Trying, testing times demand tried-and-tested slogans, so when Prime Minister Shinzo Abe called on Japan’s manufacturing industry to come to the aid of frontline workers last week, he went with a classic. The effort, he promised, would be an “all Japan” affair.
To a certain time-locked view of Japan and its image of a co-operative, coherent “Japan Inc”, those words barely needed saying. Even as the country has dragged its feet on declaring an emergency, and imposed only a voluntary, partially effective lockdown, the assumption of both media and markets has been that this crisis would eventually draw out Japan’s collective strength.
Its mightiest industrial names may have been slow to the digital revolution, runs that argument, but this situation demands other skills Japan supposedly possesses in surplus: organisational brilliance, mass production of the highest-quality goods and the instinct to set aside all other concerns and collaborate in the national interest. If tens of thousands of ventilators and high quality protective gear were the answer, then where better to produce them than a $5tn economy run by a cosy cabal of government and business that worships the manufacture of things?
And yet, aside from some helpful but low-key pledges from the likes of Sony, Toyota, Panasonic, Sharp and a few others on mask and gown production, the silence from across the broad sweep of Japan Inc has been noticeable. So much so, say analysts, that (among coronavirus’s many other grim revelations) this crisis may finally provide proof that Japan Inc — as it lives in both domestic and foreign imaginations — does not exist.
The Japan Inc theory as an explanation of how the country works has endured for several reasons. One is the persistence of cross-shareholdings — the interlaced corporate ownership of other companies’ stock that protects managements and seems to ensure collusion.
Another related feature of Japanese companies has been their longstanding scepticism about the idea of shareholder primacy — a scepticism evidenced by piles of cash withheld from shareholders and now seemingly vindicated by this crisis. Historically, Japanese companies have always justified their behaviour with the argument that they exist for the benefit of all stakeholders.
Overarching this has been the idea that the Ministry of Economy, Trade and Industry — along with other interventionist arms of government — possess the sort of powers (masterminding mergers, demanding “all-Japan” solutions from across the industrial base etc) that it would if Japan were actually a command economy. Even after the 2017 Toshiba crisis, which laid bare METI’s total failure to engineer an all-Japan rescue for one of the country’s best-known companies, the Japan Inc credo has remained.
But now, three months on from Japan’s first officially recorded coronavirus case, the “all Japan” instinct has not noticeably kicked in. Many companies are, naturally, keen to be seen doing the right thing, but do not appear rallied to any grand cause or collective response. Keidanren, the country’s main business federation, has not stepped up as an organisational or policymaking force, let alone played any inspirational leadership role.
As one senior economic adviser to the Abe administration put it: the idea of a co-operative Japan Inc might — just about — work in the aftermath of a conventional domestic disaster such as an earthquake, but coronavirus is showing that, in fact, Japanese companies do not behave in a particularly exceptional way.
Toyota, rather than stepping in to build ventilators, has said it hopes to turn out about 600 plastic face-protectors a week from its factories. It has also offered its expertise to unspecified medical device companies that may not, acknowledges Toyota, want to admit they are being helped by Japan’s most famous corporation.
The government’s efforts to lock down the country have also opened up a divide between business interests and government policymaking on an unprecedented scale outside wartime. SoftBank’s Masayoshi Son has been the most vocal chief executive in repeatedly taking to Twitter to blast the Abe administration for lack of leadership and clarity of strategy and to despair of the inflexible regulation that, he has said, is hampering his efforts to supply protective gear.
But even where politicians have been proactive in suggesting more rapid regulatory approval mechanisms, companies have been reluctant to step in.
The greater test of whether Japan Inc as a collective endeavour exists, said the CEOs of four major Japanese companies speaking separately, will come in the aftermath of this crisis when the situation calls for a response to the reality of mass bankruptcies, restructurings and the need for industry-wide bailouts that cannot be met by Japan’s fiscally-stretched government. The rosy view of how Japan will approach that situation, said one chief executive, suggests it will all somehow be worked out as a common national bid to return to normal. “It will not be like that. It will be every company for itself,” he said.
Source: Economy - ft.com
