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10 Business Lecture Notes ?/span>2001 by Mineharu Nakayama

10.1. The Premodern Background

Keywords: tendency to work hard, formal education, Sankinkootai, Edo and Osaka, Mitsui, Mitsubishi

tendency to work hard, formal education

agriculture for millennia and metalworking, bronze figures, steel swords in the 12th c, weaving and embroidery techniques of Chinese in the 7th and 8th c

woodblock - the 8th c, Chinese painting

Portuguese - the 16th c, guns, technical improvement

Edo - high skills in metalwork, porcelain making, multicolored woodblock prints

annual trip to and from Edo - sizable surpluses of staple commodities

Edo and Osaka - sake brewing, dry-goods retailing, and banking

management - head clerks - Mitsui (dry-goods store)

big city merchants and peasant entrepreneurs in the late 18th and early 19th Mitsubishi - Iwasaki Yataro (Tosa)- samurai entrepreneur- economic agent in Nagasaki - ships

Chinese and Koreans - neither perceived the necessity or comprehend the possibility of learning much from the West

10.2. The Prewar Economy

Key words: import tariff, gold, silk and silkworm eggs, monetary system, dispatch promising youth abroad, inviting technicians from abroad, rapid rate of growth, textile, heavy industries, chemical, dual structure, retailing system, family based organization, government for patronage and guidance, Zaibatsu, Mitsui, Mitsubishi, Sumitomo, Yasuda, Keiretsu, Trading company, Keidanren (Federation of Economic Organizations)

import tariff - 5%, and machine made wares-but people are not interested in Western goods

serious drain of gold

silk and silkworm eggs

nationwide monetary system, dispatch promising youth abroad, inviting technicians from abroad

rapid rate of growth - Sino-Japanese War in 1894-5, Russio-Japanese War - 1904-5, Asian empires (west's withdrawal), military expansion

cotton spinning (textile - light - heavy industries-chemical)

Dual structure - lower level - cheap labor, small handicraft industries (labor intensive) vs. upper level highly mechanized production

inefficient retailing system - mom and pop shops, lack of space, complexity in wholesale distribution

close knit bond between employers and employees, family based organization-paternalistic and humanistic feel

industries - under the eager encouragement of government (government for patronage and guidance)

Zaibatsu - financial clique - 4 giants (Mitsui, Mitsubishi, Sumitomo, and Yasuda) - military related industries -> dissolved - Keiretsu (like clubs - mutual back scratching), but not like a conglomerate (not related companies under the same ownership) -> Trading company

No monopoly

Keidanren (Federation of Economic Organizations)

10.3. Postwar Economy

Key words: black market, educational level, the good working habits, experienced technicians, industrialists, and businessmen, government bureaucracy, cheap labor, new plants, destruction of Zaibatsu, shipbuilding, coal mining, production of steel, electric power, fertilizers, and chemicals, high technology, income doubling plan, GATT, OECD, Annual growth rate

Not fully closed the economic and technological gap between Japan and the West before WWII

After WWII, only the black market flourished - subsistence level of living, more behind than the Meiji Period

US carried out its stringent retrenchment policies of 1949 - slow but gradually picked up

Recovery reasons - 1) high educational level, 2) the good working habits, 3) a large reservoir of experienced technicians, industrialists, and businessmen, 4) a superb government bureaucracy, 5) cheap labor - certain extent, but not much, 6) brand new plants, 7) destruction of Zaibatsu -> innovative, 8) Korean War, 9) not much defense expenditure

concentration on basic industries - (textiles -export) shipbuilding (world's biggest battleship->tankers), coal mining, and production of steel, electric power, fertilizers, and chemicals -> high technology -> world's greatest creditors

by 1955 per capita levels of wealth - prewar level

1960 - income doubling plan

General Agreement on Tariffs and Trade (GATT) in 1955

Organization for Economic Cooperation and Development (OECD) in 1964

Economic summit in 1975

Australia - bitter - but recognized as a trade partner

Annual growth rate (Japan 1994)

JPN 1.3% in 1992 4.2% in 88-92 real GDP growth -2.8% in '98

US 2.1% 1.6% +3.9%

car import in 1992 to JPN from US 20%, Germany 58%

Long term interest rate in 1998 JPN 1.5% US 5.3%

Short term interest rate in 1998 JPN 0.7% US 4.8%

10.4. Employment System

Key words: lifetime employment, leader, ringisei, nemawashi, unemployment, wage, benefits, labor union, "spring offensive", employment structure

lifetime employment (still popular) - trained thoroughly, variety of jobs to broaden their knowledge of the company's activities, most promising- given a most challenging job, reducing internal friction, grow loyalty

drawback - corrosive competition and friction within the age cohort, no leapfrog by subordinate, no one tries to demonstrate individual brilliance or aggressive leadership

leader - consult fully and encourage them to show initiative and special abilities

subordinate - full support for superior, easy consultation, initiatives are expected in any level

bottom up, ringisei (ringi system) - documents are widely circulated - careful and thorough consultations and consensus - nemawashi - cohesiveness, but slow, difficult for outsiders to fit in

American - dictatorial top-to-bottom

name cards - professional affiliation - not occupation

no clear lines between executives and workers - eating and wearing the same, company housing, job security, pride in the products, happy to work

unemployment - deceivingly low - female workers -not registered-JPN 4.1% in 1998, US 4.5% (Japan 2000)

dynamic, rapidly, growing company - newly hired young workers - incentive for expansion - growth breeds more growth

workers in petty retailing and small industries - no assurance of lifetime employment or steady rising wages geared to seniority

hourly wages in 1997 JPN $22.76 ($=100yen), US $17.33 (Japan 2000)

manufacturing hrs/wk - JPN 38.8, US 42.8 in 1999 (Japan 2000)

temporary workers, peripheral workers - fewer benefits (big corporation workers - full benefit)-> more emphasis on skills and production results

labor union - 1/3 or less - unionized, not craft unions, but company unions -#of unions 33047 in 1992, unionization rate 24.4%, US 16.1 % in 1991 (Japan 1994)

- "spring offensive" - annual negotiation (in 1993 3.89% raise)

- Sohyo (government employees - JSP or JCP supporters), Domei (blue workers - DSP) - no opposition to technological advances - strikes - symbolic

1992 (from Japan 1994)

JPN employment primary 6.4%, secondary 34.1%, tertiary 59.5%

US in 1991 2.9% 24.2% 72.9%

10.5. Business Organization

Key words: stockholders, financial institutions, saving, tax benefits, bonus, Japan Inc., MITI, Zaikai, Nikkeiren, success measurement, aging, foreign trade, Food self sufficiency, R&D, Robots, Foreign Trade dependency

stockholders - not own or control most of the big companies - executives with financial institutions - 80 to 20 % debt-equity ratio, banks, Bank of Japan, government - national owned

Not worry about quarterly bottom line - long range stability and growth in market share

good growth record - more bank loans -> helpful in raising equity capital - maintain a sound company (wiser strategy for growth - greater advantage)

The Japanese - firm tradition of saving - US - accustomed to living in debt

fewer social security, lower retirement pay - saving 40% of GNP in 60S - 15% per household in 1991, US 4.9% in 1992 (Japan 1994)

Tax benefits - for company reinvesting their profits is better than distributing through dividends (saving through postal savings with lower interest) - saving encouraged

bonus - new year and midsummer - one to three months' salary

Japan Inc. - government and private companies, government control - limited (MITI - control of foreign exchange and licensing of foreign technology, encouraged competition, encouraged mergers of weaker companies to the stronger-administrative guidance, rewarding or punishing), companies are eager to be free from them

Prewar - business - obedient handmaidens of government-> dissolution of Zaibatsu, Anti-Monopoly Law, establishment of a Fair Trade Commission and other institutions borrowed from the US

Government - select a few industries, to ease the difficulties caused by declining industries - shifting workers, retraining workers

actual business initiatives - up to private industries

Zaikai "financial world" - a reciprocal influences, equal partner

Nikkeiren (the Federation of Employers association)- a central strategy board in labor relations

pollution controls

strength of group ties, minimize disruptive changes in leadership, damaging interpersonal competition, stronger cohesion

much less ownership of company stock by executives

success is measured less by money than by the symbols of prestige-less concerned with quick profits, but win national and international prestige

agreement - merely spell out the details - litigation is avoided, compromises

Japanese economy - a blend of the best aspects of capitalism and socialism

aging and the dependence on foreign trade (tariffs-no longer high)-less emphasis on export

70s - inflation 26% , in 1973 US embargo of soybeans -> strong sense of vulnerability- Food self sufficiency - 1990 - cereals-30%, wheat 15%, corn 0%, beans 8%, meat 70%, fruit 63%, vegetables 91%, rice 100%- JPN import 14.7%, US 5.7% import (international ratio) in 1991 (Japan 1994)

US agriculture export - to JPN 19.7% in 1992, in 1992 pork 75.7%, lemons & limes 72.1%, beef & veal 55.8%, grapefruits 56.4% (Japan 1994)

R &D expenditures JPN $94,433 million (public fund -16.8%) in 1991 (Japan 1994)

US $157,400 million (43.3%) in 1992 (Japan 1994)

R &D expenditures JPN 15,741 billion yen (gov. fund -20.4%) in 1997 (Japan 2000)

US 24873 billion yen (32.4%) in 1997

Robots - JPN 274,210, US 41,304 in 1990 (Japan 1994)

Foreign Trade dependency

JPN exports 10.2%, imports 7.4%; US 8%, 11.1% in 1998 (Japan 2000)

JPN exports to US 30.5%, import 23.9% in 1998 - US is #1 trade partner (Japan 2000)