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Preparing For the Twenty-First Century
by Paul Kennedy
Chapter 8: The Japanese "Plan" for a Post-2000 World
Preparing For the Twenty-First Century
by Paul Kennedy
Chapter 8: The Japanese "Plan" for a Post-2000 World
• "Can Japan continue to be an island of
prosperity in a sea of discontent"
Japan’s Isolation Policy
• Japan's economy and standard of living have
skyrocketed over the past 4 decades.
• Japan is a tiny island in the large Asian block
of countries.
• Japan has isolated itself from the rest of the
Asian countries.
• Keeping all of the prosperity at home while
many of the Asian countries starve.
Island of Prosperity
• Since 1945, Japan’s rate of creation wealth has
been the fastest in the world.
• GNP has exploded:
• 1951 - The Japanese GNP was 1/3 of Great
Britain’s and 1/20 of United States’
• 1993 - 3 times Great Britain and 2/3 of United
States
Island of Prosperity
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Social Harmony
Cultural Uniqueness
Strong National Identity
Social and Racial Coherence
Individual Sacrifice for the Good of the
Collective
Sea of Discontent
• Can Japan remain isolationists when an increasingly
large number of their Asian neighbors starve?
• In 25 years Asia's population is expected to be as high
as 5 billion.
• A widening separation between the "haves" and the
"have-nots."
• A more assertive and aggressive China.
• Severe North Korean hunger crisis which could lead to
a war against South Korea
• Can Japan overcome a potential negative global
reaction against their national protectionism policies,
and dominating self proclaimed superiority?
Japanese Educational System
(Positives)
• Teachers are highly valued.
• Learning is reinforced at home and with "crammers".
• Japanese study 220 days/year including Saturday half
days.
• This compares with only 180 days in United States.
• By the time Japanese are 14 years old, they have as
much education as a 17 or 18 year old American.
• Japanese students continue to outscore US and
European students on standardized tests.
Japanese Educational System (Negatives)
• Subjects focus on factual acquisition rather than the
free flow of debate and ideas.
• The rigid education is based on facts and group think.
--not creativity
• This education style tends to lower creativity and self
expression.
• This weakness later appears in Japanese factories and
organizations.
• Higher education has also underperformed in creative
research.
• As of 1987 Japanese had won only four Nobel Prizes in
science compared with 142 for the United States.
Japan's Financial Strength
• Tax system encourages personal savings.
• Aging population and high cost of housing further
promotes savings.
• Banks and insurance companies are flush with capital.
• Lending money at low interest rates to manufacturers.
• This gives Japanese companies a significant cost
advantages over foreign rivals.
• The "Keiretsu" is a form of corporate shared
ownership of many firms and banks.
• This shared ownership allows managers plan for the
long term without regard for quarterly profits.
The Globalization of Japan
• Japan dominates many international market products and
services.
• Highly integrated with western Pacific and east Asia.
• In 1991, 36 out of the world's top 100 companies were Japanese.
• 29 of the world's largest banks are Japanese. Germany has 12,
France 10 and US and Italy have 9.
• 4 of the world's top 5 insurance companies are Japanese.
• The top 4 Security firms are Japanese.
• High Soft Power with IMF and World Bank.
• Global economic vulnerability has always been the price Japan has
had to pay in achieving global commercial preeminence: and that
vulnerability is, if anything, increasing.
Japan’s International Trade Strategy
• “Japan Inc.” avoids the rules of international free
trade.
• Imposes Discriminative Tariffs.
• Manipulates the distribution system. Fixing contracts
in secret.
• Buy technology -- and then dominate the production
markets with exports.
• Establish global points of presence, in order to remove
own barriers.
• Japan exports and Sub-contracts on a global scale.
• Perceived victim: US 40-50 billion dollar trade deficit
Japan's Long Term Growth Strategy
• Plan for decades in advance. Ignore quarterly profit
reports.
• Increase capital spending. Japan's capital spending
has exceeded that of the US in absolute terms.
• Invest heavily in education and Research &
Development.
• Highest rate of qualified scientists and engineers.
• Over 800,000 Japanese are engaged in R&D, more than
Britain, France and Germany combined.
• Switch to high value added products, and away from
labor intense products.
Negative Aspects of Culture and Society
• Rigid Hierarchical Social Structure.
• Rigid social conformity to the point of repression of
civil liberties.
• High Suicide Rate
• High cost of living and reduced purchasing power.
• Emphasis on national superiority transcends to a deep
streak of racism.
• Reflected on views against Koreans, Chinese, American
blacks, and other non-Japanese ethnic groups.
Negative Aspects of Culture and Society
• Enormous privileges to a select group of males who run
the large corporations and bureaucracies, and control
the ruling Liberal Party.
• Majority of population has cramped accommodations,
excessive work hours, group calisthenics, and with the
only consolation of national pride.
• Women are meant to take care of the home, manage
the savings, and ensure the children's after-school
education.
The Costly Life of Japanese Consumers
• Japan's Average per capita income is the highest in the
world.
• But real purchasing power is diminished with higher
living expenses,
• such as high prices on cost of food, consumer goods,
land, and housing.
• Society is also behind in public facilities, sewage
disposal and places of recreation.
Japan's Food Crisis
• Uncompetitive Farms translate into higher food prices.
• Restrictions on food imports worsens the dilemma.
• Japan is purchasing agriculture/biotech technologies to
improve situation.
• Purchasing and managing beef farms in the US and at
home.
• Japan’s food source is dependent on the rest of the
world.
• In times of global crisis, food supply and prices could
negatively impact their society.
Japan's Aging Population/What to do?
• Life expectancy in Japan has increased
dramatically.
• From a life expectancy of 45 years to 76 years male,
82 years female.
• Total fertility rate has decreased to 1.5 births per
woman.
• This is below the average 2.1 births per woman
needed to maintain the population.
• In 25 years Japan will have the highest ratio of
people over 65.
Japan's Aging Population/What to do?
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The use of robotics and automation of many processes.
Allow Immigration only for scientists and engineers.
Continued Outsourcing as a solution.
Have women enter the workforce.
Do we want to a militarized Japan?
• No military spending. (Less than 1 percent of GNP)
• Accused of free loading on America's military
supremacy.
• Extremely Efficient with a dominating mentality.
• Memories and feelings of the past still present.
• Japan has a proven record of imperialistic expansionist
policies.
Japan: A Crisis in the making
• Extraordinary high property prices and almost equally
inflated stock prices.
• Volatile paper assets used as collateral on real estate
and overseas operations/acquisitions.
• Real Estate industry trouble could require major selloffs to increase bank liquidity at home.
• Japanese pride and honor could result in an underreporting of economic problems.
The Big Japanese Question:
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What should Japan do to maintain its global dominance?
Switch to more value added products.
Spend more and save less.
Focus more on consumption, enjoy more luxuries, and be more
cosmopolitan.
Strive for less structured and hierarchical society.
Reduce trade barriers for better public relations and lower
consumer prices.
Shift from an industrial base to a service based economy.
Outsource low value added manufacturing.
Some of these points would deviate from current Japanese
philosophy.
Japan's Current Problem
• $600 Billion In Bad Loans
• Billions Of Additional Bad Loans Go Unreported
• Real Debt May Equal 250% Of Japan's Output (11 Trillion
Dollars)
• Government Gridlock
What Needs To Be Done
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Leadership/Sacrifice
Fix The Banks
Change The Accounting
Rewrite The Tax Code
Audit The Government
Stop The Market Rigging