IMD International


Dominique Turpin, who shares strong ties with Japan, takes a hard look

at his adopted country

By IMD President Dominique Turpin - December 2014

Where is Japan heading in the world's ongoing globalization race? The land of the rising sun has been surpassed by its gigantic Chinese neighbor and its status as the most competitive country on earth is becoming a fading memory.

There are numerous signs that the archipelago is trying to reinvent itself to prevent its decline, as it did well when it began trading with western powers in the 19th century in order to avoid colonization. It achieved an equally impressive feat again at the end of the Second World War, inspired by the American model and with enormous help from the likes of quality management experts William Edwards Deming and Joseph Juran. The question today is simply: Will Japan really dare to change?  

Anyone who has been to Japan knows that the country is one of a kind. It is geographically isolated, with deeply rooted cultural codes and a complex language. These factors accumulate to separate Japan from the rest of the world. Until the mid-1980s, Japan clearly dominated several industries, including televisions, watches, motorcycles and cars. Today its consumer electronics and car manufacturers are struggling against the Apples, Samsungs and Audis of this world. 

In addition, cultural barriers have held Japan back from staying the course on its rapid rise to the top. With some rare exceptions (e.g. Sony's presence in the global entertainment industry), the most obvious sign of Japan's faltering is the absence of large Japanese service companies on the global stage in sectors such as banking, hospitality, advertising, and large retail stores. The political equivalent of this is Japan's tendency to be almost unheard of in diplomatic circles. Japan's voice on issues such as the situation in Ukraine or the war in Syria has not been widely heard. Its international political influence is nearly non-existent.  

The number one barrier hindering the country in the game of international trade is the difficulty for the Japanese to manage anything which is not Japanese. The country knows how to run factories and blue-collar workers overseas. But it is struggling to integrate minorities, foreigners and women into society. Korean, Filipino, and Chinese executives rarely make it to leadership levels in large Japanese companies. The Japanese are aware of this — they are very curious about what foreigners think about them — but they struggle to confront the problem.  

Outside of their islands, the Japanese are often ill at ease. According to a recent TOEFL survey ("Test of English as a Foreign Language") they rank behind North Korea in English proficiency, coming in at 124th in the world. Many Japanese are still too used to speaking their own language while traveling in Asia, where younger and older Chinese and Koreans often speak Japanese, and are not comfortable where their language is not spoken. This is reminiscent of American travelers, except that unlike Japanese, English is spoken almost everywhere.  

This moral, cultural, historical and geographical isolation is problematic and feeds Japan's isolation, which is deeply rooted in the past. Although Japan is located at the doorstep of a gigantic market — China — the relations between the two countries remain tense.  

In 2012, the rise to power of Shinzō Abe, who promised a stronger country, restored some hope to the Japanese. The prospect of hosting the Olympic Games in 2020 has given great pride and motivation to the country, which is suffering from colossal national debt. Thanks to "Abenomics" (a term that refers to the economic policies advocated by Prime Minister Abe), the Japanese mood improved very significantly. However, a few weeks ago, Japan entered into recession as the most important structural reforms have been slow in coming. By delaying the necessary tough decisions on the major structural reforms that the country needs, Japan is likely to fall into a deeper recession.  

Beyond these circumstances, to really participate in the battle for globalization, the Japanese people face a dilemma: maintain their cultural and demographic confinement, or undergo a real cultural and structural transformation. This means that Japan has to break the window through which it has been looking at the world for so long, and accept the need to open up to the outside. This is the biggest challenge the country faces if it doesn't want to risk further decline.

Dominique Turpin is the Nestlé Professor and President of IMD. He co-directs IMD's Orchestrating Winning Performance program. He did his doctorate in Japan, and has been a regular visitor to the country for more than 35 years.


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