Japanization: What the World Can Learn from Japan's Lost Decades

Chapter 5Galapagos NationHow Isolation Stunts Japan’s Evolution

No modern nation would fascinate Charles Darwin more than Japan. It’s the highly developed economy that time forgot. It may be sitting amid a sea of epochal change as Asia’s upstarts rise, but its business and political systems generally behave as if the world has been sitting still for decades. Japan is the market equivalent of the endemic species Darwin found on the remote Galapagos islands off Ecuador’s coast. Its products and business customs are highly distinct from anything found elsewhere, but not particularly suited to thriving beyond the water’s edge. Even as deflation has deepened, Japan has refused to turn away from the fossilized policies that are walling it off from an Asia region racing forward. All too many if its companies still have a sepia-toned view of a rapidly globalizing world, refusing to think bigger and more internationally. Welcome to “Galapagos Nation.”

“Around 1990 Japan was self-satisfied with the economic success, and Japanese people thought that they have nothing to learn from anybody,” Masamoto Yashiro, a legendary banker and private-equity expert, said at a University of Tokyo symposium on October 19, 2013. “This time is over now, and Japan and Japanese corporations must change to regain growth and become competitive again.”

Japan, first and foremost, is a nation of paradoxes. Everywhere you turn you find a startling mix of the old and the new, the traditional and the novel, the ...