Wednesday, July 21, 2010

All hell breaking loose on Japan - blame it on their history

At times one wonders what Japan has done to get hit from all quarters. First of all they have been living in a recession since so long. They had a lost decade and now they don't seem to have found any respite. Then the doyens of Japanese industry, Toyota got hit, first with safety concerns of sudden acceleration. This was followed by public outcry over their apathy towards this issue and their lack of a quick response. And now,the patent fight for Prius' technology with Paice, the supposed holder of the patent for the technology that translates electric energy and energy from burning gas into torque. So as per a settlement, they now need to pay $98 per car as royalty. That means, $1.4 mn for June alone, and apparently Paice had spent $20 mn on the technology! Does that royalty figure seem fair? When in reality, it has been proven that the technology being used in the Prius has been developed by Toyota's own research. Just because the technologies are in effect the same, one should not ideally subject the auto major to such a huge royalty payment! So why in effect is Japan suffering this way? Could the answer lie in ancient Japanese history and culture?

Japanese peoples over the years have been a sheltered and protected community. They're not overly aggressive. In the early part of Japanese civilization, they were subservient to the Chinese. The very first mention of Japan is in China's Book of the Later Han, around AD 57, where Japanese are referred to as the people of Wa, comprised of close to around 100 tribes who used to come regularly and pay tribute to the Chinese. The Japanese king Suisho was also known to have presented Japanese slaves to the King An of Han in China'.

And then as the years progressed, in the Edo period, Japan began to notice effects of Western influences on its people. They got afraid of being subjugated by the 'West' and imposed a seclusion that lasted more than 2 centuries, only to be broken on gunpoint, almost! But in the subsequent Meiji period, Japan woke up. The need to prove themselves better than the Western Powers that made them open up to trade at gunpoint became all too important. A strong wave of nationalism swept through the nation.

Another undercurrent was the overall mild mannered nature of everything Japanese. In ancient times, the IRAA which was supposed to safeguard democracy and the Meiji constitution ended up being titular. Again, they were dragged into the first Sino - Japanese war. They seldom ever showed aggression, and Chinese and Russians routinely flirted with Japanese borders in the olden days. Again, while the world has been ravaged by religious wars - the crusades, wars between Islam and Christianity and the ever-present dissent between the Shias and Sunnis amongst Muslims themselves, Japan is an example of how 2 religions - Shintoism (the native Japanese religion that worships forces of nature, people, kings and so on) and Buddhism that originated in India and spread through China to Japan have co-existed.

And in a way all these cultural aspects have come to the fore in modern day Japan. Corporate culture is known to be mild, in fact too mild, such that people are wary about calling a spade a spade! They are in love with the status quo. In fact, I learnt from some Japanese that they revere Mt. Fuji because of its symmetric nature, that denotes stability! In the wake of a recession, therefore, sweeping reforms, like the kind that were needed a decade ago were totally missing - they privatized the post office as a way to get out of a recession! Anti - public sentiment measures are impossible. And now, as the world has been reeling under the Great Recession, Japan is staring in the face of yet another lost decade. Besides, one can see the after effects of the seclusion, in that they still keep themselves away from the glare of spotlights, and keep to themselves when it comes to their research or technologies or even plans and emotions!

Now, trade has been hit, and the Yen seems to be strengthening compared to other surrounding currencies and the Government is being persuaded to do something about the fiscal policy fast. Whether they will take the supreme step of loosening monetary policy is yet to be seen. Years ago, Japanese, not having any avenues to invest within the country started stocking up on American properties. This blew up Japanese real estate into a bubble. And now apparently most Japanese banks are busy buying up stake in American banks. Where is this trend going to lead them? Only time will tell.In the mean time, their industry seems to be suffering - from apathy, lack of innovation, shrinking local demand and more importantly bad luck. The only way out would be get themselves a makeover in attitude!


Anonymous said...

“There's a world of difference between truth and facts. Facts can obscure the truth.” ~ Maya Angelou

Sindhu, this is one of your rare posts that make me feel short-changed. On reading the title – ”All hell breaking loose on Japan - blame it on their history”, I anticipated reading about historical influences on the present day economic, social or political issues in Japan. Half-way into the post, I begin to wonder whether it would be fair to label the recent troubles of one Japanese company as the onset of an economic Armageddon for Japan. Here are some of my observations on this post (aka "The logical loopholes” and “The reasons why I felt short-changed on reading this post"):

1. Let's consider the case of the Toyota recalls. You say that the company deserved a break. Some would say that the company got what it deserved – it made a bad product, it did not recall the bad product soon enough, it got its image bashed. Interestingly, on the issue, Wikipedia reports that "The US government sought a record penalty of US$16.375 million from Toyota for its delayed response in notifying the National Highway Traffic Safety Administration regarding the defective accelerator pedals." Seems like a case worthy enough for a public outcry, wouldn’t you agree? Put the bruised reputation down to bad R&D rather than to history.

2. The Toyota Prius IPR story? This one is not without a controversial ‘other’ view which shows Toyota as a petty thief which stole Mr. Alex Severinsky’s (a Soviet emigrant to the US) invention – “a culmination of years of work and research”. Read a part of this counterview here:

My point? That the situation which Toyota is going through is one which it has brought on itself through some bad R&D and, maybe, due to competitive anxiety. Any company, regardless of its country of origin, can find itself (and you know that a few have, in the past) in the same situation. All hell breaking loose on Japan? Not really. Blame it on their history? I wouldn’t.

3. The post makes a case for Japanese congeniality “Japanese peoples over the years have been a sheltered and protected community. They're not overly aggressive. […]” A Google for the term ‘Asian Holocaust’ may reveal certain belief-altering facts. I quote Wikipedia “[…]between 1937 and 1945, the Japanese military murdered from nearly 3,000,000 to over 10,000,000 people […] This democide was due to a morally bankrupt political and military strategy, military expediency and custom, and national culture." Nothing personal.

Your thoughts on the corporate culture in Japan do the most justice to the title of the post. I do wish that you would have expanded on this idea in detail – ‘how did the Japanese culture influence the corporate decision making by its corporations, and how did such decision making result in Japan’s present circumstances’.

Summing up, certain logical fallacies and typos [“Then the doyens (why the plural?) of Japanese industry, Toyota got hit”; “Japanese peoples (?) over the years” ] kept me from relishing the wordsmith’s serving of the week. I eagerly await the next helping.

Sindhu Subramaniam said...

Hey Anonymous,

Thanks a lot for the comment. I guess I did indeed fall short of covering all aspects that I perhaps wanted to. Call it the flip side of having to keep it short :)

The idea I wanted to cover here was that ancient Japanese history shows that the people have been by default mild, and protective. The seclusion perhaps brings to fore the point that Japanese are quaint and alone in themselves. So, I'd maybe argue that they quietly perform their research, without wondering whether anyone else is also involved in similar research. My point was based on the Bloomberg news report that Toyota was given credit for its own research in the IPR issue.

No doubt Toyota made a gross error in not acting fast. But this I attributed to the fact that they are too slow in terms of their culture. They are in love with status quo.

As for the spelling errors - peoples is a term one uses for a civilization, it isn't a plural form of people :D

Doyens - well I apologize for the error. Thanks for the comment though.