Forget unicorns; focus on gazelles. That is economist Richard Katz’s prescription for Japan in his new book, “The Contest for Japan’s Economic Future.” Katz, former adjunct professor at the NYU business school, is my longtime guide through the thicket of Japanese economics. His first book, “Japan: The System that Soured” (1998), is one of the best explanations of why the country’s economy went off the rails. This newest work builds on that analysis and offers compelling suggestions on how to fix it.
In simplest terms, Japan’s problem is sclerosis. The country’s economic policymakers have opted for stability, halting the “creative destruction” that promotes innovation and delivers prosperity. “Among all rich countries, it is Japan where new companies find it hardest to get the external funding that is needed for growth. Consequently, the birth and death rate of companies has plunged and is now one of the lowest among 27 rich countries.”
Blame a preference for stability and survival. Protecting older companies, the jobs they have produced and the political and financial relationships they have nurtured, starves newer, more innovative businesses of resources they need. Those older companies are products of the analog era, slow, if not unable, to adjust to the demands of a digital economy. Japan suffers as a result.