Learn about Japan’s Six Megatrends

12/21. For an hour, I listened – fascinated – to a podcast by Richard Katz about the main challenges facing Japan today. His list of Megatrends. Sometimes you meet a person who has such sharp insights that all you can do is ‘listen and learn’. I prepared a short summary as my handy reference and also to introduce you to his podcast.

About Richard Katz

Richard (Rick) Katz is an American journalist and correspondent who has spent decades writing about the Japanese economy. The depth of knowledge that he shares comes from somebody who has a deep affection for Japan – and yet is pained by why the country is not yet doing better.

His podcast highlights the urgent need for renewal. Japan has now lost (economically) for three decades in a row, he says, and it must ‘rediscover’ its entrepreneurial spirit if it is to see better times. Rick’s coverage of Japan has appeared in publications such as ‘Foreign Affairs’, ‘The Financial Times’, ‘Toyo Keizai’ and ‘Wall Street Journal Asia’.

Megatrend 1: The Shift in Generational Attitudes

Rick says that there’s a gradual trend for people to becoming less conformist and choose independence over security, especially among younger generations. Because there’s such a shortage of skills in the workplace, employers are becoming more flexible about choosing their employees. Rick shared a story about a man employed at a large company who got a nice pay rise, but still decided to leave. His boss couldn’t understand why. “Well, I’ve had my adventure here”, said the man, “and now I’m looking for my new adventure”.

Megatrend 2: The Ageing Population

The need to give a ‘personal financial guarantee’ is a big problem that prevents a small/medium business passing from the older generation (60s and 70s) to the younger generation (30’s to 50s). Rick talks about 600,000 profitable SMEs that could close because the children of the owners don’t want to take over. He estimates that 5-6 million jobs are at risk.

He says that what is missing are the financial vehicles in Japan that would enable the changes in ownership between generations. He also cannot understand why people in Japan have to retire at 60 when they still have so much to contribute in business.

Megatrend 3: Gender Issues in Japanese Society

Women are a prime focus of megatrends. Rick points out that working women have great potential to stimulate economic growth but little has been done in practice to help them. Former Prime Minister Yasuhiro Nakasone passed the 1986 Equal Employment Opportunity Law in 1986. Both Junichiro Koizumi and Shinzo Abe, in their turn, determined that there should be a 20% quota of all managers being female. But all these good intentions failed because the law was never enforced.

Prejudice endures in the workplace. Most Japanese women are still stuck in the Clerical (‘Mommy’) track – they can rise so far and no further. What is their answer? To fight career advancement prejudice by working in foreign companies and in newer, smaller companies.

Megatrend 4: Globalization

This is one of the most prominent trends in Japan due to its absence. The span of expertise and nationalities that one finds in foreign companies – the cross-fertilization of ideas – is missing in Japan, according to Rick. Japan comes last in a list of 196 nations that allow foreign companies to operate on their soil.

The country is already missing more than 200,000 engineers for its companies. This shortage can grow to 500,000 engineers in 5-7 years. If Japan is going to revive its economic performance, says Rick, it has to embrace globalization in much more powerful ways in the coming decade.

Megatrend 5: Technological Agility

A change in technological regime requires new business institutions, because technology changes life. When light bulbs came, they created nightlife. Transistor radios (cable-free radios, no parental control) gave teenagers the freedom to listen to whatever music they wanted. Elvis Presley was the ‘killer app’ for the transistor radio.

Rick says that the time of the large Japanese companies (born and raised in the analogue age) is passing. R&D is not being done by companies of 25,000 employees but by companies of 1000 or 500 employees. New technology should be used in Japan for new tasks rather than just to make existing tasks more efficient.

Megatrend 6: Entrepreneurship

A key question for Rick is: “Where are the indigenous trends within Japan that can help it to become more entrepreneurial, like it used to be?” The labor market is opening up. Gifted people in their 40s are now ready to abandon their feeling of security and join smaller companies – “Because I have 10-15 years left and I want to do something interesting in my career”. One big obstacle to entrepreneurship in Japan is recruiting people. This is slowly being resolved. But the other big problem is to get finance. That remains acute.

A bank will not lend you money unless you are big. But you need investment money to get big. Foreign Direct Investment is very rare in Japan. If it was more common, says Rick, many more doors would be open for SMEs.

Finding enough ‘kachos’ (managers) is another issue. Visionaries need good management, to give them sustainability. Then there’s always the tendency to say ‘shikata ga nai’ (‘It cannot be helped!’). Rick sees Fatalism in Japan as a corrosive influence that undermines confidence and determination. He says that the influence of Social Media can hold it back and play a very positive role.

Just changing a few of these Megatrends will help to alter direction. I know that the Japanese government is placing a lot of emphasis now to encourage SMEs (small and medium enterprises). I’m sure that a new ‘golden age’ for Japan will arrive.

Mike Druttman

Listen to Youtube: Japan’s Six Megatrends and Why They Matter – with Richard Katz.