the country to rubble, the Japan I see around me seems much stronger and more durable than statistics suggest. It remains the pop-cultural model that countries from Taiwan to Singapore are keen to follow in its street fashions, its gizmos, its convenience stores. Japan is still a byword for quality and efficiency. Its people, in moments of stress (as after the tsunami), summon a fortitude and a community spirit at which the rest of the world rightly marvels. And when Richard Florida at the Rotman School of Management in Toronto conducted a survey of 45 countries a few years ago, Japan ranked first in the values index a register of how much the country holds to the traditional. For Florida, this ranking was not an advantage, but for those who worry that Japan has left its past behind without ever quite arriving at an international future, the result could be both a surprise and a consolation.
As I look around the city I've made my home at the deer grazing just outside the glass-and-concrete city hall it's hard not to wonder if the country's strength lies not in its future but in its past, at least in the traditional sense that time moves around rather than always pressing forward. Fashions change in Japan, famously, more furiously than anywhere else, and there are few places more full of surging crowds, flashing images and all the apparatus of tomorrow. But the ideas underlying all these spinning surfaces often suggest that progress is cyclical, not linear, that moments keep returning as the seasons do and that change itself can be a constant. Every year, the details shift but the pattern looks very much the same.
The recent power and popularity of Japan, such as it is, has come not from its trying to diminish its distance from the world so much as from trying to turn that distance to advantage. The brilliant miniaturism of its TVs and smart phones arises from a land that has long liked to work in small spaces think haiku and bonsai. The manga and anime that have swept the pop-cultural globe come from a culture that has long thought in images more readily than in words. The planetary phenomenon that Yorkshiremen call "carry-oke" derives from a country whose people are at once publicly shy and yet strikingly confident when it comes to playing a part.
Japan has long been less like anywhere else than anywhere else I know, and when the country sees that as a strength, it finds its place on the international stage. Who would have thought, for example, that people from Bombay to Rio would be devouring raw fish? In an era of globalization, the local has a new and particular force.
Their economy is stalled, their political system looks bankrupt, their land was hit by an apocalyptic series of traumas, and their kids are acting out. But when Japan looks toward the future and this was not the case in the England I grew up in or in California when I lived there it sees something that looks as familiar as the falling leaves and brilliant skies of November. The things that don't change give a meaning and a perspective to the many things that do. Autumn turns to winter, and then to spring again.
Excerpted from Reimagining Japan: The Quest for a Future That Works, edited by McKinsey & Co., Clay Chandler, Heang Chhor and Brian Salsberg (VIZ Media, 2011). © McKinsey & Co.