2007 Reports

Japan's Problems and Emerging China: A Japanese Banker's Perspective

Mr. Yashiro drew on his experience as a senior executive in the oil and banking industries in the United States, Japan, and China, to compare economic prospects and corporate cultures in Japan and China. Mr. Yashiro began by outlining some of the key reasons behind Japan's post-bubble economic malaise. With American industry in decline in the late 1970s and early 1980s, excessive hubris among Japanese corporate leadership combined with a strengthened yen following the Plaza accords to help create a domestic economic bubble. The result has been stagnant growth and loss of competitive edge for Japan since the bubble burst in the early 1990s. Mr. Yashiro went on to explain lessons that Japan should learn from the bubble experience. Lack of international perspective, English skills, scarcity of foreigners among senior corporate leadership, the seniority-based promotion system, and risk-averse behavior continue to hinder Japanese corporations' global competitiveness and the expansion of Japan's economy. Moreover, lack of clear national goals, exemplified by former Prime Minister Abe's stated goal of a "beautiful Japan," is the most significant roadblock to renewed economic and political strength. Reflecting upon his recent experience working to reform Chinese state-owned banks, Mr. Yashiro outlined several key challenges on the path of continued growth. Chinese financial institutions, which recently had bad asset problems similar to those experienced by Japan, have largely taken care of them by transferring them to asset management companies. Moving forward, China must maintain its high rates of economic growth to avoid further nonperforming loan problems. Chinese banks must continue to develop a strong credit culture and risk management skills, prevent irregularities, and improve profitability through services other than loans and deposits. In contrast to the Japanese corporations, Mr. Yashiro described the eagerness of Chinese banks to tap into the skill and experience of foreigners. Already benefiting from infusions of Western capital, by absorbing foreign expertise Chinese financial institutions will soon be among the leading banks in the world, according to Mr. Yashiro. In Tokyo, on the other hand, it is rare to see foreigners among senior banking executives, and without fresh ideas and perspectives, Japan will struggle to compete globally.