The Power to Compete

The Power to Compete tackles the issues central to the prosperity of Japan – and the world – in search of a cure for the "Japan Disease." As founder and CEO of Rakuten, one of the world's largest Internet companies, author Hiroshi Mikitani brings an entrepreneur's perspective to bear on the country's economic stagnation. Through a freewheeling and candid conversation with his economist father, Ryoichi Mikitani, the two examine the issues facing Japan, and explore possible roadmaps to revitalization. How can Japan overhaul its economy, education system, immigration, public infrastructure, and hold its own with China? Their ideas include applying business techniques like Key Performance Indicators to fix the economy, using information technology to cut government bureaucracy, and increasing the number of foreign firms with a head office in Japan. Readers gain rare insight into Japan's future, from both academic and practical perspectives on the inside.

Mikitani argues that Japan's tendency to shun international frameworks and hide from global realities is the root of the problem, while Mikitani Sr.'s background as an international economist puts the issue in perspective for a well-rounded look at today's Japan.

• Examine the causes of Japan's endless economic stagnation
• Discover the current efforts underway to enhance Japan's competitiveness
• Learn how free market "Abenomics" affected Japan's economy long-term
• See Japan's issues from the perspective of an entrepreneur and an economist

Japan's malaise is seated in a number of economic, business, political, and cultural issues, and this book doesn't shy away from hot topics. More than a discussion of economics, this book is a conversation between father and son as they work through opposing perspectives to help their country find The Power to Compete.

Introduction Japan Again ix

Chapter 1 The Power to Innovate 1

Japan Again 1

The Keys to Revitalizing Japan 4

Keidanren’s Raison Dêtre 7

The Nature of Innovation 11

Schumpeter’s Contribution 15

Building Infrastructure 19

Business Innovation 23

Summary 27

Chapter 2 The Power to Operate 29

Workforce Fluidity 29

Privatization 33

Lifetime Employment 37

Escaping Lifetime Employment 40

Immigration Problems 43

Why English Needs to Be a Common Language in Japan 45

Growing the Population 50

Summary 53

Chapter 3 The Power in Questioning Abenomics 55

History of Abenomics 55

Independence in Finance 59

The Optimal Inflation Rate 62

Halting the Rise of Interest Rates 65

What to Do About Our 1-Quadrillion-Yen Debt 67

The Pros and Cons of Abenomics 70

Summary 75

Chapter 4 The Power of the Low-Cost State 77

The High Cost of Governance 77

How to Reform the High-Cost Structure 83

Addressing the Japanese Disease 87

The United States and Individualism 92

The Impotent Bureaucracy 95

Internationalizing the Bureaucracy 99

Creating Think Tanks 103

Political Appointees 106

What It Will Take to Improve the Bureaucracy 109

Summary 111

Chapter 5 The Power to Succeed Overseas 113

The Decline in the Number of Students Studying Abroad 113

Escaping from the Galapagos Effect 118

The Future of Journalism 121

Media in the Internet Era 125

The Importance of Liberal Arts 131

Ryoichi Mikitani’s Experiences Abroad 134

Summary 137

Chapter 6 The Power to Educate 139

Uniform Japanese Education 139

The Education of the Mikitani Family 141

What the Education System Needs 146

Higher Education 151

What People Study in University 154

The Founding of Rakuten 157

The Evaluation System for Teachers 160

The Need for Strategy in the Japanese Education System 162

Summary 168

Chapter 7 The Power to Build Brand Japan 169

Brand Power 169

The Demonstration Effect 174

Brand Value at the National Level 178

Foreign Nationals Working in Japan 183

Making Japan Attractive to Foreign Nationals 186

Japan and the Trans-Pacific Partnership 189

Summary 195

Conclusion What is the Power to Compete? 197

Japan Uniquely Incorporates and Interprets Cultures 197

Competitiveness as a Platform 200

The Global Logistics Revolution 202

Summary 205

Epilogue 207

Acknowledgments 211

Index 213

HIROSHI MIKITANI is the founder, chairman, and CEO of Rakuten, Inc., one of the world’s largest Internet companies. The firm has operations in 28 countries and customers all over the world.

RYOICHI MIKITANI was a leading Japanese economist who worked and studied at Harvard, Stanford, Yale, and Kobe University and made important contributions in his work with the Japan Society for Monetary Economics. Ryoichi was also a prolific and respected author.

Throughout its history, Japan has had a strong sense of its political, economic, and cultural individuality. This pride in the Japanese tradition has been one of the nation’s greatest strengths—and one of its greatest weaknesses. In a world of connection, collaboration, and rapid exchange, Japan is falling behind. This is the reality readers must confront in The Power to Compete, a truly one-of-a-kind book with a sensitive approach to the most pressing issues faced by Asia’s island nation.

The authors and protagonists of The Power to Compete are Hiroshi Mikitani, chairman and CEO of one of Japan’s largest Internet companies, and his father Ryoichi Mikitani, a leading Japanese economist. In this series of long-form conversations between them, the perspectives of father and son come together to uncover the path forward that will allow Japan to slough off its decades-long stagnation.

Combining hard-hitting analysis with a little light banter, The Power to Compete is an enjoyable read that nonetheless presents important revelations and recommendations. Mikitani, Sr., who passed away shortly before the publication of this book, was a Harvard-educated international economist who studied under Nobel Prize winners and made important contributions to Japanese economic theory. His understanding of Abenomics, the free market economic reform plan of Japanese Prime Minister Shinzo Abe, provides a depth to The Power to Compete that is lacking in many other books on the topic. Mikitani, Jr., on the other hand, has the practical experience to know how the Japanese business world will be affected if the nation fails to evolve.

Through their conversations, Mikitani, Sr., and Mikitani, Jr., arrive at a series of conclusions that will inspire readers to work on the international stage for Japan’s development. Summarized concisely at the end of each chapter, these conclusions range from implementing business strategies like key performance indicators to using technological advancements in an effort to reform and modernize childhood education.

The authors of this book do not suggest that Japan should change. Instead, they show how Japan can use its historical strengths and strong national identity to create an economic platform to return to competitiveness in the global arena. The Power to Compete is a cross-generational conversation that should engage a new group of entrepreneurs and officials in the process of creating a future for Japan that is both peaceful and prosperous.