The "Stop Ten" Steps to Entrepreneurial Growth in Japan (cont.)

Continued from last week, I discuss government programs and actions that should be “stopped” versus started to encourage entrepreneurial growth in Japan. (The first five can be found here.)

Six: Stop mindless paperwork and regulation – If the same attention to process efficiency that has driven Japan’s manufacturing success were focused on government bureaucracy, the country’s business environment might change overnight. While its competitors move rapidly to adopt streamlined, paperless process, Japan remains mired in a legacy of mindless paper-shuffling. This is reflected in Japan’s ranking in a World Bank measure of the ease of starting a business. Out of 183 countries, Japan is ranked 91, behind Mexico and not far ahead of Zambia.

Areas where process reform might usefully stimulate entrepreneurship include requirements for guarantors, bankruptcy procedures, privacy laws and hiring/firing practices.

Seven: Stop wasting women’s energy and talent – Facing serious demographic challenges posed by an aging society, Japan has no excuse for wasting the tremendous untapped capacity of its working-age women.

Perhaps because they face barriers to advancement in the mainstream corporate world, Japanese women are already among the nation’s most dynamic and creative entrepreneurs. If gender-specific barriers were lowered, we could expect to see women spearheading even more ventures. While social safety nets are not an ideal solution, if Japan is to produce new generations of children and at the same time care for a vast population of retirees, we need to support working mothers with enhanced child-care options and opportunities to return to the workforce as the workload of parenthood decreases.

Going one step further, we need to create frameworks for women to start new businesses that are flexibly compatible with the other roles they must fill.

Eight: Stop holding Japan’s door closed – Faced with a dearth of home-grown entrepreneurs, one obvious solution is to import. And Japan has many attributes that foreign “knowledge workers” prize: safe, efficient and cosmopolitan major cities; highly dependable infrastructure and services; proximity to key Asian markets and production bases.

Foreign talent can meanwhile fill key gaps in the skill-sets of home-grown start-ups: global perspective and communications skills; lateral-thinking skills neglected by Japan’s education; and more.

In fact, the lack of diverse global skills threatens to “hollow out” Tokyo’s role as a global head-office hub. In many key functions, such as marketing and public relations, monocultural head office staffs effectively devolve work to overseas subsidiaries simply because they are incapable of managing it. This puts Tokyo at risk of becoming “Asia’s Delaware,” an empty city of corporate shells where little actual business takes place.

To reverse this trend and attract a new wave of overseas talent, Japan’s immigration authorities need to shift from grudging acceptance of foreign knowledge workers and entrepreneurs to an active welcome. One key measure to signal a change in attitude would be the repeal of “re-entry permits” – the cash grab by government that forces all resident foreign passport-holders to pay every time they leave and re-enter Japan.

A more substantive measure would be to eliminate the crushing burden of school costs imposed on foreign-resident families and their employers. Although foreign residents pay local and national taxes that support public schools, in practical terms it is impossible for a 14-year-old moving from Silicon Valley to Tokyo to fit into a standard local middle school.

At present, the only alternative is for families or employers to pay 2.5 million yen or more to send that child to an international school. The government should institute a system that provides any foreign resident who pays “ward tax” with educational vouchers for use at international schools.

Nine: Stop ministerial “silo mentality” – Having been involved in the start-up of several ventures in Japan, I can testify that one fate any entrepreneur should fear is getting trapped among a web of competing ministerial bureaucracies. Depending on the business involved, you many find yourself running between MIC, MOF, METI, MLIT, MLHW and a surfeit of agencies in search of permits and “case-by-case” approvals. The demand you receive from one will inevitably conflict with the requirement posed by another.

The only possible solution I see to this problem is an office of “Innovation & Entrepreneurship” at the level of the prime minister’s office. This would be a “one-stop-shop” where new ventures could take inter-ministerial snafus for quick and painless resolution. It could also encourage “cross-pollination” among the various ministries.

Ten: Stop Ageism – Japan’s customary system of automatic promotion on the basis of seniority exacts an enormous toll on both public and private-sector organizations, breeding complacency and sapping ambition. The government needs to lead the way by instituting merit-based promotion across the board. Competition and meritocracy are not antithetical to Japan’s working world. The problem is that university entrance examinations are currently the last time in life that most Japanese are foced to compete to get ahead.

Breaking Down Walls Beats Building Ladders
To even entertain the notion of doing less-not-more, of ceding control to unseen forces, may cause Japanese government bureaucrats to break out in a cold sweat. The notion is antithetical to their historical modus operandi. But if increased entrepreneurial activity is the objective, breaking down walls will beat building ladders every time.

The Japanese people are, by nature, creative, clever, hard-working and socially adept at forming highly competitive teams. The challenge is not to change their essential nature – but to set it free. Your comments are always welcome.

Posted by whsaito

  1. I really enjoy reading your blog posts and they are very enlightening and encouraging. I just want to add some points that stymie Japan’s drastic changes, though the points you’ve made are already comprehensive and there are very few I can contribute.

    1. Young people are waiting for changes, but never take action.

    What is deplorable about this country is most people recognize that something must be changed to overcome the smothering social condition. They recognize their working environment is far from ideal, in which the seniority system and top-down decision making are still dominant. Again, they all know what is wrong but do not take action, partly because if doing so they might lose their job or at least be in danger of losing their position in their company.

    Also, the turnout among younger generations have been quite low (but this tendency can be seen in most developed countries). In consequence, political parties adopt policies that are beneficial to the elderly and putting off the solving of serious problems for the future generations.

    What I want to point out here is young people must know that changes do not come from the top (the government) nor from outside (Restoration or occupation); change is what people make realize. In this sense, I hope people (including me) manifest their views (criticisms) of the society and take action for the better. They have no time waiting for the doomsday to come in which all the sins are measured and sent to the hell, and all the good people are saved.

    2. Japan’s intolerance against diversity

    This point has already been pointed out by you and professor Kurokawa. But I want to introduce some examples to be more concrete about the situation young people confront.

    If someone has changed jobs twice, the CV is usually recognized as flawed or tainted, i.e. not considered seriously and they have very few choices.
    I want to take up another example; one of my friends has spent two years in France after graduating from the college. Now she finds it quite difficult to find a job at a respectable company because she is thought to waste her time after graduation and to be already too old to be adopted as an employee.

    If japanese companies seriously want to change and aim at the global market, they must be more tolerant for the people with foreign experience (and the resulting age gap), but to the contrary. Japanese labor market is still rigid and people’s choice of a company is limited. (these days, a buyers’ market) As you know, there is an infamous recruitment system in which most college students start working just after graduation; this deeply impedes the diversity of japanese employees. So, I agree to your proposal of meritocracy.

    But, I am still pessimistic about the future of Japan; when we look back at history of Japan, essential changes have been caused by external influences and in critical situations. Japanese people are too patient and inclined to make compromises, even when they recognize what should be done. To me, however, this way looks like a changing of the disposition of chairs on the deck of a sinking TItanic.

    I am really powerless, but I have to keep doing what little change I can do to this country from abroad.

    (My comment is fragmentary and somewhat illogical, my apologies)


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