Bad Economic Times Shock Japan
TOKYO — ALMOST a year ago, Sony Corporation chairman Akio Morita warned Japan's business leaders to change their hyper-competitive ways by giving more benefits to employees and shareholders, the way Western companies do.
But ever since that bit of radical advice was offered by Japan's most famous businessman, a deep gloom has settled into Japanese corporations, created by the longest economic downturn in postwar history and a paralysis in the nation's politics that has blocked pump-priming measures.
"We Japanese need to change," Mr. Morita says. But as to what exactly is needed to revitalize the economy, he says, "I'm not sure what is a good measure."
For Japanese companies, the present economic situation is unique. Capital costs have risen to Western levels, exchange rates have become unfavorable for exporters, and the land and stock market price bubble has popped. The slump has lasted 20 months.
"I am in the worst [hit] industry," says Morita about manufacturers of electronic goods. Even Sony workers, he notes, "have no confidence in the future."
For the first time since Sony's labor union began to survey its members about how they plan to use their twice-yearly bonuses, workers say their top priority is savings rather than spending.
One hope for economic revival, says Morita, is for the electronics industry to come up with innovative products that will create new demand, as the Sony Walkman did over a decade ago.
Morita's proposals for fundamental changes in Japanese business practices, while widely debated, have not motivated Japanese executives into structural shifts. Many companies still have a cushion of profits from the late 1980s boom.
During a slow-growth economy, "it's time to just stay still," says Kunio Nishimura, a planning manager for Mitsubishi Materials Corporation.
"Up to now, we had a myth ... that the Japanese economy would have unlimited growth," says Toru Kusukawa, chairman of Fuji Research Institute Corporation. "But now this myth is collapsing."
"We said that we were perfect," Mr. Kusukawa says. "Now it happens that we are like one of you [non-Japanese]. Now we are coming to some sobering realizations."
JAPANESE managers are not well equipped to bring about a retrenchment in their companies after decades of expansion, Kusukawa says. The auto industry is the sector to watch for any possible structural changes, he says. November vehicle sales dropped 12.3 percent from a year earlier, the Japan Automobile Dealers Association said. So far, however, the industry leader, Toyota, has yet to make fundamental shifts in strategy.
A few companies have paid some top executives to stay home on reduced salary. Almost every big firm is hanging on to its workers, while rotating idle workers to other divisions, reducing overtime, and hiring fewer graduates. Official unemployment has only risen a bit to 2.2 percent.
Morita defends lifetime employment, even when a company faces tough times. "We have to keep our people. When trouble happens, all the people from the top to the bottom work hard to find some solution," he says. "Everyone is willing to share the pain." Layoffs might rupture Japanese corporate culture.
One unique Japanese business practice that will not change, says Kusukawa, is the "stability" of shareholders, who accept low dividends. The controlling interests in big Japanese firms are usually held by banks and related firms that prefer long-term growth and market share.
In late November, the Paris-based Organization for Economic Cooperation and Development (OECD) warned Japan that it might not return to a 4-plus percent growth without "further substantial structural change," including more liberalization of markets. The OECD report predicts growth in real gross domestic product will rise to 2.5 percent next year from 1.8 percent in 1992. One constraint is that many nations are moving to restrict Japanese imports due to the rising size of Japan's trade surplus. The OECD says the surplus could rise to $152 billion in 1993, a big jump from $103 billion in 1990.