ECONOMY-JAPAN: New Business Model, Koizumi’s Legacy

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Aug 30 2006 (IPS) - Japan’s rapidly accelerating economy is regarded as Prime Minister Junichiro Koizumi’s major contribution as he prepares to step down next month from the high office he assumed in 2001.

But analysts say the recovery has created a dramatically transforming Japanese economy and paved the way for a shift from the traditional focus on creating a large affluent middle-class to a highly competitive society, a trend that carries important consequences for all of Asia.

Japan’s foreign direct investment in the Association of South-east Asian Nations (ASEAN) in 2005 totalled 3.2 billion US dollars and new free trade agreements (FTAs) have been signed between Japan and several members of the ten-nation grouping such as Malaysia and Singapore. The grouping also includes Burma, Thailand, Vietnam, Laos, Cambodia, Indonesia, the Philippines and Brunei.

”Economic reform was a priority for Koizumi. As he prepares to demit office, he leaves his successor to grapple with new challenges that have never been on the table before,” said Prof. Koichi Ishiyama, business expert at Tooin University.

Ishiyama referred to a rising wealth gap in Japan and pointed out that the situation contrasts with a growing job market – the ministry of health and welfare reported in July that job offers have increased 3.5 percent over last year.

”Japan’s postwar growth in the seventies was supported by the rise of a middle-class based on uniform values, a system that contrasts with the current trend where having a job does not necessarily translate to a high standard of living,” he told IPS.

Under the Koizumi administration, Japan has undergone a dramatic transformation through his policy of promoting fierce restructuring of companies and right-sizing the government.

The bitterly fought postal reform bill that was passed in the Diet (parliament) is a case in point. Koizumi boosted his popularity when he won the elections over the bill, ushering in a long awaited change to jump-start the economy after the bursting of the bubble economy in the mid-eighties.

Masami Morishima, a businessman in his early forties, who started his own Internet publishing company three years ago, agrees. ‘’Koizumi’s reforms have taught ordinary Japanese that we need to be able to develop our own goals rather than depend on our companies to lead us. We must learn to be competitive and be respected for our ability which is a new concept,” he said.

The net result today is an economy that showed a growth of 3.2 percent in the fiscal year that ended in April 2006, and a stock market that rose 66 percent in three years.

The Japan Institute for Social and Economic Affairs, a leading think tank, in its latest issue published in June, says that the Japanese economy has mended thanks to reforms in labour, finance, accounting and corporate governance.

Prof. Steven Vogel, at the University of California, writes in the report that the remodelled Japan differs from the earlier version in several ways. For one, they are now re-evaluating their long-term relationships with banks, workers and other firms. They are also more variable in their practices and more open to having foreign managers and business partners.

According to economist and writer Yosuke Iinuma, the foundation of the latest growth in Japanese economy is the revitalization of the country’s major industries, such as steel, automobile and electronics, and not necessarily due to a flurry of new businesses which are the real symbols of a strong liberal economy.

For example, Toyota, Japan’s largest automobile company, reported this month a rise in sales by 13.2 percent and a 40 percent jump in net profits to almost to a little over 3.2 billion dollars in the April-June quarter.

Established companies cited success in streamlining personnel costs by giving up life-time employment and modernizing to meet global competition by outsourcing manufacturing to the United States or to cheaper Asia, mostly to China.

Iinuma told IPS: ”Japan’s new leaders must strive harder to encourage innovation to create new industries in such fields as Internet-enabled services, to create a vibrant job market which is the only way to stem rising social disparity.”

He explains that while some new Internet firms such as online shopping companies are earning big profits-1.7 billion dollars in fiscal 2003 or up 70 percent over the previous year- there is still a long way to go as compared to the U.S.

Japan, says the Paris-based Organization for Economic Cooperation and Development, has 13.5 percent of its population living in relative poverty defined as less than one-half of the median household disposable income.

But businessmen like Morishima remain unfazed. ”There is no turning back on the new Japan. We have to learn to survive in a tough global environment.” (ENDS/IPS/AP/IP/IF/LB/PS/DV/SK/RDR/06)

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ECONOMY-JAPAN: New Business Model, Koizumi’s Legacy

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Aug 30 2006 (IPS) - Japan’s rapidly accelerating economy is regarded as Prime Minister Junichiro Koizumi’s major contribution as he prepares to step down next month from the high office he assumed in 2001.
(more…)