10 - Japan's Corporate Governance, Labor Practices, and Citizens' Social and Economic Life at the Beginning of the New Century

Summary

Introduction

The economic problems of the 1990s and 2000s had an impact not only on the Japanese government's economic policy, politics, and political outcomes but also on broader aspects of Japanese society and life. Although many factors were attributed to Japan's economic problems, policy makers, politicians, and observers argued that the structural features of the Japanese economy were an important cause of the problems. Japan's corporate governance, financial system, labor market practices, and the clientelistic relationships between government and industry were considered sources of economic inefficiency, impairing the performance of the Japanese economy.

Japanese corporations themselves also felt the need to restructure their business and management and regain competitiveness and efficiency to improve their performance, as many of them suffered poor performance, debt, excessive investment and capacity, low rates of returns, redundancy, and high production costs. Private corporations, particularly those in the export sector, were the first ones to acknowledge the need for change and to initiate reform, because they were exposed to international competition and had no other choice but to change if they wanted to survive in the market economy. They were thus much more forthcoming in executing their own changes than politicians, bureaucrats, and their constituent industries and sectors that had been accustomed to favorable government policy and protection provided by politicians and bureaucrats. These traditional constituents' first inclination was to hang on to their entitlements and ride out the economic recessions with help from the government.