Are you really keeping up with the times???
It seems that the partnership talks between Honda and Nissan have fallen through… Honda appears to have lost patience because Nissan was moving too slowly!
In any case, Japan takes three to five times longer than new economy companies. It has a terrifying lack of a sense of the times.
It also looks like Sony might end up being Japan’s only flat-screen TV manufacturer. There are even reports that Panasonic may sell off its TV business. Japanese TVs are just like Japanese BEVs—two to three times worse in terms of cost performance.
Let’s take a look back at the 30 years during which Japan retreated from its position at the top of the world—it has been a history of decline.
The 30-Year Decline of Japan
In 1989, Japanese companies had an overwhelming presence in the global market capitalization rankings. Out of the top 30 companies, 21—70%—were Japanese, leading the world economy. However, by 2020, Japanese companies had completely disappeared from that ranking. What happened during these 30 years?
Sluggish Economic Growth and Widening Gaps with Other Countries
The 30 years of the Heisei era were a period of economic stagnation often referred to as the "Lost 30 Years" for Japan. Meanwhile, other countries achieved rapid growth. The United States and China, in particular, used innovation and financial power to drive the global economy. GDP data clearly illustrates this gap.
In 1995, Japan’s GDP was $5.4 trillion, maintaining its position as the world’s second-largest economy. However, by 2010, China had surpassed Japan, pushing it down to third place. By 2019, the U.S. had reached $21.4 trillion, China $14.3 trillion, while Japan lagged far behind at $5 trillion. Over the past 25 years, Japan’s GDP has barely grown—in fact, in dollar terms, it has significantly shrunk.
In 2024, Japan's nominal GDP (in dollar terms) is estimated at approximately $4.07 trillion, down from about $4.2198 trillion in 2023.
Several factors have contributed to this stagnation:
1. The Bubble Collapse and the Banking Crisis
The early 1990s bubble collapse had a severe impact on the Japanese economy. Real estate prices and stock values plummeted, leaving many companies and financial institutions burdened with bad debts. Although major banks underwent mergers and restructuring, the process took too long, prolonging economic stagnation. During this time, financial institutions failed to take risks or support innovation as they should have.
2. A Conservative Corporate Culture and Lack of Innovation
While Japanese companies take pride in their technological prowess and diligence, there are fundamental issues that hinder innovation:
Decades of failed economic policies
Since the bubble burst, Japan has tried to stimulate the economy through massive fiscal spending and lower interest rates (including negative interest rates) for over 30 years—only to fail continuously. Japan is full of economists who don’t even understand basic principles. Throughout history, fiscal investment has only been a temporary stimulant. Economic growth is 100% impossible without innovation—a fundamental concept in economics. Yet, many graduates from Japan’s top universities don’t even grasp this basic truth.
It’s like AI making mistakes in simple addition and subtraction—failing at the easiest tasks.
Fear of failure
Japan has very few startups or venture companies. New challenges are seen as risks rather than opportunities. This prevents the trial-and-error cycles that are essential for innovation, as seen in Silicon Valley.
Rigid, siloed organizational structures
Many Japanese companies have vertically segmented organizational structures, leading to poor collaboration between departments. This makes it difficult to integrate different fields of knowledge and create new value.
3. Galápagos Syndrome: A Failure to Compete in Global Markets
Japanese products and services tend to be tailored specifically for the domestic market. A prime example is the "Galápagos phone" (Garakei)—phones loaded with features that were popular in Japan but deemed excessive abroad, ultimately causing Japan to lose its international competitiveness. This tendency to focus only on domestic success while neglecting global market strategies has been a major factor in stagnation.
4. Delays in Education and Talent Development
In Silicon Valley, Stanford University plays a central role in fostering industry-academia collaboration, producing a wealth of innovative talent. Meanwhile, Japan’s education system is criticized for its uniformity and lack of emphasis on critical thinking and creativity. Furthermore, Japan lags in developing talent with the advanced digital skills needed to compete globally.
Why Hope Alone Won’t Fix This
Japan still possesses high technological capabilities and talented individuals. However, that alone is not enough to regain its top position on the global stage. A combination of policy missteps after the bubble burst, structural rigidity in the economy, conservative corporate culture, and educational shortcomings have all contributed to Japan’s decline.
To move forward, Japan must face these issues head-on and implement fundamental reforms. Specific measures include:
Deregulation and fostering an environment that encourages risk-taking
Japan must support new businesses and startups while cultivating a culture that values learning from failure.
Developing strategies with a global market perspective
Companies must look beyond the domestic market and create products and services that can compete internationally.
Reforming education and talent development
Japan needs to shift its education system toward digital skills, critical thinking, and innovation.
Final Thoughts
Japan’s 30 years of stagnation weren’t just due to bad luck or the natural flow of time. The delayed response to the bubble burst, conservative business culture, and issues in education and talent development have all compounded into the current situation.
Moving forward, Japan needs to fundamentally rethink its approach. The most important thing is to question everything from the ground up.
Are your common sense, your determination, and your instincts in line with the times?