Japan’s companies are key to Japan’s growth

by Gerhard Fasol

Economic growth: Almost everyone agrees that economic growth is preferred over stagnation and decline. Fiscal policy and printing money unfortunately can’t deliver growth.

1. Building fresh new successful companies,
2. returning stagnating or failed established companies back to growth (see: “Speed is like fresh food” by JVC-Kenwood Chairman Kawahara), and
3. adjusting the structure and business models of existing companies to the rapidly changing and globalizing world (see: “Japanese management – why is it not global?” by Masamoto Yashiro)

deliver growth.

Economic growth for Japan: reducing friction

Governments best help economic growth by reducing friction, and by getting out of the way of entrepreneurs building, turning-round, and refocusing companies.

Some required action is counter to intuition: for example, in many cases reducing tax rates increases Government’s tax income, a fact known for many years. Effective education and research are key to create, understand and apply such non-obvious knowledge.

Economic growth for Japan: corporate leadership and governance reform

Companies need efficient leadership, leadership needs feedback, wise and diverse oversight by Boards of Directors, who ring alarm bells long before a company hits the rocks, or fades into irrelevance. Corporate governance reform may be the most important component of “Abenomics”. Read a Board Director’s view on Japan’s corporate governance reforms:

• Corporate Governance Reforms – A board member’s viewpoint (Journal of the American Chamber of Commerce in Japan, ACCJ)
• Corporate governance reforms in Japan – practical views of a Board Director – in greater detail, and with many links and references

Japan’s electrical conglomerates are some of the poster children motivating Japan’s corporate governance reforms. In an interview about Toshiba’s future on BBC-TV a few days ago, I explained that Japan’s electrical conglomerates showed no growth and no profits for about 20 years, and the refocusing Toshiba has announced now should have been done much much earlier, 10-20 years ago (“Speed is like fresh food“). Refocusing Japan’s established corporate giants will release resources for start-ups, spin-outs and growth companies.

Economic growth for Japan: Japan can be very good at restructuring and turn-rounds

After Japan’s economic bubble burst in the 1990’s, Japan developed much know-how to successfully turn around failed companies:

• Japan Airlines,
• Kenwood, or
• Atsushi Saito’s Industrial Revitalization Corporation of Japan (IRCJ) successfully turned around about 40 companies, and returned a profit to tax-payers,
• and many more.

Happy New Year!

Gerhard Fasol

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