Restructuring wave may have eroded Japan's social fiber

Veteran French journalists who recently visited Japan gave mixed views on the changes taking place in this country as it tries to emerge from more than a decade of economic doldrums.

Francoise crouigneau (second from right) of the Paris-based Les Echos business daily discusses Japan's economy during the Feb. 18 symposium at Keidanren Kaikan in Tokyo, as co-panelists (from left) Gilles Fontaine, Eric Chol, Caroline Brun, Serge Marti and moderator Akira Kojima listen.

They agree that some of the major Japanese firms have successfully restructured operations and improved corporate governance. On the other hand, job and salary cuts have put the nation's corporate workers on a more unstable footing: Those cutbacks, coupled with tougher employment prospects for the younger generation and rapid aging of the population, appear to be destabilizing the nation's social structure.

Those were the observations of a group of senior economic journalists from French newspapers and magazines who took part in a Feb. 18 symposium organized by Keizai Koho Center at Keidanren Kaikan in Tokyo, following a series of meetings with government officials, economists, scholars and businesspeople in the country.

Francoise Crouigneau, chief editor for Europe and international news at the Les Echos business daily, said "the end of the tunnel" now appears to be on the horizon for Japan.

Crouigneau, who has watched Japan's economy over its periods of rapid growth, noted that major changes are beginning to take place. A new generation of politicians, corporate executives, economists and bureaucrats is emerging in Japan -- one that is more internationally open and more well-versed in international rules than their predecessors 10 or 20 years ago, she observed.

Recent statistics show that the Japanese economy, despite earlier hopes of a much-awaited full recovery, is losing steam, with the nation's gross domestic product shrinking at an annualized 0.5 percent in the October-December period, its third consecutive quarterly drop.

Crouigneau said that while she could not judge what these statistics mean for the Japanese economy, it is clear that Prime Minister Junichiro Koizumi needs to maintain the momentum of his reform initiatives.

Much remains to be done, including the issues of the public pension system, an inevitable hike in the consumption tax and reform of the political system itself, she told the audience.

Gilles Fontaine, a senior reporter at the corporate desk of L'Expansion magazine, observed how some major Japanese firms have altered not just their manufacturing operations but even their corporate cultures.

Fontaine quoted Toshiba Corp. Chairman Taizo Nishimuro as saying that Japan's slump during the 1990s prompted many companies to realize their weaknesses.

Toshiba, for example, "fundamentally changed its corporate culture" based on a model of the General Electric of the United States, changing its ways of communication between managers and introducing greater employee participation, he said.

Like many of their European counterparts, Japanese firms have also introduced measures to improve corporate governance and increase transparency of their operations, such as inviting outsiders to serve as part-time members of the board, releasing quarterly earnings reports and disclosing executive compensation figures, all of which made the companies closer to the American model, he noted.

Akira Kojima, chairman of the Japan Center for Economic Research who served as moderator in the symposium, cited Nissan Motor Co. President Carlos Ghosn, originally from Nissan's French parent Renault SA, as a "hero" whose turnaround of the ailing Japanese automaker became a catalyst for changes in corporate Japan.

But Fontaine noted that Ghosn carried out the revival of Nissan in tandem with the firm's Japanese managers, which demonstrates that Japanese companies themselves have the capability to restructure operations.

The L'Expansion reporter meanwhile said corporate reforms are still insufficient in certain aspects, such as the very limited number of non-Japanese managers and board members at companies here.

While there are some Japanese corporate managers who have studied at business schools in the U.S. and Europe and speak fluent English, it is not clear how these new-generation executives are seeking to run their companies, Fontaine noted.

When asked to elaborate, Fontaine said many in France tend to identify Japan with well-known Japanese brands such as Sony, Toshiba and NEC, but they know very little about the key people behind those companies. While they know a lot about the products as well as top executives of some American firms, few Japanese corporate executives have the same level of public recognition, he added.

Crouigneau of Les Echos meanwhile pointed out that while the performance of Japanese companies may have improved, the purchasing power of salaried workers has not yet recovered, leaving consumer spending still lagging as a driving engine of the economy.

Caroline Brun, editor in chief of Le Parisien daily, noted that massive corporate restructuring appears to have left Japan with an unstable social model.

The wave of changes affected not only workers who lost their jobs but also those who faced substantial pay cuts, with lifetime employment and seniority-based promotion no longer guaranteed, she told the symposium.

Coupled with the rapid aging of Japan's population, these changes have had the effect of destabilizing the nation's social structures, she added.

Brun observed that some segments of Japan's younger generation are adrift and "clueless," unable to embrace some ideal or guiding principle on which to anchor their lives. While this phenomenon is also happening in many other countries, it is particularly evident in Japan, she said.

One reason behind this phenomenon may be the inability of many university graduates to find good jobs, Brun said.

Higher education is supposed to put people on the right track in life, as academic efforts and parents' financial sacrifices would put everybody in good universities and promise them decent career. But that no longer seems to be the case here, she said.

Brun also referred to the growing ranks of so-called "freeters" -- Japanese youths who do not have regular jobs after completing education because they have either refused to seek employment or have been been rejected by the conventional labor market.

A similar situation is observed in France, but for different reasons, such as the higher unemployment rate among French youths, she said. Data in Japan showing that roughly 30 percent of young people who join major corporations quit within three years is "beyond imagination," she added.

Eric Chol, a senior economic reporter for L'Express magazine, said one positive development in corporate Japan is the growing perception of China as an economic opportunity, rather than as a threat.

Discussions with people here clearly show that China remains a major source of concern, but there has been a clear change in the attitude over the past two years, with a wider recognition of a division of labor between Japan and China, he said.

On another issue, Serge Marti, editor-in-chief of Le Monde, suggested that while Japan is justified in seeking a permanent seat of the United Nations Security Council, the nation should also consider playing greater roles for the world's financial stability.

Marti conceded that Japan's bid for the UNSC permanent seat is valid, but he wondered if it might be anachronistic for the world's second-largest economy to try to have a greater say in international diplomatic and military affairs.

He also questioned whether Japan is playing sufficient roles in the operations of the International Monetary Fund and the World Bank, whose top leadership has alternated between Americans and Europeans but never been held by a Japanese.

* A new generation is emerging among politicians, corporate executives, economists and the bureaucracy -- one that is more internationally open and more well-versed in international rules than their predecessors.

* Many crucial issues still have to be faced, including the issues of the public pension system, a hike in the consumption tax and political reforms.

* Nissan Motor chief Carlos Ghosn carried out the revival of the carmaker in tandem with Japanese managers, which demonstrates that Japanese have the capability to restructure corporate operations.

* While Japanese brands are popular, the executives behind the companies that make them are not well known, in contrast to many American top executives.

* Some youths are clueless, unable to embrace some ideal or guiding principle on which to anchor their lives.