Small-Business Owner Learns the Hard Way: 'Japan Has to Change'
TOKYO — New things hurt like a broken promise.
Masatoshi Nakajima had always relied on the unspoken pledge of Japanese commerce - that relationships are among the most important criteria for making deals. Ties between borrower and bank, manager and employee, have long oiled the works of the world's second-largest economy. Close business alliances helped Japan rebuild after World War II and for decades kept it humming along at optimum performance.
Until now, as Mr. Nakajima has discovered. When he needed an advance for his fish-importing business, the bank used to forward him $10,000 with few questions asked. They knew him and that was enough. But last October, the bank suddenly tightened the spigot. His source of credit cut, Nakajima struggled until March, then filed for bankruptcy. The breakdown in his relationship with the bank meant ruptured ties with his workers: Like their boss, all 17 were suddenly out of a job.
After nearly a decade of stagnation, Japan's economic system - a unique combination of capitalism and state control that has produced one of the growth miracles of the past half century - is crumbling under its own weight. This has prompted a lot of hand-wringing, but beneath the eye-catching upheaval, shifts are taking place that suggest the shape of Japan's future.
Nakajima embodies many of them. Reared within the old system and forever transformed by the way it failed him, he is now a fervent believer in the need for change.
"Japan is at a turning point," he says, sitting cross-legged on the floor of his small living room. "You can't just think of nice relationships anymore. People worry that means Japan will be dominated by [Westerners'] way of thinking. But people can't go on like this. The Japanese have to change."
There is, of course, a lot of time to think about all this these days. Nakajima has been home since April, filling the hours by reading two books a day. In 23 years of marriage, this is the first time he's been home all day long, he says with a rueful smile.
His wife, kneeling Japanese-style at the edge of the room, hears this and quickly looks down at her hands. They haven't talked much about the bankruptcy, and she listens silently as Nakajima tells his story. He still looks the part of a businessman, with his wavy salt-and-pepper hair, white button-down shirt, and steel-framed glasses. Only his casual khakis and bare feet signal otherwise.
The adjustment has been hard. "This has been shameful, but in many ways I felt more shame about the people I let down in my business," he says haltingly, his face flushed with emotion. "It was really difficult."
The Nakajimas' house, in a semirural Tokyo suburb, is full of work mementos. A Maersk Shipping calendar hangs on the wall, opposite a rack of souvenir spoons from business trips to Alaska, Iceland, and elsewhere. "I didn't know how to face this situation," Nakajima says, adding that he understands why other men in his position have chosen to kill themselves.
Support from friends and family pulled him through, and small economies keep his family going. His sisters send rice twice a month, and his wife shops and cooks more frugally. His three children - a teenager, a college student, and a recent university graduate - are supportive in their own quiet way. "My kids used to complain about dinner sometimes," he says. "Now none of them complain about what they eat."
Record bankruptcies and their causes
Bankruptcies are piling up so quickly here that statisticians have stopped using superlatives to describe them: The records just get broken the next month. More businesses went under in March, when Nakajima closed shop, than during any previous month since 1985. By June, bankruptcies were increasing at their fastest pace since the end of World War II.
There are many reasons for this country's economic stagnation, but the major one is financial. Japan's banks went on a careless lending spree in the 1980s that has caught up with them. They've had to admit to at least $600 billion in bad debt and cut back on loans, particularly to small firms. The subsequent business failures have fed an unemployment rate of 4.3 percent, the highest since World War II, deeply worrying a nation grown accustomed to lifelong employment.
But some critics say job security is an overblown myth. "The economy made it possible during the high-growth years, the 1950s to '70s," says economist Haruo Shimada of Tokyo's Keio University. "An entire generation grew up believing in it. It was a unique period, but the pie isn't that big anymore."
He learns to break the old rules
Nakajima would agree, and if he returns to the fish business, he says he'll do things differently. He'll avoid traditional, unsophisticated fish workers in favor of English speakers who understand computers and exchange rates. He'll pay on merit, not seniority, and give raises the same way. In other words, he'd break all the rules of modern Japan.
Nakajima put in 17-hour days at his firm, Miyoshi Trading, buying king crab, salmon, whelk, and lobster and reselling them to retailers at Tokyo's Tsukiji market, the world's largest fish emporium. The firm was on the third tier of a multilayered distribution system that keeps competitors out and prices artificially high. But at Tsukiji and a few other places, deregulation is cutting out middlemen like Nakajima and pushing prices lower.
"Distribution was simplified, that made things harder for us," Nakajima says. He found himself fighting harder for market share just as credit dried up. His Japanese bank had provided most of Miyoshi's funding, but he also got loans from an American bank in Seattle. Having seen the difference between the two, Nakajima says he understands why Japanese institutions are in trouble.
"The US bank listened to us much more and made us submit reports and business plans. They [were] more of a partner," he remembers. "In Japan, they didn't ask for a thorough business plan. It was all ambiguous onegai borrowing," he says, using a word that translates as "please" but also means prayer and entreaty.
"We'd go and bow and bow and bow, and they'd give us money," he says. He calls American banks "more professional," and that's what he'd like to see here, even at the cost of traditional business values. "The old Japanese system of ambiguity has to end. People should be responsible for themselves."
This summer Nakajima visited northern Japan to see his father, a Buddhist priest, and think about the future - part of his own bid to be responsible.
Somehow, despite all the difficulty, he says he can now see that these months have held hidden blessings. "For the first time, I appreciate the beauty of cherry blossoms," he says.
His wife speaks up then for the first time all afternoon, in agreement and support. "It's been a good time to look back and reflect," she says.