Abe Craves Olympic Glory

Japan’s athletes celebrate at the Rio Olympics in 2016.  AFP PHOTO

“Don’t expect Shinzo Abe to try to change the constitution before the Olympic Games,” a senior Japanese government official told me privately this week. He explained that the Prime Minister’s long-cherished plan of removing the clause in the constitution which commits Japan to a form of pacifism would be put on hold until after the 2020 games.

Mr Abe originally set 2020 as the deadline for constitutional change.

My contact explained that the Prime Minister is treading cautiously because of domestic politics, international diplomacy and economics.

“I want to make the Olympics a trigger for sweeping away fifteen years of deflation and economic decline.” Shinzo Abe

Political tension

Domestically, Mr Abe requires the support of a two thirds majority in both the upper and lower houses of the parliament before he can seek its approval for constitutional change. At the moment, the numbers are on his side but he needs continued backing from both houses.

Although the opposition parties are weak, the constitution is an issue upon which they hope to draw public support. Resistance to changing the so-called pascificist clause, known as Clause Nine, remains strong, if the many recent surveys on the topic are to be believed. A final change would need approval through a referendum.

That means that if the Prime Minister wants to press for reform the constitution, he will need to debate the policy in the glare of the media. According to my friend in the government, this is not something Mr Abe wishes to do as he tries to rally the country around the Olympic flag.

Bitter Memories

Furthermore, China and South Korea are critical of Mr Abe’s plan to change the constitution and to allow Japan’s armed forces to fight abroad. Both nations have bitter memories of being occupied by Japanese soldiers in the first half of the 20th Century.

The Olympics offers an opportunity for Japan to build friendly relations with its neighbours through sport. Reigniting the debate about the region’s history of conflict would send the wrong diplomatic signal entirely, according to my source.


Another issue is Mr Abe’s plan to revive the economy, known as Abenomics. The economy is improving partly because of all the spending associated with run-up to the Olympics. The games also offer Prime Minister Abe an opportunity to broadcast to the world his key political slogan “Japan is back.”

When he learned that Tokyo had won the honour of hosting the games, Mr Abe said: “I want to make the Olympics a trigger for sweeping away fifteen years of deflation and economic decline.”

Figure skating

The enormous publicity value of a big sporting tournament was made clear by the success of the World Figure Skating championships in Nagoya last week.

It attracted star athletes from China, South Korea, Russia and many other countries to compete alongside Japanese stars. Japan gains great prestige when it hosts international sporting events which are shown throughout Asia on television.

Abe pledges resolute response to North Korea

Japan and South Korea are pressing the United States to step up the diplomatic effort to prevent war with North Korea.

South Korea’s ambassador-at-large for international security affairs, Chung-in Moon, has said that President Trump should send an envoy such as the former national security advisor Steve Hadley to try to dissuade the North from further missile launches and nuclear tests.

Professor Moon was speaking after North Korea launched another long-range rocket over Japan.

Following the launch, Japan’s Prime Minister Shinzo Abe said in parliament: “In order to press North Korea into changing its policies, we shall take a resolute attitude in our diplomacy,” but he also said “dialogue for the sake of dialogue is meaningless.”

A former Japanese ambassador to the United States and the United Nations, Ichiro Fujisaki, has warned that the Americans have become “very serious” over the North Korean issue because they recognise its missiles may soon be able to reach the US mainland.

Mr Fujisaki told the BBC: “Mr Trump has been very clear he will try to defend Japan, so we are putting some confidence on this US position. The US is very serious this time on nuclear deterrents and this was not the case about 40 years ago, if I may say.”

This week, tens of thousands of South Korean and American personnel have been involved in joint military exercises. They included simulated air strikes on ground targets. The North has called it “an all out provocation.”

Ambassador Moon said that the South Korean president Moon Jae-in is “desperate to avoid war” but if there was a conflict, any decision on military action must be taken jointly between South Korea and the US.

“If America fights, America wants to win but in order to win, they will need to commit ground forces. Those ground forces would be drawn from the South Korean army,” he warned.

In an on-the-record discussion at Chatham House, Professor Moon proposed that London could host a new round of negotiations involving six parties: South Korea, North Korea, the US, China, Russia and Japan.

Professor Moon said the latest missile launch could well have been deliberately designed to escalate matters. “It’s not irrational – it’s very rational from their point of view,” he said.

North Korean propaganda claims its weapons programme is needed to protect the Supreme Leader Kim Jong-Un, to protect the state’s institutions and to protect its people. Professor Moon said that these motives combine with a quest for domestic political legitimacy and a desire for international recognition.

Professor Moon said that further sanctions which could lead to the complete isolation of North Korea would be counter-productive.

He claimed that President Putin of Russia has said that the North would continue with its weapons programme “even if the people have to eat grass.”

Professor Moon said: “If we close all ties with the North, there is no way we can influence it other than creating a humanitarian disaster.” He also cautioned against shutting down all channels of communication with potential opponents of Kim Jong-Un.


Do lazy students let down Japan’s colleges?

This week I’ve been considering the claim: “Most Japanese universities are not very stimulating or rewarding places intellectually.”

It is not a new allegation. It was made by an American writer named Robert C. Christopher in the book The Japanese Mind: The Goliath Explained, which was first published in 1983.

Low ranking

Given the enormous prestige placed on university education in Japan, it is perhaps surprising that only one Japanese University, Tokyo, is on the Global Top 50 list compiled for 2017 by Times Higher Education.

It is ranked at number 46, below universities in Munich, Stockholm and Wisconsin.

Robert Christopher wrote in 1983: “Tokyo University, known as Todai, carries the prestige of Harvard, Yale and M.I.T. all rolled into one.” I asked a friend who teaches at a rival Japanese institute about this bold claim and he said that it remains true.

“Tokyo University, known as Todai, carries the prestige of Harvard, Yale and M.I.T. all rolled into one.” Robert C.Christopher

More colleges, less places

Of course, there are other Japanese universities which are regarded as world class, including Kyoto, Keio and Waseda. Yet Japan has an astonishingly large number of higher education institutions; more than 700 in all and that number has doubled since 1983, despite a sharp decline among the population of young people.

The book The Japanese Mind claims that most students do not receive a rigorous intellectual workout at university for three principle reasons.

Firstly, a low teacher-student ratio – some classes are enormous.

Secondly, a reluctance among colleges to dismiss students for missing classes or achieving low grades.

And thirdly and most importantly “once the dreaded entrance exams are behind them, it it commonplace for Japanese youngsters to suffer a psychological let-down and slack off in their study habits.”

Final freedom

The author Robert Christopher says that Japanese undergraduates “have a keen awareness that university will be the only time in their lives that they are likely to experience genuine personal freedom.”

I put those points to my professor friend and he said that the claim still largely holds true, even though he believes that academic standards have risen in most universities in recent years.

From oversupply to shortage

In the 1980s, there was an oversupply of well-educated young people entering the job market every year. Now, we often read about a shortage of people to take up jobs in Japan, although this is not particularly true in the prestigious white-collar professions.

The Financial Times reports this week that building companies and nursing homes for the elderly desperately require more people to come and work for them.

The pressures associated with care work and construction are different to those faced by hard-pressed salaryman. Job insecurity has been a problem so therefore some employers are offering long-term contracts to new staff.

When selecting university graduates, the recruiters may also not be too worried about the college record of the candidates, provided they commit to maintain a high professional standard when they join the company.


Japan cannot defend itself, warns US colonel

Japan is unable to defend itself, according a scathing article about its military published in the Washington Post this week.

The journalist John Pomfret claims that the Self Defence Force is weak, disorganised and under-funded. He suggests this causes dismay to Japan’s principal ally, the United States.

Pomfret bases his article on an interview with Grant Newsham a colonel in the US Marine Corps, who served as a liaison officer to Japan’s Ground Self Defense Force.

Newsham complains of Japan’s “pathological dependence” on the United States for its security.

“The Japanese like to say, ‘The Americans are the spear and we’re the shield,’” Newsham is quoted as saying. “Well, in battle, the spear gets bloodied and the shield doesn’t. It’s the Americans who are expected to do the dying on Japan’s behalf.”

Fatal crash

The perils facing US personnel based in Japan were underlined when a US Navy aircraft crashed in Japan this week. Fatal accidents involving the US military increase the pressure on the Japanese government to justify its alliance.

Japan’s defence capability is also high on the agenda because of the threat from North Korea and because Prime Minister Shinzo Abe wants to reform the constitution so that Japanese forces can fight abroad.

That is a politically divisive issue in Japan. But the Washington Post suggests the Self Defence Forces are ill-prepared for combat and that the air force, navy and ground troops can barely work together. It says “they do not even possess radios that can talk to each other.”

Colonel Newsham says the problems were apparent when the Americans helped clear up after the 2011 earthquake and could not communicate with the Japanese.

Trump agenda

The Washington Post article fits in with a wider agenda of the Trump administration, namely to reduce the dependence of US allies on its expensive military protection.

That was also a theme in an interview for NHK television this week by Mr Trump’s former advisor Steve Bannon. He claims to still speak to the president “two or three times a week.”

“Prime Minister Abe and others have talked (about) Japan’s looking at redoing its Constitution, looking at getting just away from a Self-Defense Force, maybe back to become a military power again,” Bannon said. “And I think that what President Trump is saying, given its role in the Pacific, given its role as how central it is to the strategy, that it will acquire more of a military force over time.”

He also suggested a communication gap between Japan and the US, saying the two allies are “just beginning” to ensure the two militaries can work together “and that the United States is there to help its ally Japan rearm and rearm appropriately.”


Trump’s Tokyo burger sent a USA first message to Japan

When President Trump went to lunch with the Japanese prime minister Shinzo Abe in Tokyo last week, he rejected sushi made by the finest chefs in favour of a juicy hamburger. Fortunately, his hosts had researched what he likes to eat, so they’d already put mustard and ketchup on the table.

It was a potent symbol of how the President’s America First approach to trade affects President Trump’s approach to Asia and how Japan is attempting to satisfy his appetite.

Potential havoc

The Financial Times warned that the President’s visit to East Asia had “the potential to cause havoc” and there were some moments of noisy rhetoric.
In Vietnam, Mr Trump warned that the United States will no longer tolerate what he called “chronic trade abuses.”

Edward Alden, a senior fellow at the Council on Foreign Relations in Washington says: “You can see how Trump’s philosophy of America First guides his agenda when it comes to trade. The consistent theme is how will a trade arrangement benefit the United States.”

Yet on many points on the trip, President Trump seemed in a friendly, accommodating mood. In China, he refrained from criticising President Xi Jinping over human rights or pressing for more democracy. In Japan, he said his relationship with prime minister Abe “is really extraordinary.”

“I don’t think we’ve ever been closer to Japan,” he told reporters at Kasumigaseki Country Club golf course, where the two leaders signed baseball hats bearing the words “Donald and Shinzo – Make Alliance Even Greater.”

That alliance came under pressure soon after Mr Trump came to office and pulled America out of the TPP trade agreement, much to the frustration of Mr Abe. Other nations involved in the project are now pressing ahead without US involvement.

The closest the President came to causing diplomatic havoc in Japan was when he said during a speech in Tokyo that more Japanese car manufacturers should build their cars in the US, rather than shipping them over. In fact, three-quarters of cars from Japanese manufacturers which are sold in the US are made in North America.

Praise and appreciation

The President’s speech in Tokyo was less negative about the Japanese automotive industry than some reports suggested. According to the Washington Post, the President said: “Several Japanese automobile industry firms have been doing a really good job.” He particularly praised Mazda for announcing it will invest $1.6 billion in building a new manufacturing plant, which will create as many as 4,000 new jobs.

That puts Japan in a good position to reach a favourable trade arrangement with the US. Mr Trump hopes to reach bilateral trade deals with countries around the world as these are simpler than the complex multilateral agreements, which can take decades to negotiate. Mr Trump believes that America’s position as the world’s largest market will give it an advantage at the negotiating table.

Protectionism risk

Nevertheless, the business community in the US lobbies government against disrupting trade arrangements, fearing disruption if there are disputes and retaliation. “Rather than gaining jobs through protectionism, in fact jobs could be lost,” says Eswar Prasad, Senior Professor of Trade Policy at Cornell University told the BBC.

“If the US falls out of the supply chain, manufacturers might shift production abroad, which means factories would close in America.”

Professor Presard also foresees geopolitical repercussions in East Asia.

“The international influence of the US is eroding. It is no longer regarded as credible and reliable. Other countries are stepping in to fill the void. This is leading almost every country in the world, particularly countries in the Asian region, to re-evaluate their relations with the US and perhaps move closer into the economic and political embrace of China,” says Professor Presard.

“Economic war”

Mr Trump’s former advisor Steve Bannon said just before he left the White House that the US is in an “economic war” with China. China is America’s largest trading partner. Its annual trade in goods and services is worth about $663 billion. After that comes Canada, Mexico and then Japan.

However, Japan’s importance as a US trade partner is shrinking while that of other Asian countries is growing.

As Forbes points out, twenty years ago, Japan accounted for 12% of all US trade. Today is it around 5%. At the same time, the Japanese trade surplus which Mr Trump has complained about ($69-billion last year) accounts for a much smaller slice of the US deficit than in the past, while China’s imbalance is bigger.

If the trend continues, Japan can expect a further fall trade in trade with the United States but it can also expect its trade with Europe to rise. The EU is in the final stages of agreeing a free trade deal with Japan.

Bark and bite

So far, Mr Trump’s tough rhetoric on economic nationalism has led to no substantive changes in US trade policy. “Trump’s rhetoric on trade has been much worse than his bite,” says Martin Wolf of the Financial Times.

That has been a relief to the Japanese government led by Shinzo Abe which fears a regressive, protectionist approach by the United States would harm Japan’s relationship with America and benefit its rival China.

Keeping friendly on his America First terms with Mr Trump is a challenge for Japan but it comes with rich potential awards. A few more hamburgers may well be served to keep the friendship in shape.


How can foreigners find work in Japan?

A record number of foreigners are working in Japan and many companies are actively recruiting globally for new staff.

Japan’s low unemployment rate has created opportunities for foreigners, although many people find the complex recruitment process baffling.

This week I gained insights into the opportunities and challenges at a conference on employment, hosted at the Japanese department of SOAS, part of the University of London.

It was focussed on university graduates but also had relevance to people looking to move jobs in the later stages of their career.

Global hire

Chikako Masuzaki, a consultant from Top Career, explained that the decline in the working age population in Japan is driving companies to hire globally.

She expects the working population in Japan to decrease by around ten million people over the next ten years and said there has been a 40% fall in the number of 18-year-olds since the year 2000.

According to the Labour Ministry, the number of foreign workers in Japan surpassed one million for the first time last year.

Strange questions

Ms Masuzuki said: “There is a big difference between recruiting practices in Japan and the rest of the world. For example, interviews may ask “What is the hardest thing you have tried to accomplish?” – a question which can seem strange to foreigners but which is designed to assess people’s potential as problem solvers.”

A recent Japanese language graduate from Oxford University, Amy Dafnis, started work this year at the Japan Association of Marine Safety.

She said: “I heard some horror stories about the application process in Japan but actually applying for this position was relatively straightforward.

“When I studied in Japan I did a lot of bowing and I tried to speak in polite Japanese (keigo). Now that I’m working in London, I’m not quite sure how much to bow and when to use honorific language. I don’t want to be overfamiliar but I don’t want to come across as too formal, either.”


Sarah Parsons from SOAS said demographic trends are creating a less homogenous and more diverse society in Japan. That idea was echoed by Ian Robinson, Corporate HR Manager at Toshiba Europe.

“We have very diverse industries so we want a diverse group of people,” he said.

He added: “At Toshiba, we want people to come in and challenge the way we do things. Japanese companies must adapt in order to globalise.”


Mr Robinson said integrity, commitment and innovation are among the attributes he most values in candidates.

He also said that few roles outside Japan require people to use the Japanese language to a high standard, although the ability to communicate with colleagues in Japanese is “nice to have”.

Traian Ivanov leads the human capital group at Deloitte, which supplies staff to Japanese clients. “We place an emphasis on diversity and we seek curious, dedicated and smart people,” he said.

He claimed that fewer Japanese young people than before wish to work overseas, so this provides further opportunities for internationally-minded foreigners.

Reviving fortunes

Mr Ivanov went on to say: “Ten years ago, around 500 out of the biggest companies in the world were Japanese. Now there’s only one global giant – Toyota. Traditionally strong companies such as Toshiba and Panasonic are in trouble and so they are seeking to revive their fortunes. A lot of companies are seeking to expand their overseas operations so they hire local people who understand the local market.”

Junko Hashimoto a senior manager at Access Appointments said: “Attitude and motivation are just as important for getting the right job as qualifications and experience.”

Language Skills

Harry Martin from another recruitment firm, Centre People, claimed that Japanese companies are more open to hiring foreigners and people who do not speak perfect Japanese, although an understanding of Japanese business culture is always appreciated.

Mr Martin said that the staff of Japanese organisations are expected to be loyal and long-serving. People who change jobs frequently are not attractive to recruiters. He also said: “If you approach your job search with rigid expectations you will limit yourself and may miss opportunities that you may not even have considered.”

The meeting at SOAS was organised in conjunction with the University of Sheffield, The National University of Singapore and Osaka University. Thank you to Sarah Parsons, Senior Teaching Fellow at SOAS and Managing Director of East West Interface for extending the invitation to Japan Story.

“Adorably mad” Japan delights the motoring press

The view that Japan is a weird place full of “adorably mad” machines is strongly reinforced by international press coverage of this year’s Tokyo Motor Show.
“Stay strange, Tokyo” began an article by the journalist Jeremy Korzeniewski, who compiled a comprehensive report on the event on Autoblog. He explains that “the Tokyo Motor Show never fails to show off the weird, wacky, and wild side of the automotive industry.”

The biennial show is focused on concept cars, so most vehicles are not designed for daily use but are offered as ideas for the future. The website of the popular BBC motoring show Top Gear has many pages of pictures and reports about delightfully eccentric machines. Top Gear heaps special praise on the “adorably mad” concepts of Suzuki. Other websites such as Jalopnic reckon Mazda “stole the show.”

Pretty models

The Daily Telegraph said that that “the planet is receiving its biennial boost of Japanese weirdness, from crazy concept cars through to the most implausible mobility technology.” This stereotype of the Japanese as strange, wacky, weird and crazy is reinforced by the photographs on many websites which include pretty female models posing beside the cars. Some sites, such as Autoguide, baited their readers with pictures of “the weirdest and wildest cars” including a big slideshow by the photographer Dino Dalle Carbonare.

Friendly cars

The PR people from the Japanese car makers have plenty of stories to feed the foreign journalists at the show. Toyota has claimed its new concept vehicle can “understand” drivers so that the machines and users can “bond as partners.”

According to AFP “Concept-i is a futuristic four-wheel model that reviews the person’s behaviour patterns, as well as latest news and social media activity, to assess what the driver needs or wants to hear in a given situation, like offering comforting words to a parent after a fight with a teenage daughter inside the vehicle.”
Positive news

The carmakers hope the positive coverage of the motor show will counterbalance the recent negative publicity about safety scandals including problems at Nissan and Kobe Steel.

Concept cars are fun to write about but Japan also wants to be trusted. So manufacturers should be pleased with a report on the performance of their ordinary cars in What Car magazine. It said that half the most reliable cars sold in the UK are Japanese.

Conservatives relish Abe’s election success

Japan makes a good conservative role model for other countries, according to a political journalist reacting to the general election.

Through a coalition of his party and supporters, Shinzo Abe has the support of around 80% of parliamentarians.

Conservative ideal

Stephen Bush wrote in the New Statesman’s blog that “Japan is in many ways offers the ideal target for meeting Conservative aspirations”. He notes the resounding success of Mr Abe’s right-wing Liberal Democratic Party, bolstered by the prime minister’s tough talk on defence, his emphasis on economic stability and his low immigration approach. Stephen Bush also says that Japan is “politically free of the destabilising movements that threaten the right in the UK and elsewhere.”

Koike’s challenge

Japanese voters’ inclination towards stability helps explain why the LDP nearly always wins elections. However, there was an attempt to destabilise the political status quo recently, when the Tokyo governor Yuriko Koike launched a new party. The challenge fizzled out when she decided not to run for parliament herself.


Analysing the election result on the BBC, Professor Seijiro Takeshita from the University of Shizuoka said opposition parties lacked credibility and were “full of short-term populism”. He also said that politicians in Japan balk at saying “harsh things that voters don’t want to hear”, such as raising tax to tackle the national debt.

North Korea

Other issues in the media are Japan’s relations with North Korea, Mr Abe’s efforts to reform the constitution and the state of the Japanese economy. Mr Abe has said that he will “firmly deal with North Korea using strong diplomacy”. The BBC’s Tokyo Correspondent Rupert Wingfield-Hayes said that “Mr Abe’s approach so far is to talk tough, request more missile defence for Japan and to stick close to President Trump.” But he said that Japan does not have much leverage. “It has no relations with North Korea, it has no trade and it has a poor relationship with China, so it’s hard to see what other options are available,” he said.

Constitutional reform

The Financial Times suggests that Mr Abe’s remaining years in office will focus on amending the constitution’s so-called peace clause, in which Japan renounces the threat or use of force in settling international disputes. Mr Abe’s election success has built him enough support in parliament to propose a re-write of the constitution.

The Prime Minister will also want to continue his programme of Abenomics. There has been some measurable success, with Japan’s GDP now growing at its best rate for a decade. The unemployment rate has also fallen but inflation is stuck at zero and there remains the unresolved issue of rising national debt. Professor Takashita believes the third arrow of economics, one targetted at structural reform, “is still floating through the air”.

Third Arrow Graded D

The Nikkei Asian Review is harsher: it believes the third arrow is completely off course and it gives a “D” grade to the structural reform aspect of Abenomics. “There has been progress in improving the business environment including lowering corporate tax rates, promoting corporate governance and enhancing overseas economic partnerships. But efforts to boost labour productivity, leverage foreign workers and deregulation the medical, nursing care and other sectors have borne little fruit,” says the Nikkei.

Cheating scandals mar Japan’s reputation

Kobe Steel CEO Hiroya Kawasaki. Photo: Getty Images

This week, the international media has been filled with articles condemning Japanese business culture after another high profile scandal.

Kobe Steel has admitted it falsified safety records for products supplied to more than five hundred companies, including Japan’s biggest automotive firms and train manufacturers.

Decades of cheating

The Nikkei newspaper reported that the cheating went on for decades, with the knowledge of some of Kobe Steel’s senior managers.

Several journalists noted alarming similarities between the scandal at Kobe Steel and one at Nissan, which has had to recall every new car it sold in Japan in the last three years after it falsified safety checks.

Suzuki and Mitsubishi Motors have faced scandals over fuel economy tests on their vehicles. In addition, there was recently a major scandal at Toshiba, which tried to hide the extent of the financial problems within its nuclear power division.

Crisis in Japan Inc

The Financial Times says that “after a concentrated two year outbreak of corporate scandals… (there is) a crisis in Japan Inc.”

The FT quoted Shin Ushijima, a lawyer and corporate governance expert. “Did we not learn anything from Toshiba? What was Kobe Steel’s board doing?” he asked.

It was a theme picked up in an analysis of Japan by the BBC’s Ashleigh Nghiem in Singapore.

He suggests that Japan’s reputation as “a shining example of integrity, assured quality and reliable products” has been severely undermined by the scandals.

The BBC quoted the opinion of Takuji Okubo of Japan Macro Advisors, in Tokyo.

“Large corporations used to live in a stable, predictable and growing market, but things have changed and some companies may have resorted to cutting corners,” said Mr Okubo.

Lower Standards

Reuters also takes the view that a shrinking domestic market and increased global competition is tempting some Japanese manufacturers to lower their standards. The agency quotes Professor Thomas Clarke who warned that Japan runs the risk it will “lose out as other Asian economies, including China, progressively raise their standards of quality and reliability.”

However, Reuters also suggests that some of the scandals have come to light because of greater scrutiny of companies’ behaviour. “It may be a sign that the government’s push to improve corporate governance is seeing greater disclosure of wrongdoing,” says Reuters.

Yet the stock market booms

Despite the headlines of shame and scandal, investors appear optimistic about the Japanese corporate sector. The stock market in Tokyo has been booming, along with other major world bourses.

The Wall Street Journal says that if you look at the numbers corporate Japan seems “alive and well”. The WSJ says “business confidence is booming, exports are recovering and industrial production picked up last month. Japanese corporate profits hit their highest ever level in the second quarter. All that is fueling this year’s stock-market rally.”

“We work hard but we’re not productive enough”

Pulling Japan out of a trap of low productivity is “the number one goal” of the central bank, according to one of its most senior figures.

The Deputy Governor of the Bank of Japan Mr Hiroshi Nakaso told a gathering in London that Japan continues to lag behind most developed countries in terms of productivity and that this is a major concern to the bank and to the government.

Golden opportunity

The Bank of Japan regards productivity as as an important of way of assessing the efficiency of businesses.

It therefore measures the hours people work and tries to judge the economic value of their efforts.

The labour shortage, which is caused by an ageing and shrinking population, has created a very low unemployment rate in Japan of only about two percent. As a result, companies often struggle to find enough candidates to fill their job vacancies.

But Mr Nakaso claimed that “the current serious labour shortage could be a catalyst for improved productivity” and that therefore there “we have a golden opportunity to upgrade Japan’s economy.”

“We have a golden opportunity to upgrade Japan’s economy.” Hiroshi Nakaso, Deputy Governor, Bank of Japan

Inflation hope

Mr Nakaso hopes employers will respond by offering higher wages and will adopt a more efficient and productive approach to work.

He cited the example of a trucking company which has recently raised wages and put up prices for its customers. He said such measures would help nudge inflation towards the Bank of Japan’s target of two percent.

But he acknowledged that such situations were relatively rare, even though “improving productivity is precisely what the third arrow of Abenomics is aiming for.”

White collar challenge

Speaking to an event hosted by the Japan Society at the Guildhall in the City of London, Mr Nakaso claimed that Japanese factories are among the most efficient in the world, so the productivity challenge is most acute in the non-manufacturing sector “which employs white collar workers like me.”

Some economists have suggested that Japan’s productivity would rise if if brought more women and older people into the workforce, or opened the door to more immigrant labour. However, Mr Nakaso said that it is “unrealistic” to see those measures as a complete solution to the problem. “Even if we did all those things, we would not be able to achieve the 2.9% increase in productivity we need to achieve our goal of two percent GDP growth,” he said.

Jobs for life

He said another challenge is the lack of mobility within Japan’s workforce, which makes many people reluctant to change their jobs. This is a legacy of the jobs-for- life culture which developed during Japan’s post-war boom years.

“Long term contracts between companies and workers prevent mobility,” said Mr Nakaso. He noted that greater labour mobility leads to greater productivity in many developed countries and it can help with the spread of new ideas, working practices and technology.

He said companies respond to the labour shortage in a variety of ways, such as reducing their opening hours, automating payment systems or being less generous in providing benefits to customers which are not profitable.

A new dawn

Mr Nakaso finished with offered an upbeat view of contemporary Japan which he said runs counter to the gloomy impression often left by the media. He cited the current tourist boom, an increase in leisure time and the rise in life expentancy.

He also said that that there are now more than 200 Michelin starred restaurants in Tokyo.

“The public perception is based on old statistics,” said Mr Nakaso. “I admit that there have been false dawns in the past but this time we believe that after a long night, the new dawn is near,” he said.