Japan needs to invest in people, support younger generation
18:01 JST, January 17, 2022
The year 2022 is expected to continue to pose challenges for Japan with the pandemic, foreign affairs, the economy and other issues. This is the fourth installment in a series of articles on how authoritative figures in various fields view such topics. The below was excerpted from remarks by Ken Shibusawa, chairman and cofounder of Commons Asset Management Inc., in a recent Yomiuri Shimbun interview.
Distrust has arisen against capitalism, both at home and abroad, especially among the younger generation. Under capitalism, in which companies focus on profits, issues such as inequality, poverty and global climate change have long existed.
Today, with the development of digital technology, which allows anyone to be connected to the world via a smartphone in their hand, it has become easier to see the challenges of capitalism in their historical context.
In the Showa era (1926-1989), Japan’s demographic structure was a “pyramidal society” with many young people and few elderly people. In that era, the nation experienced great success in exporting “Made in Japan” products, which supported mass consumption in developed countries. But Japan was criticized by the United States and other countries that were suffering from trade deficits.
In the Heisei era (1989-2019), Japan’s economic growth slowed down, and “Japan bashing” was replaced by “Japan-passing” in the rest of the world.
In the current Reiwa era (from 2019), the demographic structure is accelerating toward an “inverted pyramid society” with more elderly people than young people. Social issues that Japan has never experienced before will become more apparent. The success stories that people experienced in the Showa era no longer work, and the nation was unable to find a new growth model in the Heisei era.
In these times, I think it is significant that the Cabinet of Prime Minister Fumio Kishida has embraced the “new form of capitalism” as the nation’s vision for the future.
In my view, the new form of capitalism is one that regards people as capital and invests in people, aiming to raise the level of “human capital.”
If companies grow, and then distribute and invest the profits to their employees to improve their capabilities, such firms will be able to grow further. With a shrinking population and no abundant labor force, it is essential to increase the labor productivity of each individual. In particular, we must support young people between the ages of 10 and 39, who will play a leading role in the next 30 years, so that they can be successful in the world.
The virtuous cycle from growth to distribution and from distribution to growth should be extended globally, not only to corporations but to society as a whole, with the aim of creating a sustainable society.
My ancestor Eiichi Shibusawa (see below) said in his lecture “Rongo to Soroban” (The Analects and the Abacus), “It is our important duty today to make the analects and the abacus inseparable.” The analects symbolize morality, while the abacus refers to economic activities.
What he meant is that if we do not manage our business with a philosophy that benefits society as a whole, business will not be sustainable. The point is not “analects or abacus,” but “analects and abacus.”
Which fields can be expected to grow in Japan?
With the spread of the novel coronavirus, the way we work has been reconsidered, and the negative effects of the excess concentration of population and industry in the Tokyo metropolitan area have been highlighted. The 5G high-speed, high-capacity communication standard should be developed nationwide, allowing people to work via telecommuting and remote meetings as a way to revitalize regional areas.
Even climate change can be an opportunity to create new industries, such as the development of clean energy technologies.
However, it is difficult to achieve a virtuous cycle of growth and distribution only in Japan, whose population is declining. Emerging and developing countries — where the number of young people will increase — have the potential for growth.
By connecting with these countries, we can create a virtuous cycle of growth and distribution on a global scale. Japan should send out the message, “Let’s build a prosperous life and sustainable society together on the Japanese plan.” In other words, “Made with Japan.” Official development assistance in health and other fields can also be a vehicle for creating a virtuous circle.
Raising wages will be at the center of the debate on the new form of capitalism. To achieve this, we need to move away from the Japanese employment system, which consists of mass hiring of new graduates, lifetime employment, and a seniority system, and to make employment more fluid. We must make it so that only companies that pay fair wages will be able to attract employees.
At the government’s council to realize the new form of capitalism, I directly asked Prime Minister Kishida not to say three things: “unprecedented,” “cannot be accepted by organizations,” and “who will take responsibility.” I believe the government’s resolve is being tested for the sake of the future.
A businessman active in the Meiji era (1868-1912) and the Taisho era (1912-1926). He is known as the “father of Japanese capitalism” and the “father of the modern Japanese economy.” He was involved in the establishment and management of about 500 companies, including the First National Bank (a predecessor of Mizuho Bank). He taught that morality and corporate profits are compatible. He is still highly regarded both in Japan and abroad.
Ken Shibusawa was born in Kanagawa Prefecture in 1961. He earned an MBA in finance in 1987 from the University of California, Los Angeles. After working for a foreign financial institution, he founded Shibusawa & Company in 2001 and Commons Inc. (now Commons Asset Management Inc.) in 2007. He is the great-great-grandson of Eiichi Shibusawa. He is a member of the government’s council to realize a new form of capitalism.
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