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Is Japan's Success of Myth?

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A respected Japan specialist, Eamonn Fingleton, wrote an interesting piece in the New York Times the other day.

While I do not disagree with many of his points, I think he has missed some very relevant issues in his overly optimistic assertion pertaining to Japan's future.

Take his view on life expectancy. Mr. Fingleton points to a longer life expectancy for Japanese than Americans as a sign that Japanese have a better quality of life than Americans, but he does not touch on important peripheral issues very much connected to lifestyle and happiness. Take, for instance, the financial and physical costs of work absenteeism and presenteeism related to chronic pain and mental illness in workplace in Japan. The American Chamber of Commerce in Japan estimates this costs the Japanese economy at least 3.3 trillion yen a year. Indeed, some firms take advantage of their workers by maintaining vague job descriptions, thereby piling on more and more tasks which can lead to mental anguish. This is often tolerated by workers who prefer to avoid conflict in order to maintain harmony, two cultural mainstays that work in the employer's favor.

As to the point in his piece that Japan's unemployment rate is lower than that of the United States, Japan counts self-employed in official statistics and persons who work as little as one hour per week are considered employed in Japan. These factors skew the numbers considerably and does not even begin to speak to the issue of productivity achieved with hours worked.

Another item discussed briefly was the reality that Japan is the world's net importer of food. Japan must import roughly 60% of its total food consumption. This amount is likely to grow given that the food chain is contaminated as a result of the meltdown of three nuclear reactors near Fukushima last March. In addition, unless food contamination concerns are dealt with effectively, Japan's appeal as a destination for foreign talent will be challenged.

To help remedy the need for skilled overseas labor, the Japanese government has just announced it will implement a system to attract foreigners by revising visa requirement procedures to be more in sync with places like Singapore. Yet Japan's population as a whole will pose additional problems for a stable workforce in coming decades. After reaching a peak of 127,000,000 in 2007, the population is expected to hit 48,000,000 by the year 2100. Who will pay the under-funded pensions? And who will clean Japan's pristine streets?

In short, Japan's challenges are immense. Its population is in steady decline. It is the most indebted nation on earth. Its manufacturing base is increasingly moving operations overseas. Its energy production capability is severely limited as 90% of all nuclear plants are off-line. Its strong currency makes Japan-produced goods expensive to sell. Competition from hungry Asian Tigers that create high quality products makes it increasingly hard for Japan to win and maintain market share.

In the end, the United States has four things that Japan does not possess: food self-sufficiency, a growing population, valuable natural resources and a creative populace that is not afraid to take risks. These are the things that will sustain America in the future.

Yet Japan's success is no myth. A nation with virtually no natural resources (other than its people) has done remarkably well as an economic powerhouse. The challenge going forward is to promote the kind of risk taking that leads to innovation while, at the same time, promoting a better work-life balance for the people of Japan. That will be easier said than done.

David Wagner is Director of Crisis Communications at Country Risk Solutions, a political risk consulting firm based in Connecticut. He has lived and worked in Japan for 25 years.