Quotes of the Day

March 11 — Japan's Zero Hour
Yoichi Funabashi
FORMER EDITOR IN CHIEF OF THE ASAHI SHIMBUN

The earthquake of March 11, 2011, changed the geography of Japan — literally. Digital maps and GPS devices are likely to deviate by more than 5 m as a result. Beyond this geological shift, aftershocks from the earthquake are reverberating across many dimensions of Japanese life, creating upheaval in our politics, economy, social institutions and foreign relations. In ways many Japanese never before experienced, our national spirit has been shaken.

Throughout Japanese history, seismic disasters have often seemed to mark the dramatic end of an era. The momentous question now is what sort of change the Great Eastern Japan Earthquake will delineate. Japan can no longer afford the delusions of "graceful decline" or "small is beautiful" — notions that appealed to many prior to March 11. Our choice is rebirth or ruin.

Unfathomable losses are the most immediate consequence of the earthquake and tsunami. Some are at least measurable, or will be in the foreseeable future — in particular, the toll in lost lives, vanished communities and destroyed property. But the losses are intangible as well. The compound crisis of earthquake, tsunami and nuclear emergency has shattered Japan's image as a land of safety and security. Instead of viewing Japan as a haven of immunity from danger and inconvenience, many around the world now perceive the country as fraught with peril and discomfort. This perception is certain to have an effect on foreign investment and the nation's appeal as a destination for tourists.

Another consequence of the disaster is a crisis of trust. The government has performed inadequately in sharing information with the Japanese public as well as the rest of the world. Unfortunately, Japan's ineptness in communication and global literacy is a long-standing problem. More fundamental in this regard is the exposure of the too cozy relationship between an elite cadre at Tokyo Electric Power Company and officials at the Ministry of Economy, Trade and Industry. The lack of transparency and accountability has undermined faith in Japan's ability to manage risks properly and effectively.

Well before March 11, Japan's vulnerabilities included its fault-ridden land, a heavy reliance on oil and nuclear power, a rapidly aging population, isolated local communities and bloated national debt. But these vulnerabilities have become more pronounced since the last comparable event, the 1995 earthquake in Kobe. Within this same time frame, the number of people ages 65 and over has increased to 29 million, or 22.7% of the population, from 18.3 million, or 14.5%.

The events of March 11 could make Japan more fragile. The three hardest-hit prefectures — Iwate, Miyagi and Fukushima — are struggling with the destruction of entire municipalities, the departure of tens of thousands of people, the abandonment of agriculture by many elderly farmers and the uninhabitability of vast expanses of land because of radiation fears. Companies will move their factories to other regions, perhaps overseas, because of power shortages and damaged infrastructure.

At the same time, the March 11 disaster highlighted the national strengths that provide the most promising grounds for hope. The Japanese people gained a newfound sense of unity and solidarity as they witnessed the patience, courtesy and fortitude of those who lost homes and loved ones. The victims' ability to maintain social order even as civilization seemed to crumble about them was not only heartwarming but confidence-inspiring. Japan has also reaped rewards in the form of sympathy and support from abroad for the role it has played as a global civilian power, including its involvement in developmental assistance, environmental protection and disarmament. But the task ahead will require a sustained and intense focus on recovery and rebirth.

First, Japan needs to strengthen public policies aimed at protecting the lives and assets of its people from threats such as natural disasters and major technological malfunctions. Next, the switch from an energy structure that relies on oil and nuclear power to one based on renewable energy is a must. We should set our long-term sights on becoming a green society, with energy needs met by solar power and other renewable sources. Third, Japan faces challenges in its nation-rebuilding exercise that relate to the type of country it wants to be. One consideration is the concentration of population, government and industry in Tokyo. The clustering of so much power, wealth and knowledge looks more than ever like a massive risk. At the time of the Great Kanto Earthquake in 1923, the government considered, and then rejected, the idea of relocating the capital. Perhaps this time, the decision should be different. From the perspective of risk management, decentralizing government operations to other parts of the country would be desirable.

On March 16, Emperor Akihito spoke to the nation, expressing his sympathy for the victims and gratitude to emergency responders and other relief workers. Before his statement, the Emperor declared voluntary power cuts in the Imperial Palace and residences, displaying solidarity with the disaster victims and the Japanese people.

Many people took the Emperor's message to be the most weighty of its kind since the Aug. 15, 1945, radio broadcast by his father, Emperor Hirohito, announcing the country's surrender in World War II. Then the Japanese people heard the Emperor acknowledge that they were "enduring the unendurable and suffering the unsufferable." For Japanese of a certain age, where they were and what they were doing during that broadcast has long been considered a turning point in their lives. In the same way, 2:46 p.m., March 11, 2011 — the moment the earth cracked in Tohoku — will mark "zero hour" for the Japanese people for years to come.

Shortly after the earthquake, several friends remarked on the phenomenon that Mount Fuji had gleamed as brilliantly as they had ever seen it in the week following March 11. Those words imbued me with a fervent desire for Japan again to rise, with all the majesty of that snow-covered summit. At the same time, a feeling of melancholy overcame me as I reflected on the pulsating spirit of noble purity that welled up among the people immediately after the earthquake and tsunami.

The images of victims "enduring the unendurable" were both wrenching and uplifting. However, somewhere in those images I sensed resignation and fatalism. Does "enduring the unendurable" not resemble our resignation over the political leaders who have repeatedly betrayed us? This resignation is what I fear most.

Political leadership and a constructive contribution by the media will be critical factors. Whether these factors will be sufficient remains to be seen, but this much is certain: in the past 20 years, never have I been more sanguine about prospects for Japan's rebirth. There is an overflow of will and hope among the Japanese people as they begin rebuilding their country.

All of the above explains my cautiousness — and my optimism. I believe that Japan will be reborn.

How to Drive Change
Carlos Ghosn
CHAIRMAN AND CEO OF RENAULT-NISSAN ALLIANCE

Japan's resilience in the aftermath of the Tohoku earthquake has reminded the world of this nation's extraordinary capacity to face adversity and pull together. So much was lost. And yet, as I watch Japan come to grips with this enormous tragedy, I am filled with admiration, respect and hope. The social and cultural values demonstrated by Japan's people with such dignity, calm and resolve amid the catastrophe reaffirm my faith in the country's ability to rally in the face of almost any challenge. My regard for those values underlies my faith that the Japanese people can not only recover from the damage inflicted by the earthquake but also address their nation's long-term challenges.

Three particular values come to mind. First, there is the quality of service. No other country has the same kind of reliable and predictable consumer relations, underpinned by modesty and humbleness. Second, the Japanese value simplicity. Finally, the Japanese excel in process. No one executes like the Japanese; they embody focus, discipline, relentless effort and quality combined with a respect for hierarchy.

Many people believe Japan is resistant to change, that transforming Japanese companies is impossible. That's not true. You can make any change you want in Japan, with a few conditions: you need to simplify the change, explain it and connect the change with people. If you can do those things, you can do anything. In my experience, change is much easier here than in any other country. Japanese people take time to understand change and the reasons for it. And when they get it, they move — fast.

I know Japanese companies can change, but successful globalization, particularly in emerging markets, will put them to the test. Japanese companies will find it increasingly difficult to compete globally without understanding and embracing diversity. At the most basic level, diversity in Japan means having more women in the workforce. The country needs more active people, and the most obvious resource is women. I don't think Japan has a choice here. Women will have to play a much bigger role and take much more responsibility in business and society than they currently do.

People who say they do not have much hope for Japan don't really understand Japan. The country clings to the status quo not because people don't want to change but because sometimes their leaders don't have a clear sense of direction. How can people follow leaders who are lost? If there is one recommendation I would make to Japan's corporate leaders, it is to take the time to form a vision, simplify it, explain it and make it meaningful to people. If you can do those things in Japan, the people will make change happen.

Poised for Prosperity
Jesper Koll
MANAGING DIRECTOR, HEAD OF JAPANESE EQUITY RESEARCH AT JPMORGAN SECURITIES JAPAN

I have one of the most difficult jobs in the world. I'm a professional Japan optimist. I've been singing Japan's praises since arriving in Tokyo in 1986. Unfortunately of late, I have found it harder and harder to maintain credibility.

To be a Japan optimist, it is essential to consider both the demand and supply sides of the national economy and to remember that on both sides obstacles to renewed dynamism are surmountable. On the supply side, Japan's economy is constrained by excessive rules and regulations. On the demand side, it suffers from popular anxiety about underfunded pensions and the possible bankruptcy of public services. Wise leaders can fix both problems with relative ease. The government sends mixed messages on national goals. Privatization of the postal savings system? Yes! Then ... no. Fiscal consolidation? Yes, then no, then maybe. Such unpredictability has had a predictable result. Japan's bewildered firms have slowly but surely curtailed investment at home. What's killing the Japanese economy is not the strong yen or high tax rates. It is the lack of clear focus in public policy.

What should that focus be? First, Japanese economic policy must come to the rescue of the nation's producers and entrepreneurs. Business investment and private risk taking are what create jobs and incomes. Examples abound of highly successful new entrepreneurs in Japan. The problem is that the successes have been largely restricted to retail, a sector that was the focus of deregulation during the 1990s, and "new economy" sectors involving the Internet and digital media that escaped entanglement in the regulatory dragnet.

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
Pico Iyer
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.

• In the wake of an earthquake, a tsunami and a nuclear crisis, consultancy McKinsey & Co. commissioned essays on Japan's challenges — and its many strengths. Some extracts