The purpose of this dissertation is to study the effects of the Japanese culture over the economy of the country. The work will illustrate the positive and negative culture contributions to the Japanese economy, demonstrating also how economy and culture can coexist and work together for the national wealth. The essay is a part of the course “Economie et culture: l’autre versant de la mondialisation” held by Prof. Pascal Morand and Cristina Barrios at ESCP Europe, Paris campus.
The following essay is not meant to cover all the characteristics of the Japanese culture and/or Japanese economy, but it will guide the reader through the most relevant aspects.
The first part is focused on the concept of Individualism, opposed to Collectivism that characterized European and American culture, and on the importance of age: seniority in fact affects and influences the relationship between people and it is the base for the introduction of the hierarchic system, one of the pillars of the Japanese culture.
The second part of the essay covers Japanese economy and management, highlighting how Japanese economy is pursuing an agenda of broad economic deregulation, where lifetime employment and seniority system are no longer general rules and the banking system is getting closer to the international financial markets.
Moving to Japanese management, the essay illustrates the system of promotion and reward, whereby an important criterion is seniority. Seniority is determined by the year in which an employee’s class enters the company: therefore we are going to show how Japanese career progression is highly predictable, regulated, and automatic, and the compensation for young workers is quite low. Compensation consists of a wide range of tangible and intangible benefits, including housing assistance, inexpensive vacations, good recreational facilities, and, most important, the availability of low-cost loans for such expenses as housing and a new car.
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Having analysed the previous main characteristics of Japanese economy and culture, in the last part of the essay, we have chosen to present an empirical example of a successful Japanese firm: we introduce the Toyota case. Toyota is the best known Japanese firm and it is widely recognised for its management philosophy, reflected into the “Lean Manufacturing” and the “Just In Time” production.
Japanese Culture – Key aspects
Japanese are one of the most homogenous nations in the world being isolated by both geography and choice for many years. There are relatively few linguistic differences among different parts of the country; peoples’ lifestyles are quite similar and the degree to which rich people and poor people are economically differentiated is much less than Europeans are familiar with. Moreover Japanese are ethnically homogeneous, since there are no real foreign populations in Japan: some 98,5% of the residents of Japan are ethnic Japanese and the remainder are mostly Koreans and Chinese. Marrying a foreigner has always been virtually taboo and, although it has started to become a little bit more respectable, it is still not encouraged.
Japan possesses a long and rich cultural history; although many of the basic elements originated abroad, especially in China, they are extremely different from the European and the American ones. There are some well-know peculiar Japanese culture aspects such as origami, ikebana, tea ceremony, martial arts, mangas etc, but most of the keys aspects of this ancient culture are still hidden or at least Europeans are not familiar with.
Even if Japanese people usually regard their own culture as unique, actually it is surprisingly eclectic and open to outside influences: the written language comes from China and the Buddhist religion from Korea; the Japanese language itself is full of English words which are generally liked and used widely.
Despite the general homogeneity, there are some minor regional differences that it worth to analyse; in particular the Eastern areas facing the Pacific Ocean are seen as more outward looking when compared with the parts facing the Sea of Japan. Another important difference exists between Kansai (the old traditional area that includes Kyoto and Osaka) and Kanto, the Tokyo area, which represents modern Japan: accents, art and cooking styles all differ.
The consciousness of being Japanese is part of a strong nationalism even if this feeling has been tapped by Japanese firms which for years successfully sold the idea that import goods are generally inferior, are not suited to local habits or lifestyles, or might even be dangerous to health. The outcome of this strange idea is, for instance, that many Japanese believed that they cannot eat imported rice without suffering indigestion.
Similarly, consumers often used to prefer to buy Japanese products even if they were more expensive in order to demonstrate their nationalism. This was one of the several reasons why foreign firms found it difficult to penetrate the Japanese market. But in 1991 the financial recession that Japan had to face brought a high rate of unemployment and people began to seek cheaper products even if they were imported. This phenomenon allowed foreign firms to access Japanese market more and American cash-and-carry stores opened.
Individualism vs. Collectivism
Extremely interesting in the Japanese culture is the role of the individual in the society: in Japan, each person is expected to conform to the society’s norms, though there are exceptions with much of the radical younger generation and a few individuals that intentionally mock conformity. It is widely held that it is dangerous for an individual to distance himself or herself from the group: one should do what the others are doing and not buck this trend. Japan is a collectivist society where group needs and wants are placed above those of the individual and Japanese people tend to be other-directed (Ritts, 2000).
People are expected to avoid any action that would disrupt the harmony of the group called wa. The effort to keep harmony increases the level of hidden stress and there are usually strong undercurrents and rumours circulating behind the scenes. To help recover from the stress of having to constantly behave correctly, Japanese adult males often enjoy reading thick manga comics, some of which feature a hero totally unconstrained by any social mores and contain sex, sadism and violence; some Japanese television programs also involve extreme violence and probably serve a similar function of cathartic release (Kevin Buncknall, 2006).
Japanese culture discourages individualism in contrast to the European and American cultures that embrace it. In European schools, for instance, students are valued and frequently receive better grades if they participate to the lesson, even if their participation is unnecessary. On the contrary, Japanese society views such contributions as rude and disruptive, and active participators might very possibly receive lower grades. Japanese believe that the students should listen to the teachers, as they are the “source of knowledge”.
Individualism versus collectivism is a peculiar aspect in both the Japanese society and the culture, and foreigners have to consider these differences in order to be respectful.
As a matter of fact, assimilating to the European society may be difficult for someone of Japanese heritage because of such divergent thought patterns. Several other traditional values, a part from individualism/collectivism, that may make assimilating to European society difficult for someone with Asian heritage include: filial piety, shame as a method of reinforcing expectations and proper behaviour, self-control, emphasis on consensus, fatalism, and inconspicuousness (Ho, 1992).
The importance of age
Age, in the Japanese culture, is associated with many positive features, as it denotes wisdom, authority, and the freedom to be flexible and creative.
A traditional Japanese ritual is the kankrei. The kankrei recognizes the release of an older person from the responsibility of middle age and recognizes new freedoms and competencies. A national holiday, known as Respect-the-Aged Day (September 15), has been institutionalized to celebrate it. Grandparents are treated very respectfully and it is an honour for them to look after the baby while the parents are busy with work.
Cultural values play a role in the care of the elderly. The Confucian emphasis on filial piety, where all family members should respect and obey the elderly family members, contributes to how the elderly are both viewed and treated (Holmes & Holmes, 1995). However, the major function for the Japanese older adults is to be the senior advisors for family problems (Frazier & Glascock, 1994).
Even if elderly is view as an asset to the society, it is estimated that aging in Japan may become a problem, because, while the numbers of women in the paid work force is increasing, fertility is low, and the elderly population is growing.
It is certainly incorrect to believe that Japanese do not have negative stereotypes and prejudices with regard to the elderly. In fact, these stereotypes do exist and Japanese hold many of the same views that Europeans have about the elderly e.g., elderly are a burden and stubborn
Hone is the hidden, actual feelings that one may have about the elderly, but is often masked by rituals of respect (Koyano, 1989). Retirement is sometimes far from rewarding; retired corporate officials are sometimes referred to as soodaigomi, “a big heap of trash” and are not welcome at the office (Holmes & Holmes, 1995).
The evolution of the “Family System”
Cultural values played also an important role in the government views towards family.
From the beginning of the industrial era in the late 19th century, the government instituted a family system that registered individuals in an official registry and family members were required by the law to live in a multigenerational household and when daughters married out they had establish their own household. The care of the aging family fell under the purvey of the sons, typically the eldest son, and ultimately the daughter-in-laws (Harris & Long, 1993).
After World War II a new family system was established based on free spouse choice and equal inheritance. The responsibility of elder care still lies with the children and frequently the elderly live with one of their children (Harris & Long, 1993).
Modernization has lead to a decrease in family based society, since the society has became more individualistic and the norms of filial care for the elderly have weakened; moreover, there is an urban-rural difference in viewing filial care, with rural women viewing it is more favourably than with urban women.
Japanese relationships are described by the on: a concept that permeates Japanese society and that basically represents the norm of reciprocity. On refers to a favour or benevolence granted by person A to person B and the resultant debt that person B owes person A. Everyone owes a limitless on to their parents for previous care and essentially what they have become (O’Leary, 1993). Thus, children care for their aging parents.
The concept of Ie is also present in Japanese society. Ie represents the embodiment of a direct genealogical continuity of the blood line. It symbolizes a continuing family entity. Thus, there is preservation of the family, maintenance of the ancestral graves, and caring for the elderly (O’Leary, 1993).
Youngster Japanese
Quite often young Japanese are sent to English-speaking countries like America or England to study. In Japan they are subject to rigid expectations about their behaviour and need to conform while abroad they sometimes express a rebellious attitude.
A popular topic of conversation among Japanese adults is the behaviour of young people, particularly their questioning of traditional values such as group loyalty and conformity; as a matter of fact, a small but increasing number of younger Japanese are beginning to act independently.
Even the identification of self with work has weakened a little and a few males are spending more time at home with the wife and children and they will even take more of their holiday entitlement to do this. Many older people worry about such changes in youth and the challenge to traditional values. Some of the elderly condemn the new generation in bitter terms, believing that they are rejecting an essential part of what is seen as “being Japanese”. This is frequently felt to be a disease imported from the West.
The increasing numbers of Japanese studying abroad may eventually speed up the pace of change, including the adoption of new ideas and a more creative approach in business, but so far the young tend to be frustrated by the system and are often eventually forced back into more traditional modes of behaviour if they wish to advance their careers.
One significant feature is that a small number of intelligent, well-educated youngsters are no longer following the traditional path of joining a top company and working their way up; instead, they are choosing to set up their own businesses, particularly in the arts and creative areas. Such people are often the more successful youngsters or at least those who are trying hard.
Education
The Confucian approach to education involves much rote learning, discipline, and emphasis on conformity. It often discourages questioning and creative thinking. This is a problem for any modern economy and the Japanese are well aware that they could do better here.
Education is seen as serving a social purpose, such as building a national identity, and not as a way of helping individuals to develop their full potential; as a consequence, rigid central control exists, even down to the level of the detailed content of the textbooks used in all schools.
There is a fiercely competitive struggle among children to succeed and climb the educational ladder to the finest universities. The child is under pressure all the way through, from teachers, peer group and parents, especially the mother. A degree from a well-regarded university meant a guaranteed job for life, in either a large company or the public service. The recession in the 1990s weakened the likelihood of this, but parental perception has not changed; the strong pressure to force their child to climb the ladder continues.
Hierarchy
The hierarchy is a fundamental characteristic in Japan today-life and has important implication in both Japanese culture and economy.
One of the things about Japanese social relations that foreigners frequently comment on is the character of interaction between people. For example, Japan is widely regarded as a fairly hierarchical society. People are expected to understand and know their social standing vis-à-vis the people that they’re interacting with.
A pair of Japanese businessmen exchanging name cards will spend a great deal of time studying, very carefully, each other’s name cards, not simply to know the name of the person, but also for clues of their social status. Do they work for a more important company or a less important company? Are they from a major city, or are they from the countryside? From their job title can you determine whether they’re sort of senior to you or junior to you? All these things are important features in determining how you can interact with one another.
One of the most classic examples of hierarchy can be spotted during a Japanese polite conversation. Most polite conversations include degrees of deference, respect and distance, therefore, when talking to someone, you have to assume that either you are from a superior social status or from an inferior one. But, if you get the assumption wrong, you can offend the person you’re talking to by sounding superior to them when you should be more deferential, or sounding insincerely deferential when it’s clear that you are the senior person in this conversation. This is the reason why people are concerned about establishing a hierarchy, even on the first meeting.
Japanese Economy
“For the first time, economics is coming to Japan.”
What is economics? Economics is the allocation of scarce resources. In Japan until 1990, there were never any real scarcities. Labour force was growing, land prices were going up, economy was growing at 5 to 7 percent on a nominal basis. That has come to an end, and as a result Japan is forced to restructure and deregulate its entire economic system. (Koll. J, 2005)
Following the oil crises of 1973 and 1979 the Japanese industries came out of nowhere to take the world market by storm. At the time, much of Japan’s success in penetrating the world markets was credited to the actions of the Japanese government’s. (Porter, Takeuchi, Hirotaka, Sakakibara and Markio, 2002).
Today, however, the Japanese economy is pursuing an agenda of broad economic deregulation, where lifetime employment and seniority system are no longer general rules, keiretsu are dissolving themselves, especially in automobile and electronics industries, and the banking system is getting closer to the international financial markets. The central issue today has become:
“To what extend Japan will accept the “Anglo-American” capitalism model?”.
It cannot be denied that unique economic institutions and policies, such as the keiretsu, have contributed to the Japanese economic development during the era of catching up with the West.
However, facing international pressure and globalization, the mood has been changed. By 2005, more than sixty major companies including Sony, Toyota, Toshiba, Hitachi and Nomura Holdings had adopted the American-type system and even among companies that have not opted for a full American-type system, there seems to be some tendency toward hiring a greater number of foreign managers.
Renault is an example: the French company bought 37% of Japan troubled Nissan, at that time in which the Nissan’s president was Yoshikazu Hanawa. However after little time Carlos Ghosn, CEO of Renault, became the new CEO.
Another example of the effects of deregulation is the boom in cellular telephones occurred in 1998: the number of cellular telephone subscribers rose explosively from 2.1 million to 60 million in the seven years from 1993 to 2000. (Lincoln, 2001).
In Japan, it is the Ministry of Finance who strictly controlled the banking industry through formal, or informal, directives control over the financial system, imposing Japanese banks to provide artificially low interest rates to selected firms falls in vertical keiretsu and frequently bailout the loans to overextended enterprises well beyond the company’s capacity to repay and often beyond their net worth.
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This vicious cycle was going on until economic recession hit into the heart of Japanese economy. Now, staying afloat in global era, the Japanese financial industry has been undergoing a large-scale consolidation; banks are therefore moving to take advantage of economies of scale and scope, through improve cost competitiveness, price leadership, and strengthen capital to withstand diverse risks and expand revenue opportunities by cross-selling. (Nishikawa, 2001).
In conclusion, in order to answer to our main question “To what extend Japan will accept the Anglo-American capitalism model?”, we can say that the Japanese’s capitalistic system is still far away from the “Anglo – American” standard. The reason is that Japanese culture considerably differs due to history, culture, and social framework: therefore, the capitalism system that Japan adopts is a hybrid one.
Japanese Management
The culture of Japanese management is generally limited to Japan’s large corporations. These flagships of the Japanese economy provide their workers with excellent salaries and working conditions and secure employment.
These companies and their employees represent the business elite of Japan: qualification for employment is limited to the men and the few women who graduate from the top thirty colleges and universities in Japan.
Placement and advancement of Japanese workers is heavily based on educational background. The students, who are not admitted to the most highly rated colleges, rarely have the chance to work for a large company; instead, they have to seek positions in small and medium-sized firms that cannot offer comparable benefits and prestige. The quality of one’s education and, more important, the college attended, play a decisive roles in a person’s career.
The problem is that few Japanese attend graduate school, and graduate training in business per se is rare: there are only a few business school programs in Japan and companies that provide their own training show a strong preference for young men who can be trained in the company way; in fact, the interest in a person whose attitudes and work habits are shaped outside the company is very low.
When young students are graduating from college, they start searching for a suitable employer, but this process is not simple at all; there are only few positions available in the best government ministries, and quite often the entry into a good firm is determined by a competitive examination, even if the situation is becoming less competitive, as the number of candidates is gradually decreasing.
Note that the Japanese strive for total professionalism in whatever they do. Any task is taken seriously and is normally done with careful dedication. Employees at all levels are expected to seek perfection and most try to do so.
The general attitude is that there is only one way of doing a job properly and it will be followed. Zen Buddhism encourages this view, seeing the world in terms of either right or wrong.
The high quality achieved in products such as motorcars, cameras, and TV sets is a manifestation of this dedicated approach.
Training and education are highly valued as a quest for professionalism and perfection.
Companies expect their workers to voluntarily give up their evenings or part of the weekend to work or engage in work-related social activities and hardly any staff members seem to take all of their allotted annual holidays; in 2003, the Japanese worked longer hours than any other developed nation (Kevin Buncknall, 2006).
Since land is expensive, observing senior executives sharing an office is quite common. However, they will usually only share with someone of the same status; the all-pervasive hierarchical view of society prevents those above dealing equally with those below. It is common to see several vice-presidents in one tiny area, whereas in the West, each would probably insist on having his or her own rather splendid office. This sharing of working space has the benefit that people know what their colleagues are doing and information passes quickly and easily between people (Kevin Buncknall, 2006).
Life-time employment
One of the prominent features of Japanese management is the practice of permanent employment (shushin koyo).
Lifetime employment traced its origins to corporate welfares that emerged during the Interwar period; it is a product of dynamic interactions among labour, management, and government in response to changing environment, further reinforced by the formation of labour laws, state welfare system, and social norms in contrast to American business practices.
As a result, today’s Japanese lifetime employment is deeply embedded into complementary practices and institutions, ensuing its resilience and stability. The shift from spot labour markets to long-term employment was initially driven by efficiency considerations, whereby achieving greater productivity through higher human capital, it produced benefits to management in the form of profits and greater employment security. (Hiroshi, 2002). Moreover, following that the most violent labour disputes in Japanese history took place between 1949 and 1954, involving major companies, such as Toshiba, Hitachi, Toyota, and Nissan, where employers learned that such disputes could provoke high performance costs, they decided, through a collective agreement, to implement the employment of the life time (Kazuo, 1992).
Permanent employment covers the minority of the work force that work for major companies. Management trainees, traditionally nearly all of whom were men, are recruited directly from colleges when they graduate in the late winter and, if they survive a six-month probationary period within the company, they are expected to stay with the companies for their entire working career; employees are not dismissed thereafter on any grounds, except for serious breaches of ethics.
Permanent employees are hired as generalists, not as specialists for specific positions. A new worker is not hired because of any special skill or experience, but what are closely examined are the individual’s intelligence, educational background, and personal attitudes and attributes. When entering a Japanese corporation, the new employee will be trained from six to twelve months in each of the firm’s major offices or divisions; thus, within few years, the employees will know every facet of company operations and knowledge allowing companies to be more productive.
Gender roles
Although the Japanese Constitution guarantees equality in gender roles, this does not in fact exist. Japanese males do not regard women as equals and most would subscribe to the view that “a woman’s place is home”.
In Japanese companies, women are known as “Office Ladies”. Their main function is to be young, decorative and well dressed in order to brighten up the men’s workday. In the evening they are expected to engage in mindless and frivolous entertainment, while at work they are only entrusted with minor tasks like making tea for the men and doing the photocopying.
It is assumed that women will marry and leave work by their mid-twenties and, in many companies, a woman must resign if she is getting married. It is difficult for the intelligent and earnest-minded professional woman to be taken seriously; many of them have to serve a lengthy period of time undertaking mindless repetitive tasks before they can start to rise in their career path. In order to succeed, women have to be a lot better than the men at their level.
In the business world, male networks are extensive and bonding activities are commonplace, normally being held after work hours or at the weekend. They include attending various sporting activities and going out for an evening’s eating and drinking. Women have no place here: this is a hidden but powerful brake on their advancement.
Men, on the other hand, are expected to be married by 35 years of age. The function of the male is to earn sufficient money to take care of his family, which involves working hard, spending long hours at the company, and gaining promotion. There is little feeling that he should be at home, share in family life, help raise the children, or even love his wife, although he is expected to sire children. Once that has been achieved, he is largely perceived as a mere breadwinner and status-earner for the family. In general, the Japanese males are not really comfortable with modern Western views about the position and progress of women, nor the career-mindedness of modern Western women; to many it seems both alien and threatening.
Such attitudes towards women are still the most common, although there have been some relaxation and changes since the 1980s. A shortage of skilled labour is slowly eroding the traditional view that women have to resign on marriage and especially if they have a child, and a small, but growing, number of women are developing a career path. Younger Japanese in particular are changing their attitudes and becoming less “Japanese” in their views about the proper roles of husband and wife but they can still find it difficult to alter things. Over half of Japanese women are in the work force, but in the main they still occupy the lower positions.
Reward system
Another unique aspect of Japanese management is the system of promotion and reward, whereby an important criterion is seniority. Seniority is determined by the year in which an employee’s class enters the company. Career progression is highly predictable, regulated, and automatic, and the compensation for young workers is quite low, but they accept a low pay with the understanding that their pay will increase in regular increments and be quite high by retirement. Compensation consists of a wide range of tangible and intangible benefits, including housing assistance, inexpensive vacations, good recreational facilities, and, most important, the availability of low-cost loans for such expenses as housing and a new car. Moreover, regular pay is often augmented by generous semi-annual bonuses.
The members of the same graduating class usually start with similar salaries and, each year, salary increases and promotions are generally uniform; the purpose is to maintain harmony and avoid stress and jealousy within the group.
Individual evaluation, however, does occur. Early in workers’ careers (by the age of thirty) distinctions are made in pay and job assignments and during the latter part of workers’ careers, another distinction takes place, as only the best workers are selected for accelerated advancement into upper management.
Those employees who fail to advance are forced to retire from the company in their mid-to-late fifties. Retirement, however, does not necessarily mean a life of leisure; in fact poor pension benefits and modest social security means that many people have to continue working after retiring from a life career. Many management retirees work for the smaller subsidiaries of large companies or within the large company itself, but at substantially lower salaries.
A few major corporations in the late 1980s were conducting experiments with variations of permanent employment and automatic promotion; they were rewarding harder work and higher production with higher raises and more rapid promotions. Nevertheless, most corporations retained the more traditional forms of hiring and advancement.
Japanese managerial style and decision making in large companies emphasizes the flow of information and initiative from the bottom up, making top management a facilitator rather than the source of authority, while middle management is both the impetus for and the shaper of policy. Consensus is stressed as a way of arriving at decisions, and close attention is paid to workers’ well-being.
Rather than serve as an important decision maker, the ranking officer of a company has the responsibility of maintaining harmony so that employees can work together and a Japanese CEO is considered as a consensus builder.
Seniority System
The system of seniority wages was originally based on valuable experiences and skills and on the assumption that living expenses would be greater for senior employees; the system became then firmly established and widespread in the period of sharp inflation. However, this structure has being challenged by younger managers, including the Japanese transnational firms and an increasing numbers of shinjinrui, the new breed of young people, who reject the traditional system of seniority wage and promotion system.
A recent survey conducted by a Japan’s business newspaper, found that 80% of top managers at 450 major Japanese corporations wanted the seniority promotion system abolished.
“Japanese management philosophy cannot just continue as it has for the past 40 years” says Shotaro Watanabe, vice-president of Kao Co
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