No. 10 — March 15, 1996

Feature Article


Atsushi Yamakoshi

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Each generation faces serious problems, sometimes caused by its predecessors but typically brought about by an accumulation of internal and external influences. In the past three years the Japanese economy has faced such serious problems as the yen's appreciation, the need for corporate restructuring and a financial crisis arising from the collapse of the bubble economy. Analysts question, however, whether current efforts to address these problems involve fundamental solutions.

Some optimists contend that Japan eventually will be able to solve its myriad economic problems by gradual, conventional approaches. In their eyes the economy's current problems are somewhat cyclical in nature. Indeed, recent signs of a comparatively weaker yen, a lower trade surplus and recovery may encourage these optimistic views. In contrast pessimists argue that Japan will experience a catastrophe unless drastic and fundamental measures are taken to address the economy's structural imperfections. They tend to point out that the people currently occupying the seats of power are unlikely to instigate deep-seated changes, basically because they are bound by vested interests. Yet, some of these pessimists find hope in the potential of people in their 20s and 30s to leapfrog over their elders to generate change. As precedent, they point to the Meiji Restoration and the postwar reconstruction period, in which a younger generation took initiatives that fundamentally changed Japan.

It is not clear whether the new generation has the required capabilities. Various differences among generations gradually are becoming apparent, though. Cultural anthropologists, among others, long have tried to assess what is cause and what is effect in determining whether a society's structure will change. For example, is corporate restructuring, as a response to the prolonged recession, an influence for long-term change if young employees' loyalty to their companies thereby is weakened, thus undermining a system based on corporate loyalty? Similarly, have the repeated scandals among senior government officials damaged the motivation of young, elite bureaucrats to seek their own way up the promotion stairs? From another standpoint, has the relative stability of the economy in the postwar period produced successful role models who have impressed people not only with their performance but with their way of thinking and behavior? Or are the current phenomena just examples of cyclical changes — represented by the creativity and the energy of young people not yet burdened by responsibilities?

Younger generations may not have the abilities to change Japan in the ways that many analysts believe are necessary. However, they at least have that potential and sooner or later will be tested.


Cyclical Movements And Structural Problems

Government and private-sector economists generally agree that Japan finally is emerging from a five-year downturn. Among the positive signs are: what seems to be a more stable yen, apparently engineered by policy coordination among the Group of Seven major industrialized countries starting last summer; a recovery in the Nikkei index of 225 first-section stocks traded on the Tokyo Stock Exchange to around the 20,000 level from lows below 15,000 in early July 1995; and a decline of 11.4 percent in Japan's 1995 overall trade surplus to $107.1 billion, the smallest annual imbalance since 1992. (For more background on these issues, see JEI Report No. 2B, January 19, 1996, and No. 5B, February 9, 1996.)

In early February the Economic Planning Agency announced in its monthly economic report that a modest recovery was underway. This report is symbolically very important because EPA's use of the term recovery traditionally has been considered an official pronouncement of the end of a recession. In this particular case, where a recovery was announced in September 1994 and then reconsidered given ensuing conditions, the government is being particularly cautious about stating that a recovery is at hand. EPA Minister Shusei Tanaka was quoted as saying, "The economy cannot immediately go into a full-scale recovery track."1 Finance Minister Wataru Kubo also pointed out that, despite the good news that the economy is now in a gradual recovery phase, "employment conditions remain extremely severe and personal consumption is rising at an extremely modest pace."2 The EPA monthly economic report,like innumerable government reports in recent years, also talks about the need for sweeping deregulation if the Japanese economy in the medium to long term is to perform at anything more than its current plodding rate.

Typical road maps of economic reform in Japan often start with what the outside world perceives as "Japan Inc." — that complex web of relationships among and between businesses, whether big or small, and regulators as well as employers and employees. Yukio Noguchi, a professor of economics at Hitotsubashi University, suggests that these linkages are the product of the economic structure put in place in wartime, a structure that no longer is effective. He cites as examples the problems with productivity in the services sector in light of the yen's appreciation and the price gap between Japan and abroad (naigai kakakusa). These fundamental problems are derived, Mr. Noguchi says, from the "1940 taisei [system]" that was established during World War II.3

Mr. Noguchi describes the 1940 system as having five major elements. First, Japan's corporate structure emphasizes benefits for employees rather than for shareholders. Under this rubric so-called lifetime employment and seniority-based pay and advancement prevailed. Second, corporate financing shifted from raising funds via stock market offerings to borrowing. Third, direct intervention by bureaucrats into economic activities through legal controls and administrative guidance became the norm. Fourth, a centralized fiscal system, based mainly on direct taxes, was established. Finally, a land policy skewed toward agricultural uses and tenants' right was introduced.

Mr. Noguchi argues that most of these structural elements of the economy are outdated. Many scholars agree with Mr. Noguchi's points, including Jeffrey Telgarsky and Makiko Ueno of The Urban Institute. They argue, "The '1940 taisei' is not functioning as effectively as it used to, and is even inhibiting Japan's further economic progress. This raises the question of whether it is possible for Japan to extricate itself from the postwar system."4

Those who consider Japan's current economic problems to be structurally based are concerned that the latest positive signs may encourage the people who believe that the economy's recent woes are just cyclical in nature to argue for giving gradual, conventional approaches time to solve the ills. Those who argue that structural solutions are in order point to the financial crisis of the 1990s, symbolized for them by the virtual bankruptcy of seven housing loan companies (jusen), as a reason that Japan's economic malaise requires more than monetary and fiscal tinkering. Many economists contend that a resolution of the jusen problem and, more generally, the mountain of nonperforming and underperforming loans weighing down financial institutions of all types is a prerequisite for a real economic recovery. This is particularly the case if such a solution challenges the rationality of government policies purporting to address the fallout from the bubble economy of the late 1980s and the Ministry of Finance's historical relations with financial institutions.

Throughout world history economic problems have motivated people to tackle fundamental change. The question for Japan and the current leadership, both political and corporate, is whether substantial economic restructuring is happening. Changes most certainly have occurred over time in response to such events as the twin oil crises of the 1970s, after which the industrial structure changed from one where energy-intensive industries were among the leaders to one that was less energy-based. But historical changes in industrial patterns did not impact the five components of Mr. Noguchi's 1940 taisei. These are more likely to be affected by the yen's appreciation in the mid-1980s and more recently. For example, the counteractions by exporters could lead to more foreign direct investment, weaker ties with traditional suppliers and corporate restructuring. The combination of a strengthening Japanese currency and the financial crisis associated with the bubble economy have rendered the economy's structural problems more clearly and seriously than they were in prebubble days.


Growing Expectations For Younger Generations

Those who are frustrated with the current state of Japan's economy understandably may think that changing players, replacing the old generation with a newer one, may be the best solution. However, the problem cannot be solved so easily.

There are at least two reasons why it is difficult to deal with the Japanese economy's structural problems. The first arises from the fact that the structure itself grew out of necessity. In order to change the system one first needs to understand why such a system was established and then prove why it needs to be changed now. Hitotsubashi University's Mr. Noguchi describes how the 1940 system evolved under wartime rationales that no longer hold today. Taking this approach goes beyond a focus simply on systemic problems and seeks to determine the reasons for retaining or changing various components. Mr. Noguchi's approach bothers some critics, however, because of its emphasis on the system's responsiveness to wartime needs. Eisuke Sakakibara, director general for international finance at the Ministry of Finance, has criticized Mr. Noguchi's argument for its emphasis on the system's Japanese peculiarities and the negativism associated with using the dark image of the war.5

A second reason that structural change is difficult is that, typically, the people in a position to bring about change have a vested interest in keeping the system intact. Many analysts argue that vested interests are the major obstacle to deregulation and the development of new business along with entrepreneurship. The financial mess involving the jusen is a case in point for vested interests not wanting change. In this case banks, agricultural cooperatives and the separate ministries that regulate them have money or "turf" riding on the line (see JEI Report No. 47B, December 22, 1995).

Younger generations seemingly have a real advantage as promoters of change because, less tied to vested interests, they are more willing to take drastic action. Some may argue that young people are at a disadvantage because they have neither the direct experience nor an understanding of why their predecessors built the system that currently is in place. Others argue that for just those reasons younger generations can be more objective in examining the costs and the benefits of the present economic system.

In describing the evolution of the 1940 system Mr. Noguchi of Hitotsubashi University shows that the current interrelationships among business and the bureaucracy and employers and employees have a long history, but his discussion also shows that these relationships are not necessarily historically based. For example, workers changed jobs more frequently before the war than after. A bank failure even took place before the 1940 system was established, something that until recently the Finance Ministry tried to prevent (see JEI Report No. 44A, December 1, 1995). Obviously change can take place. Some might question whether it should, given Japan's remarkable economic growth in the past under this system. But others see the necessity for change to address the more mature Japanese business climate and the economy's worldwide linkages due to trade and the growth of multinational corporations. For advocates of change, including those promoting deregulation, the question is not whether the system should be changed but who will lead the way and how.

Masahiro Okuno, a professor of economics at Tokyo University, argues that Japan now is suffering from "coordination failure," in which most people see the possibilities for a better economic situation but no one is willing to challenge the traditional system to obtain an improved status quo.6 According to Mr. Okuno, a breakthrough requires one of three situations. Someone must take the role of coordinator. Government officials played this part in building the 1940 system to win the war; although that effort failed, officials later successfully helped with Japan's postwar economic reconstruction. Mr. Okuno argues, however, that it is difficult for the government to take on such a leadership role today because a single clear goal is not evident. Moreover, those government ministries and agencies that had the most clout during and after the war now have somewhat less influence today and may be at odds with other counterparts in government. He also maintains that successful innovation inspires imitation; thus, a new system is likely to evolve if innovators outcompete tradition-bound adherents. The Tokyo University professor argues as well that differing incentives would allow and encourage new approaches that could achieve change in a society where everybody agrees in principle but disagrees in details. Particularly in the latter case the opportunity for young people to make a difference is clear.


Overviews Of Major Generations

There is a growing expectation that younger generations will be able to solve some of the economy's basic problems, including the drain on competitiveness associated with relying on seniority-based, lifetime employment and cross-firm linkages in a no-holds-barred global market. Yet, there is a fundamental question of whether the younger generations in Japan have the abilities or the inclination to deal with these problems. The attitudes and the behavior of people in any one generation are influenced by political, economic and social conditions. The White Paper on the National Life for FY 1995 looked at four generations and described the characteristics of each.7

Those born before World War II, now 56 to 60 years old, grew up in a poor period. Real (1985 prices) per capita income in 1940 was ¥373,000 ($3,730 at ¥100=$1.00). Of the Japanese born in 1935, only 45.6 percent went to high school and just 19. 7 percent went to a university or a college. Their average annual income, adjusted for 1990 prices, when they were 20 to 24 was ¥1,040,000 ($10,400). Incomes increased over the next 30 years by a factor of six. This jump was due mainly to high economic growth in the 1960s. This generation is more confident than are younger generations that Japan's social welfare system is adequate (see Figure 1). A recent profile of the prewar generation indicated that most valued traditions, were pragmatic and thought that "in some cases the public interest should have priority over individual interests or freedom" (see Figure 2). Questioned about the role of the individual versus that of the group, a majority of the respondents agreed with the comment, "It is good to sacrifice myself for the sake of my family and society" (see Figure 3). These and other responses reflect this generation's traditional roots as well as the struggles it endured from the end of World War II into the era of high economic growth.

People in the baby-boom generation, now generally between the ages of 46 and 50, were born in an even poorer period than those in the prewar generation. Real (1985 prices) per capita income in 1950 was ¥274,000 ($2,740). However, more of those born in 1945 went to high school (62.3 percent) or attended a university or a college (23.4 percent). Their average annual income in 1990 prices between the ages of 20 and 24 was ¥1,894,000 ($18,940); by the time they reached their current age group of 46 to 50 typical yearly pay had increased 3.5 times. According to the survey reflected in Figure 2, this generation shares with the generation born before the war an appreciation for tradition and realistic thinking. Since people in the 46 to 50 age group are now targets of employment adjustment as part of corporate restructuring; their confidence in the adequacy of Japan's welfare system is not strong.

Those in the shinjinrui (literally new humankind) generation, now aged from 31 to 35 years old, were born in the early to mid-1960s, a time of high economic growth in Japan. Real (1985 prices) per capita income in 1965 was ¥816,000 ($8,160). Of the Japanese born in 1960, almost all (92.6 percent) went to high school and nearly one-third (31.9 percent) went to a university or a college. When this group was in the 20 to 24 age bracket, their average annual income in 1990 prices was ¥2,652,000 ($26,520). Over the next 10 years this figure increased 1.83 times. This gain was smaller over the same 10-year time frame than was true for the baby-boom generation, which enjoyed a 2.3-fold increase. The shinjinrui's evaluation of Japan's social welfare system is low (Figure 1). They also are less supportive of the idea that public welfare should have priority over individual interests or freedom than are their elders (Figure 2). Self-esteem is lower for this group than all the others. Consequently, people in their 30s are not very positive about taking a leadership role, judging from their responses to a question about trying to attract the attention of others (Figure 3). Nevertheless, more in this age group expressed such feelings than did older respondents.

Those in the baby-boom junior generation — aged 21 to 25 now — had a higher reading for wanting to get the attention of others in a group than any of their elders (Figure 3). Real (1985 prices) per capita income in 1975, the year the youngest in this group were born, was ¥1,553,000 ($15,530). Again, nearly all (93.8 percent) of the Japanese born in 1970 went to high school, while a slightly lower ratio than in the previous decade, 30.6 percent, went to a university or a college. A new factor for this group is travel abroad, enjoyed by 17.9 percent, which is much higher than the 6.7 percent for the shinjinrui generation. The 21 to 25 year olds are confident of the economic power of Japan (Figure 1). They also think that the freedom of individuals is not respected enough (see Figure 4). And they report a preference for living differently from others' ways (Figure 3).


Implications For Changes In The System

A people's attitude toward work and lifestyle is influenced to a great degree by the circumstances in which they grow up. One can argue that young people today want more freedom because their economic status is relatively high. The corollary is that they are likely to become conservative if the economic environment deteriorates further. This reasoning presupposes that changes in a cohort's thinking are cyclical, depending on the state of the economy. If this is the case, people in their 20s today cannot be expected to be very influential in changing the system.

The relationship between a people's way of thinking and their background often is very complicated, but the research outcomes described in EPA's latest national life white paper allow some interpretations about the nature of the linkage. The prewar generation tends to appreciate Japan's social welfare system of today, probably because its members compare the current situation with the hard times that they endured early in life. It sometimes is pointed out that a sense of poverty or even the fear of starvation motivated people in this generation to work very hard, one key to Japan's high economic growth in the early postwar period. As the generation that first experienced the benefits of the 1940 system, this group appears to be wholeheartedly in favor of the philosophy that working for the family or a company is a virtue, and they actually have acted in such a way. Their starting point was very low; that makes their accomplishments look even greater. The ever-higher standard of living of this generation leads to the abundant confidence and justifiable pride that EPA researchers discovered in their surveys. Too much confidence and pride, however, can blind people to the need for changes. Therefore, it may be difficult for this generation to take a major role in changing an economic system that in their eyes has produced much good.

Although members of the baby-boom generation started their lives at an economically worse time than did their predecessors, they did not really suffer because their teenage years coincided with the high growth period. Ironically, their appreciation for the affluence that the fast-expanding economy brought is not very high, although they actually experienced the benefits. Educated in a postwar curriculum based on liberalism, this generation played a major role in the campus disputes of the late 1960s. They started working in the early 1970s. While this large group experienced the impact of some of the structural changes that occurred in the economy then and thereafter, its interest in change presumably would be high. However, people in their 40s and 50s now are major targets of corporate efforts to restructure to adapt to the new slower growth period. The prospect of a layoff or moving to a lower-ranking job makes them realistic about the downside of change.

The shinjinrui generation, born in the early 1960s, has not experienced poverty but has not enjoyed high rates of increase in income either. This may be the reason why members of this group do not appear to appreciate the enormous strides Japan's economy has made and the benefits those gains have brought. While less inclined to put priority on public welfare over individual interests, members of the shinjinrui generation nevertheless seem to lack confidence in their abilities to bring about change. They also for the most part are not willing to take leadership roles. Therefore, this generation's interest in promoting change may not be very high.

The baby-boom junior generation, born after Japan had achieved its status as a world economic power, grew up amid plenty. Many members of this group have traveled abroad, which supposedly makes them more internationally inclined. Their foreign interactions may be one reason why these 20 to 24 year olds tend to complain about the low priority placed on individuals in Japan. Conversely, this group has reason to understand how well-off economically Japan is, since, even though the economy has been struggling in recent years, they have benefited from a stronger yen both in terms of making foreign travel cheaper and bringing more imports to Japanese shores. In the sense that they have a lot of opportunities and are used to maximizing their own interests, baby-boom juniors seem to have the potential to bring to the table new ways of thinking that could lead to changes in Japan's economy. It is still uncertain, however, how strong their interest and desire are or whether they have the necessary abilities to deal with the multiple problems in the Japanese economy.

According to the EPA-reported survey results, Japan's younger generations put a high priority on individual freedoms. These are considered to be key incentives for changing Japan, particularly by foreign — especially American — observers. Unknown, though, is whether the younger generations will maintain such a way of thinking as their members mature. If the economy gets worse, for example, young people's response may be to consider conservative, traditional cures instead of seeking new approaches. Even ignoring the question of whether the old ways have value for the particular culture or society — a decision each generation must make — the general characteristics of an age group may preclude the ability to bring about change. Research by the Management and Coordination Agency suggests that those in the 18 to 24 age group are not willing to take the initiative, even in light of their complaints about the economy and society. While 57.6 percent of those answering a similar question in South Korea and 55.1 percent in the United States replied that they take positive actions to address complaints, only 24.1 percent of those asked in Japan replied that they did so (see Graph 1). Moreover, young people in Japan tend to that think they cannot do much as individuals (see Graph 2). These results might be susceptible to the perception that what people think and what they actually do often are different. At the same time the results no doubt reflect a certain reality — a reality that must be discouraging for those counting on the younger generations to be the instigators of change. Teenagers apparently are not intersted in assuming that role, either, at least at present. For example, EPA's national life white paper reported that surveyed high school students in Japan stated that they prefer enjoying the present to studying for the future — the opposite of answers given by American and Taiwanese students (see Graph 3).


Impact Of Role Models

Every generation tends to have exemplars who serve to show what can be accomplished with certain traits, be they business-oriented, that of the individual or geared to scientific discovery. Those anticipating the potential of young people to reshape Japan might glean some clues about the possibilities by looking at the people who serve as role models for the youth there today. Young stars like Hideo Nomo and Ichiro Suzuki in baseball and Yoshiharu Habu in shogi (Japanese chess) not only have impressed many Japanese with their achievements but also with their "new" behaviors.

When Mr. Nomo won American baseball's 1995 "rookie-of-the-year" award for the National League, the pro baseball commissioner in Japan, Ichiro Yoshikuni, offered congratulations, saying, "What [Mr.] Nomo has accomplished in Japan-U.S. relations is comparable to the work of 100 diplomats." Ichiro Suzuki, who goes by his first name, won five Pacific League batting titles at age 22 in 1995; he also hit .342 last year, the Japanese league's highest batting average for the second straight season. In his view enjoying baseball goes with improving his skills; he is less interested in the rewards. Having a similar orientation, 25-year-old Yoshiharu Habu became the first shogi player ever to hold all seven top titles: meijin, ryuo, kio, oza, kisei, oi and osho. Akira Shima, a 31-year-old professional shogi player, presides over a study group for young players, including Mr. Habu. Commenting on the characteristics of young players, Mr. Shima said, "It probably does not matter for young players so much whether the reward is ¥30 million [$300,000] or ¥3,000 [$30]. Their goal is winning in their favorite shogi. Those who are over 40 years old may change how they play depending on the amount of the reward."8

While admitting that these three new stars are geniuses who cannot be generalized to represent their generation, their behaviors suggest a fresh sense of individualism as one their generation, and those younger, might seek to emulate. Ironically, each became successful using an unorthodox approach. Mr. Nomo's unorthodox pitching style is called "The Tornado." Ichiro's batting form is called furiko-daho (uncoiling-like swing), which also is quite different from the standard style. When Ichiro was asked about his form, he replied, "… I have just tried to play baseball comfortably. I will feel confident and happy if I succeed without changing my style. I will not be satisfied with the success if I have to change my style completely following advice from others. Such a success will not be sustainable."9 According to critics, Mr. Habu similarly sometimes does not follow joseki (conventional approaches), which most other shogi players follow without question. Mr. Habu's attitude, he says, is: "I want to increase the challenge for inventing a new shogi as much as possible by reviewing bad situations in conventional interpretations."10 These stars have been talented enough and sure enough of themselves to succeed by sticking to their own styles. Generally, however, it tends to be very difficult to follow this course in Japan because coaches and mentors are eager to shape newcomers in the orthodox mold.

Although such people as Messrs. Nomo, Ichiro and Habu impress the younger generation, the general responses captured by government surveys indicate that imitation is not necessarily taking place — even as a form of wishful thinking. Yasuo Takeuchi, a professor of economics at Seikei University in Tokyo, is concerned about the implications for society of what he calls strong and weak individuals.

So far the Japanese people have been protected by the nation. They have been able to spend a peaceful life in a strong group like a company. The protection by these two, however, will become vulnerable in the 21st century. Some people will become strong individualists who live indomitably. Many others will become weak individualists who try to maintain the status quo as long as possible and avoid the disadvantages of dangerous and undesirable things as much as possible. ... There are two types of strong individualists; those who are staying in Japan and those who go out of Japan. The former tend to be thwarted by other Japanese, their uniqueness taken away so they become ordinary Japanese. The latter, like Nomo, cannot endure this and leave Japan. The latter's performance in the world will encourage Japanese but will not raise the Japan where ordinary people are left.11

This analysis similarly can be applied to the situation of companies as tradition-bound or as innovators. According to research by Nikkeiren (Japan Federation of Employers' Associations), only 38 percent of 313 companies responding to a 1995 survey considered maintenance of the traditional lifetime employment system to be important.12 If lifetime employment becomes unusual in Japan, the ripple effects would be many. Not only might companies feel less responsibility for training personnel in a broad range of positions, but employees themselves might feel less loyalty to their employers; that would allow strong individualists to seek out better opportunities in other companies.

Intertwined with the lifetime employment concept is the security-based pay system. More and more people think that merit-based pay is better than the current standard. Merit pay encourages strong individuals to work hard for good pay and to set their own promotion schedule. Less motivated employees conversely may try to protect their status as much as possible. On paper at least a merit-based system will differentiate between those employees capable of a strong performance and willing to try to reach their potential and the rest of the work force; these two groups cannot be treated equally by definition. Under a system that pays individuals based on their job performance or their contribution to the company rather than on the year they began work, more people could seek to change jobs. Thus, to retain their best workers companies would have to offer incentives, such as stock options. Otherwise, these employees would seek employment elsewhere, leaving a business staffed by less motivated workers — a company's worst scenario.


Policy Responses

Finding the balance between an individual-based approach and an organization-based one is considered by many analysts to be key to changing the Japanese system. In his book entitled Nippon Kaizo Keikaku (Plan for Reforming Japan) Ichiro Ozawa, head of the major opposition party, Shinshinto, describes Japan as a country where individuals historically have immersed themselves in the group for the broad benefits of security.13 Mr. Ozawa argues that this kind of "Japanese-style democracy" worked in the past largely because Japanese society maintained its homogeneity, with a history of limiting interactions with the outside world. This approach does not work any more, he suggests. Based on this understanding, Mr. Ozawa proposes pursuing a true democracy consisting of the independence of individuals through three basic reforms: strengthening the political leadership, decentralizing the government and deregulation.

There is a general consensus that Japan needs more risk-takers, people willing to push the envelope not just in scientific fields but in government and business as well. Some observers fear that a country that loses strong individualists and has an abundance of conformists may experience a decline in its living standards. In this view Japan must change to avoid the loss to other countries of its innovative people or those who have such potential. Keidanren (Japan Federation of Economic Organizations) issued in mid-January a paper entitled "An Attractive Japan: Responsibility for Innovation; Keidanren's Vision for 2020." The report's authors propose reforms in such areas as the economy and technology, politics and administration, diplomacy and international exchanges, education and corporate activities. In the area of education or human resource development, for example, Keidanren emphasizes that each participant — be it the individual, the company, the family, the institution or the community — should take a positive role.

People must be able to make selections based on their own sense of purpose and ability. … Independent and distinct educational objectives that are unique to each institution must be more visible.

Educators must cultivate their own capabilities to locate independent talent and creativity in their students. They must conduct interactive classes with an emphasis on thinking ability, debate and empirical experience to draw out the creativity of children.

Companies must install flexible personnel management systems with multifaceted assessment methods to enable a variety of individuals to achieve self-realization during the course of their working lives. Companies also must overhaul their employment practices to facilitate the hiring of experienced workers and create a diverse pool of workers.

Education that is best fit to the talent and the ability of every child must be conducted by members of each family. ...

The community, together with each family, must produce children with a sense of self-responsibility through a variety of social experiences.14

The government of Prime Minister Ryutaro Hashimoto shares some of these views. In his policy speech on the opening day of the regular Diet session in late January the prime minister characterized the mission of his government as "reform and creation." He set forth the cabinet's four top priorities: rebuilding a resilient Japanese economy, devising a society for the elderly in which people can be glad to have lived so long, developing a proactive foreign policy position for the furthering of peace and prosperity, and effecting administrative and fiscal reforms that are needed to make all of this possible.15 Mr. Hashimoto emphasized, "[S]tructural issues such as the disparity between Japanese and international prices and other high-cost structural elements are undermining Japan's attractiveness as a place to do business and there are increasing fears of industrial hollowing. ... The first structural reform here is that of thorough-going deregulation." Keidanren's views in the area of education or human resource development also are shared by the Hashimoto government. In his policy address the prime minister said, "We will thus promote educational reform so as to implement education that puts even greater emphasis on individuality and creativity for the 21st century and teaches people not just to solve problems they are given but to identify problems and to solve them on their own. ..."

Both political and business leaders are anxious to make Japan attractive to companies as well as to individuals. Each group seems to agree with the other, at least in principle, that Japan needs further deregulation and stronger individualism. The critical point may be whether the current leading generation can carry out the policies described above successfully so that younger generations can follow them with new ideas.



Those who are frustrated with the present situation in Japan naturally expect the younger generation to make a breakthrough. However, it is very difficult for any generation to deal with structural change. Vested interests are always a stumbling block. Moreover, the benefits of postwar economic development have been shared by most Japanese, although to varying degrees. Cultural elements that make Japan what it is also cannot be ignored for the sake of change. In Japan's seniority-conscious society, for example, people seldom call each other by first names and tend to use san for older people and kun for those younger. This atmosphere at least subconsciously may deprive young people of the motivation and the energy to challenge vested interests, which typically are the province of older people. Moreover, this cultural aspect has links to seniority-based pay and promotion systems in major corporations, which, in turn, are tied to lifetime employment.

In Japan historical changes, like the Meiji restoration and the postwar reforms, for the most part were carried out by young people. The latter, in fact, are considered to have been possible partly because older people were purged. The former was accomplished through the loss of many young lives. Indeed, these past changes indicate that a transition of power from the older generation to the younger one itself is revolutionary in Japan.

Change had become necessary in both of the above cases. The question today is whether sufficient motivation for change exists. One can argue that young people are not pushing for reforms because the situation is not bad enough for them to take the lead. Some even argue that Japan may not undergo drastic change unless there is a catastrophe. This might be true, but it could be dangerous to wait for that precipitating development. Before facing a catastrophe, therefore, older generations — including current members of the political, bureaucratic and corporate establishments, who may be confident about what they have done in the past and what they are doing today — should think about widening their circles to include members of younger generations. Though the results of various research projects have made people rather pessimistic about the abilities of young people to change Japan — or at least of their interest in doing so — young people by nature have the potential to be agents of change. People in positions of importance, regardless of field, have the critical task of fostering that potential by creating opportunities for younger generations to act. Equally critical is for young people not to be shy in demonstrating their potential.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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1aa "EPA Declares Modest Recovery," The Japan Times, February 10, 1996, p. 1. Return to Text

2 aa Ibid. Return to Text

3aa Yukio Noguchi, 1940 nen Taisei (The 1940 System) (Tokyo: Toyo Keizai Shinpo Sha, 1995), pp. 1-12. Return to Text

4aa Jeffrey Telgarsky and Makiko Ueno (eds.), Think Tanks in a Democratic Society: An Alternative Voice (Washington, D.C.: The Urban Institute, 1996), p. 9. Return to Text

5aa Eisuke Sakakibara, "1940 nen Taiseiron wa Ideorogiteki Rekishikan — Nihon Ishitsuron no Ichi Henshu (The argument of the 1940 system: an ideology-based historical perspective and an unusual species of arguments that Japan is peculiar)," Shukan Toyo Keizai, June 8, 1995, pp. 40-43. Return to Text

6aa "Ishuku no Kozo Dakkyaku ni San Houhou (Three means to overcome the shrinking structure)," Shukan Toyo Keizai, June 8, 1995, pp. 30-33. Return to Text

7aa Economic Planning Agency, 1995 Kokumin Seikatsu Hakusho (White Paper on the National Life for FY 1995) (Tokyo: 1995), pp. 145-158. Return to Text

8aa "70nen Umareno Shin Tensaitachi (New geniuses born in the 1970s)," Dakapo, October 19, 1995, p. 59. Return to Text

9aa "An interview with Ichiro," Nikkei Business, October 30, 1995, p. 34. Return to Text

10aa Dakapo, op. cit., p. 58. Return to Text

11aa "Nomo-gata Tsuyoi Kojin ha Zokuzoku Nippon Dasshutsu (Strong individualists like Nomo will go out of Japan one after another)," Shukan Toyo Keizai, November 18, 1995, p. 24. Return to Text

12aa "Me-ism no Ikashikata (How to make use of me-ism)," Shukan Toyo Keizai, May 13, 1995, p. 15. Return to Text

13aa Ichiro Ozawa, Nippon Kaizo Keikaku (Plan for Reforming Japan)(Tokyo: Kodansha, 1993), pp. 3-4. Return to Text

14aa Keidanren, "An Attractive Japan: Responsibility for Innovation; Keidanren's Vision for 2020" (Tokyo: 1996), p. 26. Return to Text

15aa "Hashimoto Outlines Priorities," The Japan Times, January 23, 1996, pp. 1 and 5. Return to Text

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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