© michael smitka 2007 changing japan - models and examples - michael smitka washington and lee...

© Michael Smitka 2007

Changing Japan- Models and Examples -

Michael SmitkaWashington and Lee University

Late of

Chiba University Law & Economics Faculty

千葉大学法経済学部フルブライト研究員

As a Fulbright Researcher

September 28, 2007


Fulbright Project• Book on modern Japanese economy

– For Japan, little that is accessible• Economists only talk among themselves within

subdisciplinary boxes– Non-macroeconometricians can’t read most of it– Implicit and sometimes explicit that all that matters is

monetary policy and (less central) bank regulation

• Some journalism, quirks and individual firms

– Bottom line: “lost decade” in a weird country


Two underlying themes

• Demographics and its impact– Japan in the vanguard of aging– That matters for macro performance, too!

• Lots of change despite slow growth– Micro change of all sorts– Today’s Japan is very different from received image

plus

• Economics helpful!– “Culture” fundamentally a non-explanation

» Or even a denial that explanation is possible


Issues

– Finding relevant examples– Ones non-economists might find interesting!

– Finding theories– “Change” is a hard subject!

– Countering “culturalist” views of Japan– Without turning off readers for whom that is their

starting point, that Japan is “different”

– Keeping the “forest” in view


Theories of change• “Normal” change

– Incremental response to environment

• Policy-induced change– Shifts in regulation (not really “deregulation”!)

• Technology-induced change– For example, 78 & 45 & 331/3

• “Induced” change– Of institutions and “fixed” behavior patterns

• “Revolutions”– Induced change plus a new ideology– Maybe not relevant this time around?


Normal change

• Incremental change in response• Prices• Incomes

– But direction not rate of change

• Lots of comparative examples, accumulated social science knowledge– Food & Booze:

• TODAY: Eggs and Rice, briefly (alcohol to follow…)

– Cars– Sex (well, marriage and children)– Schooling


Policies and Changes• Policies change all the time

– Why I will leave to others– Impact of policies often unforeseen

• at least by bureaucrats, politicians and voters

• Examples– Urban development policy and “sprawl”

• TODAY: post-WWII land reform; “sprawl” not analytic

– Large store and liquor license laws• TODAY: convenience stores and shopping centers

– Finance: end of “sarakin”

– Trucking: Kuroneko (Yamato Takkyu-bin)


Technological change

• Largely exogenous– But cell phones interact with policy

• cell phone shopping unique to Japan?– I’m too old to be sure!

– What has happened in US in past year?

• Lots of conveniences– Aggregate impact: save time!

• Household tasks• Food preparation

– TODAY: instant ramen, freezers


Induced change

• Institutions have lots of momentum– Interlocking patterns of behavior– Lots of truth in “1945 System” approach

• Need large shock to shift– But can have erosion around the margins

• TODAY: Large firm labor relations– Ponzi scheme not sustainable– But no alternative that can be communicated


“Lifetime” employment system

• Better labeled:– Internal labor markets with– Mandatory retirement

• Rational response to growth, human capital• Common in the US in various periods / industries• End result a “Ponzi” or pyramid scheme ( ねずみ講 )

– Slow growth eroded the bottom of the pyramid

• Not sustainable!– But how (and when) give way?


LES: incremental change

• Lowering the costs– Flattening of wage profiles– Accelerating attrition

• Early retirement systems– Mado-giwa zoku (“window sitters”)

• Shukko


LES: incremental change

• Shrinking the firm– Employing women

• Who used to quit

– Employing part-time and temporary workers

• Outside the pyramid altogether

– Employing subcontractors


LES: fundamental change

• Job-based pay– Very mixed in practice– In pure form, age independent

• Job markets & mobility– Logical counterpart– No penalty to hiring older workers

• Or encouraging younger to leave

• Long-run implication: external careers– Very partial at present

• But big rise in “professions” and certifications


Will “LES” disappear?

• Always a minority of labor force– In early years, small business 2/3rds of LF!

• Gradual erosion at the margin– 40+ years of decline

• But no “revolution”– No substitute conceptualization– How both workers and employers phrase

• Even if the phrasing doesn’t match the reality!


Sum

• Finding typologies of change is hard• Without typologies, “major” and “minor”

change is in the eye of the beholder• Even without that framework I argue:

– Demographics– The retail revolution (including new goods)– Suburbanization and motorization

• All combine to make Japan rather different!


Consumer Durable Diffusion

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

82 84 86 88 90 92 94 96 982000 2002 2004 2006

Bed

Car

Microwave

Clothes dryer

Air conditioner

Computer

Unit Kitchen


Shares of Consumption

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200020012002200320042005

rice Bread noodles Starches


Expenditures through 2006data on 30-somethings more dramatic: rice is #3

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002000200120022003200420052006

Bread Rice Noodles


Calories / Nutrition Surveydefinitions changed in 2001

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2004200320022001200019991998199719961995199419931992199119901989198819871986198519841983198219811980197919781977197619751970196519601950

Rice Products Wheat products Grains, all types Potatoes


Passenger Car Ownership, Chiba City

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Total Regular Small Kei Commercial (cargo) vehicles

Total up 80%

Small cars -2%

Trucks -22%

Full-sized cars up 16x!!


Announced 2007 store openings

floor space over

1,000 m2over

10,000over

30,0002006.01 none -2006.02 none -2006.04 6 stores 88,395 22006.05 43 stores 349,706 82006.06 46 stores 293,098 72006.07 46 stores 259,691 102006.08 65 stores 283,641 22006.09 49 stores 293,001 22006.10 47 stores 356,863 102006.12 62 stores 282,651 72007.01 59 stores 340,085 72007.02 68 stores 297,825 82007.03 88 stores 458,101 13

579 stores 3,303,057 76 22


Electronics Retail Segment

• Total ¥7 trillion and not expanding

• 26% computers, peripherals, software• 24% TVs, DVDs and related• 24% other (lighting, health, cameras)• 13% white goods (refrigerators, washers)• 5% air conditioners

– From Yamada Denki financial statements


Large Electronics Retailers

• The old world– “mom and pop” retailers– affiliated with a specific manufacturer– that turned out a huge array of products

• The new world– Yamada Denki, sales ¥1.1 trillion– Edion, sales ¥0.7 trillion– Yodobashi Camera, sales ¥0.6 trillion– Also Kojima, Bic Camera, Best Electric, etc


Image and reality

• Most Japanese are urbanites– Even more true of foreign observers

• Nostalgia for mom-and-pop stores• Strong image of discounters outside

major train stations• Reality

– Yamada Denki, 100% suburban roadside– Absolute not the common perception!

© michael smitka 2007 changing japan - models and examples - michael smitka washington and lee...

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