Transcript Topic 4 * Japan and its Corporate Hegemony

GEOG 113C – Geography of East and Southeast Asia
Professor: Dr. Jean-Paul Rodrigue
Topic 4 – Japan and its Corporate Hegemony
A – Geography and the Insularity of Japan
B – Japanese Development
C – The Corporate and Industrial Hegemony
Hofstra University, Department of Global Studies & Geography
A. GEOGRAPHY AND THE INSULARITY OF
JAPAN
1. Location
In which way the location of Japan is unique?
2. Maritime Orientation
How the ocean is influencing the Japanese society?
3. Demography
What characterizes the Japanese population?
4. Resources
Is Japan lacking resources?
© Dr. Jean-Paul Rodrigue
1. Location and Insularity
■ Location
• “jih-pen” in Chinese (sun’s origin):
• Since Western civilizations encountered
China before Japan, the name “Japan”
stuck.
• Nihon (or Nippon), meaning “Source of the
sun”.
• Relative isolation in Pacific Asia:
Contemporary Flag
• Insularity.
• Do not share a land border with any
country.
• Maritime access:
• Shimaguni (island country) / insularity.
• Labeled as the Great Britain of the Pacific.
Imperial Flag
© Dr. Jean-Paul Rodrigue
Changes in Japan’s Relative Location
From Terminus…
Limited outside influence (insularity).
Writing, Buddhism and Confucianism came from
China, via Korea.
Protected from Chinese (Mongol) and Korean
invasions.
End of maritime roads from Europe.
Closest Asian country from North America.
Core of the transpacific trade.
… To Hub
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
■ Maritime space
• 4 islands; 98% of the land mass:
China
Russia
Russia
Hokkaido
North Korea
Honshu
Kyushu Shikoku
Hokkaido (83,400 km2).
Honshu (231,100 km2).
Shikoku (18,700 km2).
Kyushu (42,100 km2).
• 3,500 islands in two major groups
(Ryukyu and Bonin).
• Several large bays:
Sea of Japan
South Korea
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•
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•
Tokyo Bay
Nagoya Bay
Osaka Bay
• Tokyo, Nagoya and Osaka.
• Important concentration of port
infrastructures and urban regions.
• Arc of over 1,700 miles.
• Coastline:
• 19,000 miles.
• 3rd in the world behind Russia and
Australia.
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
■ Linking the main Japanese
islands
Hokkaido
3
• Required the construction of bridges
and tunnels.
• Impressive engineering
achievements.
• 1) Seto-Ohashi bridge:
• Shikoku/Honshu.
• Naruto Strait.
• 2) Kanmon bridge:
Honshu
2
1
Kyushu Shikoku
• Strait of Shimonoseki.
• Kyushu/Honshu.
• 3) Seikan tunnel:
• Tsugaru Strait (Honshu/Hokkaido)
• 33 miles, 1988, longest in the world.
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
■ Physical constraints
Hokkaido
• Physical geography increases the
territorial exiguity.
• An “empty” country:
• 16% of the land is habitable.
• Most of the population lives on 0.3% of the
territory.
• Fight against the scarcity of space:
Honshu
Kanto Plain
Yamato Plain
Shikoku
Kyushu
Nobi Plain
• Long narrow valleys.
• Concentration of agricultural
productivity.
• Efficient management of existing
agricultural land.
• Kanto plain:
• 30.5% of the population.
• 8.3% of the surface of Japan.
• 50% of the flat territory.
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
■ Fishing
• Insularity and fishing have influenced Japanese food supplies:
• 25% of protein coming from fishes (6% world average).
• Japan has the most important fishing fleet in the world.
• Massive usage of aquaculture (shrimp, oysters, seaweed).
• Fishing is favored by the meeting of two currents:
• Kuroshio (warm and salty).
• Oyashio (cold).
• Enabling better plankton growing conditions.
■ Diet
• Unique diet the outcome of geography.
• Rice is the main staple food:
• Soybean as a source of protein (tofu, shoyu).
• Meat not part of the diet until 20th century.
© Dr. Jean-Paul Rodrigue
Evolution of the Japanese Diet (kg / capita / year)
400
350
300
Oils & Fats
250
Milk & Dairy Products
Fish & Shellfish
Eggs
200
Meat
Wheat
150
Rice
100
Grains
50
0
1936
1960
1970
1995
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
■ Climate
Oyashio
Cold
Hokkaido
Honshu
Kyushu
Shikoku
Kuroshio (Black current)
Warm and salty.
• Japan is the meeting place of the
important weather patterns.
• Temperate.
• Monsoons warm air masses from
the south.
• Siberian cold air masses from the
north.
• High precipitations.
■ Three major climate regions
• North: temperate climate with cold
winters and important snowfalls.
• Center: east/west variation.
• South: subtropical climate.
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
■ Seismic activity
• Meeting of 3 tectonic plates
• Most active in the world.
• 1,500 earthquakes a year (about 30
are felt).
• Process of subduction.
Eurasian Plate
Philippines
Plate
Pacific Plate
2011 Sendai Earthquake
■ Volcanic activity:
• 10% of the world’s active volcanoes
(200):
• About 40 volcanoes are currently
active.
• Mount Sakurajima (Kyushu) erupted
more than 5000 times since 1955.
• Mount Fuji last erupted in 1707.
• Numerous hot springs.
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
■ Earthquakes
• Influence construction materials, construction techniques and
lifestyle.
• The 70 years rule:
• Tokyo affected by a major earthquake every 70 years (1633, 1703, 1782,
1853, 1923).
• Great Kanto earthquake (1923):
• 8.3 MMS (moment magnitude scale).
• 100,000 – 140,000 deaths.
• Kobe 1995:
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•
•
•
6.8 MMS.
6,400 deaths and 250,000 made homeless.
30,000 damaged buildings.
Reconstruction costs: between 2 and 3% of GDP.
© Dr. Jean-Paul Rodrigue
2. Maritime Orientation
• 2011 Sendai earthquake and tsunami:
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9.0 MMS.
Largest in recorded history to hit Japan.
4th largest in recorded history.
Triggered a 10 meters tsunami.
The island of Japan moved by 2.4 meters.
The earth axis shifted 10 centimeters.
10,000 deaths (preliminary).
Problems with three nuclear reactors at Fukushima plant that were tested
to withstand a 7.9 scale earthquake.
© Dr. Jean-Paul Rodrigue
3. Demography
■ Demographic and cultural homogeneity
Language
• 128 million.
• 99% of the population is of Japanese ethnicity:
• Some minorities which are discriminated against.
Japanese
Other
Ethnicity
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•
•
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•
99% of the population speaks Japanese.
Foster national identity and unity.
Issue of conformity.
“Yamato people” (plain around Kyoto).
Distrust of foreigners.
Literacy rate of 99%.
■ Immigration
• Ethnic homogeneity does not favor immigration.
• Would need 400,000 immigrants a year to
stabilize population.
Japanese
Other
© Dr. Jean-Paul Rodrigue
Millions
Population of Japan, 1870-2050
140
120
Real
Projected
100
80
60
40
20
0
© Dr. Jean-Paul Rodrigue
3. Demography
■ Aging
Japan: TFR
• Population peaked at 128 millions.
• Declined in 2005, for the first time
since census was held (1899).
• Highest life expectancy in the world:
4
3.5
• 86 years for females.
• 79 years for males.
3
• More people over 65 than children under
15 (30,000 people more than 100 years).
2.5
• Older age of marriage, around 27
years.
2
• Many Japanese women do not marry
(subservient relation).
• Low fertility rate, about 1.3 children per
woman.
1.5
1
0.5
0
1950
1960
1970
1980
1990
2000
2010
• Net decline of the active age
population since 1997.
• Decline in savings rate.
• From net savers to net borrowers.
© Dr. Jean-Paul Rodrigue
Population Pyramid of Japan, 2005
2.14
Female
2.30
Male
3.06
(75-80)
3.05
3.64
(70-74)
3.60
3.99
(65-69)
4.02
4.26
(60-64)
5.17
5.30
(55-59)
4.03
4.05
(50-54)
3.83
3.80
(45-49)
4.08
4.01
(40-44)
4.82
4.91
4.09
(35-39)
4.65
(30-34)
4.70
3.91
(25-29)
3.67
-4
3.50
(20-24)
3.21
-6
4.29
(80+)
3.05
(15-19)
3.11
(10-14)
2.95
3.09
(5-9)
2.94
3.09
(0-4)
2.93
-2
0
2
4
6
Millions
© Dr. Jean-Paul Rodrigue
Life Expectancy at Birth, Selected Countries
60.4
Russia (2006)
73.2
China (2000)
69.6
Egypt (2006)
69.2
69.9
Thailand (2002)
68.8
Brazil (2007)
Males
73.3
Females
73.6
74.9
76.4
75.1
USA (2006)
80.2
79.1
Sweden (2008)
83.2
77.4
France (2008)
84.3
79.3
Japan (2008)
40
50
60
70
80
86.1
90
© Dr. Jean-Paul Rodrigue
4. Resources
■ Small resource base
• Limited quantities of minerals and fossil fuels.
• Japan needs to import most of its resources:
• Favored the development of trade.
• Industrial corporations and banks are controlling a significant array of
foreign resources.
• Small territory makes agricultural self sufficiency difficult:
• One of the highest agricultural productivity.
• 60% of all food is imported.
• Issues:
• Stability and reliability of partners.
• Price fluctuations.
• Must produce something in exchange.
© Dr. Jean-Paul Rodrigue
4. Resources
■ Energy
2007
3% 3%
10%
47%
16%
21%
Petroleum
Coal
Natural Gas
Nuclear
Hydro
Others
• Dependence on fossil fuels.
• Hydroelectricity and geothermal
energy have good potential.
• Japan relies on nuclear energy.
• Issue of energy security:
• Imports 84% of its energy.
• Diversify energy supplies
notably from new regional
producers (Indonesia, Brunei).
• Nuclear facilities producing 25%
of electricity needs.
© Dr. Jean-Paul Rodrigue
Dependency of Japan on some Raw Materials and
Agricultural Goods, 1992
Meat
Zinc
Wheat
Lead
Coal
Soya
Natural Gas
Copper
Iron Ore
Oil
Corn
Cotton
Wool
Nickel
29.9
82.7
84.8
86.0
91.0
95.5
96.0
99.6
99.6
99.7
100.0
100.0
100.0
100.0
0
20
40
60
80
100
© Dr. Jean-Paul Rodrigue
B. JAPANESE DEVELOPMENT
1. Feudal Japan (before 1868)
What characterized the Japanese society before its modernization?
2. Japan’s First Transformation (1868-1945)
How Japan was able to become an industrial power while most Pacific Asian
countries failed?
3. Japan’s Second Transformation (1946-1989)
How Japan was able to become a global economic power?
4. The Lost Decades (1989-)
Why Japan has recently been facing economic difficulties?
© Dr. Jean-Paul Rodrigue
1. Feudal Japan
■ Mythical origins
• Japanese are descendants of the
Sun Goddess Amaterasu (660 B.C.)
• Major Kami (divinity) of Japan.
• Mother of the first emperor (so divine
origin).
• The emperor: symbol of the people
and the unity of the nation.
■ Archeological origins
Yamato Plain
• Migration from the Korean peninsula
around 400 B.C.
• Brought rice culture from China.
• Overthrown Ainu tribes present
since the Neolithic era.
• Fragmented country that took a long
time to be unified (1603).
© Dr. Jean-Paul Rodrigue
1. Religions
■ Shintoism
• “The Way of the Kami (Gods/divinity)”:
• A combination of two Chinese words: Shin, meaning divinity, and Tao,
meaning “the way” or “the path”.
• Founded around 500 B.C.
• Mixture of many tribal religions, each having had their own Kami, or god.
• A Kami is anything that can be viewed with awe or reverence (natural
objects or creatures); a physical and conceptual representation of a spirit.
• Purpose:
• Celebration and enrichment of life.
• Sacredness of the whole universe and that man can be in tune with this
sacredness.
• Respect for the authority of the state, the employer, and the family.
• Worship:
• Act of purification; offering is presented to the kami, (money or food); and a
prayer or petition is made.
© Dr. Jean-Paul Rodrigue
1. Feudal Japan
■ The Tokugawa era (1603-1868)
• Brought stability and ended civil wars.
• Unified Japan in a strong feudal system.
• Strict partition of the society in social classes:
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Samurai; warriors and administrators.
Peasant.
Craftsman.
Merchant.
• Rise in the population and cultivated land.
• Heavy taxes:
• Peasants forced to give about 50% of the harvest to the landlord
(Daimyos).
• Wealth mainly measured by rice production.
© Dr. Jean-Paul Rodrigue
1. Feudal Japan
■ Isolation
• Self-imposed isolation (until the 19th century).
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Sakoku (closed country).
Ethnocentrism.
Xenophobia; travel abroad subject to death penalty.
Chauvinism.
• Closed to foreign trade (1630-1854):
• Trade allowed with China (Nagasaki) and the Netherlands (Deshima).
• Christian religion implemented by Portuguese missionaries:
• About 500,000 adherents.
• Failed as 100,000 Christian Japanese were killed in 1612 by repression.
• Felt as a tool of foreign control.
• Very strict social and political regime with almost no mobility.
• Isolation was seen as a way to maintain the regime.
© Dr. Jean-Paul Rodrigue
1. Feudal Japan
■ Feudal Economy
• Power measured by rice production:
• Rights to a share of the crops.
• Large cities:
• Edo (imperial capital that will become Tokyo)
• Osaka (merchant city).
• Powerful merchant families:
• Such as in Europe, merchants were becoming powerful actors.
• Large commercial houses such as Mitsui and Somitomo.
• These houses will become Japanese conglomerates.
• Several factors favorable to industrialization:
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High urbanization: 16% by 1850.
Strong fiscal income.
Active internal trade.
High literacy (25%) of the population (40% for males).
Economic specialization of regions.
© Dr. Jean-Paul Rodrigue
1. Feudal Japan
■ The end of feudalism
• Intervention of the United States in 1853 (Commodore Perry).
• Increased European military presence in the region:
• England just won the Opium War with China.
• Considerable technological advance prevented Japanese opposition.
• Unequal trade treaties signed (1858):
• With the United States, Russia, Netherlands, England and France.
• Unequal because if confers advantages only to one side (no reciprocity).
• Commercial privileges, extra-territoriality for Western residents, presence
of diplomatic representatives, low tariffs set by treaty, opening of new
ports.
• A sense of humiliation arose:
• The Shogun was not able to rectify the situation.
• Chinese proverb: “Change in dynasty occurs when there are interior
problems and threats from the outside”.
© Dr. Jean-Paul Rodrigue
2. Japan’s First Transformation
■ Context
• End of the Tokugawa period (1603-1868):
• Overthrowing the Shogun with a civil war.
• Internal rebellion to change Japan in order to survive.
• New emperor ended 250 years of military regency (1868):
• Meiji stands for “enlightened government”.
• From feudal to industrial society in less than 40 years.
■ Political reforms
• Feudal system abolished:
• Country divided in prefectures (1872).
• Landlords no longer had power and became administrators.
• The Samurai class disappeared:
• Became government leaders, educators and businessmen.
• Literacy rate of 90% in 1900.
• Parliamentary monarchy formed (1889):
• Conscription formed a civilian army.
• Capital relocated from Kyoto to Tokyo; Easier access to the ocean.
© Dr. Jean-Paul Rodrigue
2. Japan’s First Transformation
Abolition
of the
Feudal System
Land
Redistribution
Modern
Banking
System
Westernize
the School
System
(Fr. & Ger.)
Modernize
the Army
(Prussian)
Written
Constitution
(Germans)
Build a
Modern Navy
(British)
Human Rights
& Religious
Freedom
Emperor
Worship
Intensified
© Dr. Jean-Paul Rodrigue
2. Japan’s First Transformation
■ Indigenous modernization
• Acquisition of western technologies and ideas:
• “Japanese spirit, Western science”.
• More than 3,000 foreigners invited to teach science, mathematics,
technology, and foreign languages.
• Urbanization, transport and communication:
• Rail system (1872).
• Market economy.
• Formal schooling.
• Also a few wrong ideas:
• German theories of racial purity.
• European rationale for colonialism (moral superiority).
• Christian single deity: The Emperor.
© Dr. Jean-Paul Rodrigue
2. Japan’s First Transformation
■ Government / corporate dualism
• The cession by the state of large industrial infrastructures.
• Concentration of economic power in the hands of large
conglomerates.
• National achievements, private profits:
• The creation of the military / industrial complex.
• Zaibatsu (financial cliques) emerged:
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Controlled by merchant families:
Mitsui (16th century).
Mitsubishi (1873).
Sumitomo (16th century)
Notable Japanese conglomerates that gained tremendous power during
the Meiji era.
• Supported the establishment of the emperor.
© Dr. Jean-Paul Rodrigue
2. Japan’s First Transformation
■ Territorial expansion and resources acquisition
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Japan solved its problems by territorial expansion.
Limited raw materials and internal market.
Taiwan annexed (1879) after the Sino-Japanese war.
Victory in the Russo-Japanese war (1904-1905):
• Korea annexed (1910).
• Access to Manchuria (Port Arthur; Dalian).
• Manchuria (1932):
• Vast supplier of resources, especially minerals.
• Vast weapon construction programs.
• Transformation of colonies (Korea and Taiwan) to produce
agricultural commodities needed in Japan.
© Dr. Jean-Paul Rodrigue
2. Japan’s First Transformation
■ Imperialist Japan
• New Emperor, Hirohito (1926):
• Showa period “enlighten peace”.
• Government dominated by the military.
• Japan as the dominant race of Asia.
• Territorial expansion:
• Government: Establish a political control zone in the Pacific zone.
• Military: Reinforce Japanese power and prestige.
• Zaibatsus: External markets for Japanese goods facing Western
protectionism.
© Dr. Jean-Paul Rodrigue
2. Japan’s First Transformation
■ Territorial expansion during WWII
• Look at the outside to solve internal problems.
• War declared in 1941 against the Allies.
• Initial successes in 1941-1942 gave to Japan a large economic
sphere of influence.
• Several new raw materials sources:
• Indonesia: oil.
• Malaysia: rubber and tin.
• Lacking for the Japanese economy.
• Access to a vast market and labor pool.
• The industrial organization of conquered countries was done by
the zaibatsu.
© Dr. Jean-Paul Rodrigue
© Dr. Jean-Paul Rodrigue
2. Synopsis: Japan’s First Transformation
Isolationism
Technology assimilation
Military
Feudal Japan
Imperial Japan
Expansion
Social stratification
Govt. / corp. dualism
Resources / Markets
Zaibatsus
Taiwan (1879)
Korea (1910)
Manchuria (1932)
Southeast Asia (1941)
United States (1853)
Unequal Treaties (1858)
Civil War (1868)
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ Defeat of 1945
• Ended Japanese imperialism in Pacific Asia.
• The Japanese economy was in shambles.
• Territory:
• Lost all its conquest of the last 60 years.
• Parts of its national territory was occupied for the first time in history
(American bases at Okinawa).
• Casualties:
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7.1 million deaths.
4 million workers of weapon industry were laid off.
2.6 million people moved abroad (Korean and Chinese workers).
1.2 million Japanese were repatriated (military personnel, administrators,
traders, industrialists).
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ Economic damage of WWII
• Main cities (Kobe, Tokyo and Osaka) were destroyed over more
than 50% of their surface.
• Hiroshima and Nagasaki were a total loss.
• 25% of housing was destroyed, 75% of oil refineries.
• 90% of the merchant fleet and 30% of roads and railways.
• The industrial capacity was at 60% of if 1935 level.
• 13 million unemployed.
• Material losses estimated at 25% of GDP.
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ Marshall plan (1948)
• The United States established an aid plan to help the Japanese
economy recover.
• Fear about instability promoting civil unrest.
• About 2 billion dollars of aid:
• Sony started with American financial help.
■ Political and Economic Changes
• Political:
• The emperor became again a symbol.
• Adoption of a constitution similar to the United States.
• No involvement in foreign wars permitted.
• Economic:
• Break-off of the Zaibatsus.
• Advantageous parity of the yen (1 dollar for 360 yen).
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ The Korean War (1950-1953)
• Benefited the Japanese economy.
• Japan served as a depot for the UN army:
• Only allied country in the region.
• Subcontracting to the American army:
• More than 1 billion in contracts for the national industry.
• Mazda started as a jeep manufacturer for the US army.
• Related industries (energy, steel and chemistry) benefited.
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Japan recovered its sovereignty (1951).
Several Zaibatsus reformed as Keiretsus (groups of bosses).
Mutual defense treaty signed with the United States (1954).
Growth was based by imitating western technologies and exports.
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ 1) Geographical context of Japan
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Paradox in itself.
Small-sized country (very little available space).
Average-sized population (126 millions).
Very limited array of resources.
“Creative pressure” perspectives:
• Incitements at miniaturization.
■ 2) Promotion of exports
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The world economy entered in a period of post-war expansion.
Important growth of international trade.
Japan entered the GATT (1955).
Development of the national market and of the promotion of
exports.
© Dr. Jean-Paul Rodrigue
3. Share of World Goods Exports, Selected Countries,
1950-2009
20%
40%
18%
35%
16%
30%
14%
25%
12%
10%
20%
8%
6%
4%
2%
0%
15%
United States
Japan
Germany
China
Four large traders (Right axis)
10%
5%
0%
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ 3) Labor
• Good labor relations in the Japanese economy:
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Post war hardships.
Good management.
A consensus was reached in the early 1950s.
Strikes are virtually unheard of.
• Highly skilled, disciplined and trained.
• Continuous improvement in qualifications, part of the corporate
experience.
• Longer weeks, weekdays and more overtime.
• More willing to avoid conspicuous consumption.
• Less space (housing) for the accumulation of consumption goods.
© Dr. Jean-Paul Rodrigue
Hours Per Day by People Aged 15-64, 1998-2009
France
4.2
3.2
11.1
Britain
4.4
3.1
9.8
Germany
3.9
United States
3.2
4.8
Japan
6.3
0%
20%
3.3
10
3
3.3
9.8
40%
Paid work & study
Unpaid work
Eating & sleeping
Personal care
Leisure
Other
3.1
9.9
2.5
2.2
60%
2.2
80%
100%
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ 4) Technology
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Imports, notably from the United States.
Licensing, patent purchases, and imitation and improvement.
Imitation of successful technologies.
Japan then became an innovator (1980s).
■ 5) Consumption and wages
• Internal demand growth because wages were growing faster than
inflation but less than productivity growth.
• Fast adoption by the market:
• Preferences on national products.
• Short product life cycle.
• Exports can occur over economies of scale.
• Spread the gains in the society.
© Dr. Jean-Paul Rodrigue
Adoption of Consumption Goods by Japanese
Consumers, 1970s
6
Washing Machines
11
14
4
Televisions
8
Japan
West Germany
9
France
0
5
10
15
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ 6) Investments
• Done in productive forces instead of consumption.
• High technology and heavy capital investment:
• 20% of GDP.
• Steel, petrochemicals, cameras, televisions, motorcycles and automobiles.
• Saving rates:
• Between 15 and 25% of income compared to less than 3% in the United
States.
• 13% of GPD in 1970 as opposed to 6% for the United States
• Policies to favor savings, unlike borrowing for the US.
• Decline in savings due to aging of the population.
• The government provided financial assistance to banks and
invested in infrastructures such as road and railways.
• Investment needs came from 90% of national capital:
• No vulnerability to currency fluctuations.
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ 7) Educational system
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Longer schooling year.
Very competitive system.
High level of discipline.
Emphasis of technical issues.
■ 8) Military expenses
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Much smaller than most countries.
Security guaranteed by the United States.
Japan has however a significant defense force.
Resources can be allocated elsewhere.
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ 9) The role of corporations (Keiretsus)
• High level of loyalty to corporations and other institutions.
• Cradle to grave employment:
• Once graduated from school, a person's position with a corporation may
last for life.
• Corporations often provide housing, recreational opportunities, vacation
travel, and, sometimes, even marriage opportunities.
• Japanese corporate strategies:
• Coordination of investments, production and exports.
• Unwillingness to buy from abroad even when the price is lower.
• Spends a great deal on research and development to keep at the cutting
edge of new technologies.
• Corporations somewhat replaced the government for foreign policies.
© Dr. Jean-Paul Rodrigue
3. Japan’s Second Transformation
■ 10) Adaptation and ambivalence
• Tradition since the Meiji restoration.
• Able to borrow ideas and technologies and incorporate them into
the society.
• Celebration of Christian holidays, such as Christmas.
• Favorite drinks are Sake and Scotch.
• Favorite sports and Sumo wrestling and golf.
© Dr. Jean-Paul Rodrigue
3. Synopsis: Japan’s Second Transformation
Government
WWII
Corporate Japan
Imports
Trade
Geography
Labor / Education
Keiretsus
Exports
Added Value
Technology
Investments
Military occupation
Political changes
Economic changes
© Dr. Jean-Paul Rodrigue
Japan’s First and Second Transformation
First Transformation (1868 –
1945)
Second Transformation
(1945-1990)
Political System
Parliamentary Monarchy (Emperor Democracy (Government /
/ Military / Industry)
Industry)
Foreign Policy
Imperialism
Trade / Investment / Aid
Corporate System
Zaibatsu (strong linkages)
Keiretsu (weaker linkages)
Technology
Assimilating and adapting Western From adaptation to
technology
innovation
© Dr. Jean-Paul Rodrigue
4. The Lost Decades (1989-)
■ The “Bubble Economy”
•
•
•
•
Period of fast growth in the late 1980s.
High confidence and high expectations.
Evaluation of the yen after 1985 (3 times its 1971 value).
Asset prices inflation (stock and real estate):
• Real estate as the guarantee to borrow for stock market investment.
• Peak of the bubble (1990); Japanese real-estate was worth four times the
value of all property in the US.
• Unsustainable process.
© Dr. Jean-Paul Rodrigue
4. The Lost Decades (1989-)
■ Factors
• Speculation:
• Real estate and stock market.
• Growth expectations and risk taking.
• Many loans could not be paid back.
• Relocation of several factories to cheap labor nations:
•
•
•
•
•
15% of the manufacturing of Japanese corporations is done abroad.
The high value of yen favors imports more than exports.
China, Vietnam, the Philippines, etc.
Competing directly with Japan.
Relocation to Mexico, Canada and the USA (NAFTA).
• High production costs:
• Undermines international competition.
• Difficulties to adapt to the information society.
• Opening of the internal market to foreign competition:
• Its trading partners were asking for a more opened Japanese market.
© Dr. Jean-Paul Rodrigue
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Jan-87
Jan-86
Jan-85
Jan-84
Nikkei Index, 1984-2010 (Monthly); Going Nowhere
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
© Dr. Jean-Paul Rodrigue
4. The Lost Decades (1989-)
■ Economic and financial crisis
• Began in the 1990s; a period of stagnation.
• In 1990, the Nikkei lost 38% of its value (2 trillion $US).
■ Consequences
• Since 1991, 2.5 million manufacturing jobs have disappeared
(25% decline).
• Mergers and acquisitions in the banking sector.
• The keiretsus are now less dominant as independent entities.
• 1990s labeled as “Japan’s lost decade”.
• Crony capitalism with “too big to fail” corporations.
© Dr. Jean-Paul Rodrigue
80%
70%
60%
16
Japan's share of US GDP
Japan
United States
14
Trillions
GDP of Japan and the United States, 1960-2009 (current
prices)
12
50%
10
40%
8
30%
6
20%
4
10%
2
0%
0
© Dr. Jean-Paul Rodrigue
C. THE CORPORATE AND INDUSTRIAL
HEGEMONY
1. Corporate System
What is the nature and structure of the Japanese corporate system?
2. Labor and Technology
What is specific to the Japanese workforce?
3. Trade and the Financial System
What is the commercial and financial strength of Japan?
4. Mega-Urban Regions: Tokaido
How Japanese urbanization is structured?
© Dr. Jean-Paul Rodrigue
1. Corporate System
■ Political Economy
• Government / keiretsus dualism.
• Economic power is concentrated in a
limited number of corporations.
• More the case in Japan than any
other parts of the world.
• Corporatism and society:
• Difficult to separate the corporation
and the society as they are
embedded.
• Corporations are part of important
economic and political decisions in
Japan.
• Dualism between the government
and the corporations.
© Dr. Jean-Paul Rodrigue
1. Corporate System
■ The Keiretsu
•
•
•
•
“Group of leaders”.
Complex structure of more or less linked corporations.
Vertically and horizontally organized.
Six main horizontal conglomerates (keiretsu):
•
•
•
•
•
•
Mitsubishi.
Mitsui.
Sumitomo.
Fuyo.
Dai-Ichi Kangyo (DKB).
Sanwa.
• The first five conglomerates account for about 25% of the
Japanese GDP.
© Dr. Jean-Paul Rodrigue
1. Corporate System
■ Horizontal keiretsu
• Highly diversified function.
• A “trinity” or core:
Bank
Trading
Company
• A bank at the core.
• A trading company: conducting trade
on behalf of the group.
• A manufacturer or heavy industry.
Manufacturer • Cluster of affiliates and subsidiaries:
Affiliates and subsidiaries
• From related and unrelated
industries and services.
• Major manufacturers.
• Large service providers like life
insurance companies.
• 2-6% equity ownership.
• Prevents takeovers.
• Interlocking directorates:
• Leaders meeting to discuss strategy.
© Dr. Jean-Paul Rodrigue
Major Keiretsus
Industry
Banking
Finance
Industrial and
Manufacturing
Mitsui
Mitsubishi
Sakura Bank (19902001)
Sumitomo Mitsui Bank
(2001-)
Mitsui Trust & Banking
Mitsui Mutual Life
Mitsui Real Estate
Mitsui Marine & Fire
Fuji Photo Film
Mitsukoshi
Suntory
Toshiba
Toyota
Mitsui Bussan
Japan Steel Works
Mitsui Toatsu Chemical
Fuyo
Sanwa
Sumitomo Bank
Bank of Tokyo(-2001)
Mitsubishi (1996-2005)
Sumitomo Mitsui Bank
Bank of Tokyo-Mitsubishi
(2001– )
UFJ (2006– )
Fuji Bank (-2000)
Mizuho Bank (2000– )
Sanwa Bank (-2002)
UFJ Bank (2002–2006) Dai-ichi Kangyo
Bank of Tokyo-Mitsubishi Bank (-2000)
UFJ (2006– )
Mizuho Bank (2000– )
Tokio Marine and Fire
Insurance
Mitsubishi Trust &
Banking
Meiji Yasuda Life (2004-)
Yasuda Trust & Banking
Meiji Yasuda Life (2004-) Toyo Trust & Banking
Marubeni
Orix
Yasuda Marine & Fire
Kirin Brewery
Mitsubishi Electric
Mitsubishi Fuso
Mitsubishi Motors
Nippon Yusen (NYK)
Nippon Oil
Nikon
Mitsubishi Shoji
Mitsubishi Steel
Mitsubishi Gas
Sumitomo
Sumitomo Trust &
Banking
Sumitomo Mutual Life
Sumitomo Marine & Fire
Sumitomo Real Estate
Asahi Breweries
Hanshin Railway
Keihan Railway
Mazda
Nankai Railway
NEC
Sumitomo Metal
Industries
Sumitomo Chemical
Canon
Hitachi
Matsuya
Nissan
Ricoh
Tobu Railway
Yamaha
Kureha Chemical
Industries
Hankyu Railway
Keisei Railway
Kobe Steel
Konica
Minolta
Kyocera
Shin-Maywa,
Takashimaya
Toho
Nissho Iwai
Nakayama Steel Works
Nisshin Steel
Sekisui Chemical
DKB
Fukoku Mutual Life
Asahi Mutual Life
Nissan Marine & Fire
Taisei Marine & Fire
Fujitsu
Hitachi
Isuzu
Itochu
Tokyo Electric Power
Kawasaki Steel
© Dr. Jean-Paul Rodrigue
1. Corporate System
■ Vertical keiretsu
Suppliers
Manufacturer
Wholesaler
Retailers
• Centered around a major manufacturer
that is often part of an horizontal
keiretsu.
• Consist primarily of suppliers and
distributors relationships.
• Service the large manufacturer at the
core of the keiretsu.
• The Automobile Industry:
• Toyota Group, Nissan Group, Honda
Group, Daihatsu Motors, Isuzu.
• Electronics:
• Hitachi, Toshiba, Sanyo, Matsushita,
Sony.
© Dr. Jean-Paul Rodrigue
Some Firms within the Toyota Group
Company
Sector
Toyota Loom Works
Engines
Aichi Steel Works
Steels
Toyota Machine Works
Machine tools
Toyota Auto Body
Vehicle assembly
Toyota Gosei
Resin & rubber parts
Toyota Boshoku
Air filters
Toyota Central R&D Laboratories
Research & development
Toyota Tsucho Corporation
Wholesaling
Towa Real Estate
Real estate
Nippondenso
Electronics
Aisin
Auto parts
© Dr. Jean-Paul Rodrigue
Automobile Production, Selected Countries, 1950-2009
(in millions)
55
50
45
40
China
Germany
Japan
United States
World
35
30
25
20
15
10
5
0
© Dr. Jean-Paul Rodrigue
1. Corporate System
■ Advantages
• Specialization and
economies of scale.
• Stable linkages.
• Privileged customers.
• Reciprocal monitoring.
• Sharing market and R&D
information.
• Access to financing.
• Low contestability from new
entrants.
■ Drawbacks
• Complex structure.
• Imposed partnerships and
customers.
• Low performance
incentives.
• Difficult to share information
with outside firms.
• Low responsiveness to
market changes.
© Dr. Jean-Paul Rodrigue
2. Labor and Technology
■ Research, Development and Labor
• Technology is of strategic importance to increase productivity:
• About 3.6% of the GDP as compared to 2.5% for the United States.
• 25,000 patents per year compared with 50,000 for the United States.
• Priority to scientific and technological research:
• 110 scientists and technicians per 1,000 people.
• Only 55 per 1,000 in the U.S.
• Much of this research is funded by the private sector, usually by the
industry, rather than by the government.
• Far more emphasis placed on applied research than on basic research.
• Must generate income for the corporation.
© Dr. Jean-Paul Rodrigue
Labor and Technology
Labor Force Participation, 2006
100
90
80
70
60
50
40
30
20
10
0
Males
Females
■ Lower unemployed rate than
many other economies
• 2 to 3% unemployment rate on
average.
• Hides underemployment
problems.
• Massive sub-contracting to
absorb market fluctuations.
• Women labor absorbs most of
the fluctuations.
• Strict employment hierarchy.
• Secure employment for large
corporations
USA (Females)
15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65+
19 24 29 34 39 44 49 54 59 64
© Dr. Jean-Paul Rodrigue
2. Labor and Technology
■ Lifetime Employment System
• A company guarantees its new employees a job until retirement.
• Recruitment takes place directly after education:
• Training is provided on the job.
• May take a few years for the employee to become productive.
• Most characteristic of large firms and government agencies.
• About one-third of the workforce:
• Workers called “salaryman”.
• Raises:
• Mainly a function of seniority.
• Usually given to a whole level or group at the same time.
• Especially at the lower ranks where there are more employees and less
distinction between them.
© Dr. Jean-Paul Rodrigue
2. Labor and Technology
• Flexibility:
• Strict prohibitions against firing except under extreme circumstances.
• Recessions; across-the-board salary cuts rather than downsizing.
• Quitting:
• A company is seen as a family and close relationships of trust must be built
with co-workers.
• Disgrace and dishonor to quit a company.
• “Letting down” or “betraying” the family.
■ Labor changes
•
•
•
•
•
The rise of temporary workers.
New law (2004) authorizing less benefits for temporary workers.
1/3 of the workforce.
Benefit: less demanding than a full time job.
Drawback: quick to be laid off during a recession.
© Dr. Jean-Paul Rodrigue
2. Labor and Technology
■ Automation
• The Japanese economy relies heavily on mechanization.
• Accumulation of equipment goods.
• Main reasons:
•
•
•
•
•
•
•
•
•
Save costs (high Japanese labor costs).
Increase productivity.
Raise quality (commitment to total quality; Kaizen system).
Remain competitive in a global market.
Transfer dangerous and laborious work.
40% of all industrial robots were in Japan (2007).
Mostly in the automotive sector.
Limits to robotisation.
Sony investing massively in robots as consumer goods:
• AIBO (dog); most sophisticated consumer robot to date.
• ASIMO and QRIO (small humanoid).
© Dr. Jean-Paul Rodrigue
Operating Industrial Robots, 1995-2007
900,000
800,000
700,000
600,000
All other
500,000
European Union
United States
400,000
Japan
300,000
200,000
100,000
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2007
© Dr. Jean-Paul Rodrigue
3. Trade and the Financial System
■ International trade
• Very important for Japan:
• Japan is the 4th largest trader in the world (supplanted by China in 2004).
• Fills the needs of the Japanese economy in raw materials and energy.
• Trade system:
•
•
•
•
Import raw materials and parts.
Perform value added activities (notably technology related).
Export at competitive prices.
Cars and electronics are the two key main exports.
• Systematic positive trade balance of Japan.
• Increasing importance of the national market and relocation of
some industries abroad.
• Japanese economy increasingly linked with the Chinese
economy.
© Dr. Jean-Paul Rodrigue
World’s 12 Largest Exporters and Importers, 2009
329.9
316.7
Canada
Imports
352.2
329.4
Hong Kong
Exports
481.7
United Kingdom
352.5
South Korea
323.1
363.5
Belgium
351.9
369.9
412.7
405.8
Italy
559.8
484.7
France
445.5
498.3
Netherlands
552.0
580.7
Japan
United States
1,605.3
1,056.0
938.3
Germany
1,005.7
China
0
200
400
600
800
1000
Billions of USD
1,126.4
1,201.5
1200
1400
1600
1800
© Dr. Jean-Paul Rodrigue
Japan’s Trading Partners
Coal, Iron ore, Grain
Market
Offshoring
Market
Oil
LNG, Lumber
Coal, Iron ore, Grain
© Dr. Jean-Paul Rodrigue
4. Tokaido
■ Tokaido
25%
55%
13%
7%
Tokyo Metropolitan Area
Osaka Metropolitan Area
Nagoya Metropolitan Area
Rest of Japan
• Imperial road that linked
Edo (Tokyo) to Kyoto.
• Urban region accounting for
more than 90 million
people, 70% of the
Japanese population.
• Tokyo: 31 million population.
• Nagoya and Osaka (9 and
16 million population).
• Several cities are over 1
million (Kobe, Kyoto and
Yokohama).
© Dr. Jean-Paul Rodrigue
4. Tokaido
■ Functions and specialization of Tokaido
• Tokyo:
•
•
•
•
Tertiary and quaternary functions.
70% of wholesaling, finance and insurance.
Head offices of several conglomerates.
1990: between 45 and 50% of the global financial capitalization.
• Nagoya and Osaka:
• Industrial, financial and port centers.
• Massive accumulation of multimodal transport infrastructures.
• Support the external dependency of Japan.
• Several large airports supporting the trading and financial network.
■ Shinkansen
•
•
•
•
High-speed train network.
Opened in 1964.
Operates at speeds of more than 200 km/hr.
300 km/hr trains are now entering in service.
© Dr. Jean-Paul Rodrigue
The Shinkansen High Speed Rail Network
Operational
Under Construction
Planned
Hokkaido
Sapporo
Hakodate
Aomori
Hachinohe
Akita
Morioka
Shinjo
Yamagata
Niigita
Kanazawa
Honshu
Shimonoseki
Nagano
Nagoya
Sendai
Fukushima
Takasaki
Omiya
Tokyo
Okayama
Osaka
Fukowa Shikoku
Nagasaki
0
70 140
280
420
560
Kilometers
Kyushu
kagoshima
0
50
100
200
300
400
Miles
© Dr. Jean-Paul Rodrigue