Japan’s economy has been facing challenges for an extended period, however, there is a glimmer of hope on the horizon. It appears that Japan’s potential for economic rejuvenation lies in the hands of entrepreneurs. The nation is witnessing significant societal and technological transformations that have the potential to reinvigorate its economy, similar to the entrepreneurial surge that fueled Japan’s post-World War II economic boom.
Thriving economies typically require an infusion of high-growth companies with innovative ideas, a need that Japan has been lacking in recent years. Overcoming this obstacle is a complex task, but the changing landscape seems to surpass previous efforts.
An evident shift can be seen in generational attitudes towards lifetime employment and gender dynamics, significantly reducing the challenges associated with recruiting talented personnel for new high-growth businesses. Younger adults are more willing to take the risk of joining a new company, while reputable firms are increasingly open to hiring mid-career professionals, thus creating more opportunities for those seeking a change.
On the technological front, e-commerce is empowering new companies to access millions of customers by circumventing traditional distribution systems controlled by larger market players. This has given rise to a new cohort of startups that are proficient in digital technology, and even traditional companies are now collaborating with independent startups possessing this expertise. This marks a significant departure from the previous disdain that big companies held towards such collaborations.
Notably, graduates from Japan’s most prestigious universities are venturing into entrepreneurship, armed with their experience from overseas or foreign company employment. These individuals are making a substantial impact in the business world, showcasing the economic potential present in Japan.
However, challenges persist. Japan requires a shift in government policy to amplify these positive trends, and unfortunately, the necessary support has yet to materialize. Resistance from vested interests, as well as fears from large companies and mediocre small and medium-sized firms about potential disruptions caused by dynamic new entrants, have hindered progress.
The difficulty in securing initial financing is another significant hurdle for newcomers, as there is limited support from business angels, and banks are hesitant to lend to newer enterprises. Without the requisite government support, these positive trends may fail to achieve critical mass.
Prime Minister Fumio Kishida has pledged to increase the number of startups, but tangible action to fulfil these promises has been lacking. It appears that resistance from vested interests is hindering the implementation of much-needed changes.
By examining France, we witness a country that successfully altered its anti-entrepreneurial stance through effective tax incentives and increased private funding for high-growth startups.
It is evident that the competition between pro- and anti-entrepreneurship forces will ultimately determine Japan’s economic future. With the appropriate support and policy adjustments, Japan could be on the cusp of a new era of economic prosperity driven by the entrepreneurial ethos.
This is a synopsis of the original article published in the East Asia Forum, written by Richard Katz, a senior fellow at the Carnegie Council for Ethics in International Affairs.
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