Video #1 - Japanese Business Practices in Transition

Saturday, January 01, 2000

sources | lesson plan

BACKGROUND INFORMATION

When Toshiyuki Sakai was assigned to a desk in a windowless room at the head office, with no outside telephone line and no work to do, he knew that his days with Sega Enterprises, the video-game maker, were numbered.

Until a few years ago, Japan's so-called "jobs for life" system, rewarding loyalty with security, was sacrosanct. But the world's second largest economy is undergoing a quiet and painful social transformation. Recession, falling profits and the struggle to remain globally competitive are forcing corporate Japan to rethink the tradition of employment for life. More and more big companies are biting the bullet, "restructuring" and cutting payrolls, making Western investors happy but driving up unemployment. The latest unemployment figure of 4.9 percent is a postwar record. What happened?

Two years ago, Asia's currency crisis struck. The sheer weight of Japanese banks' exposure to their neighbors ($84.6 billion in loans outstanding to Indonesia, South Korea and Thailand) quickly pushed the country's financial system into crisis.

Since then, Japan has taken huge strides towards cleaning out bad bank loans, thanks to a 60 trillion yen (500 billion dollars) bank recapitalization program enacted in October. In addition, the Japanese government has used bonds to finance public works legislation. This infusion of public money has improved the short term outlook of Japan's banks and might eventually infuse life into the stagnant Japanese economy. Nevertheless, long term economic recovery in Japan, analysts say, is still years away.

The recession and bank restructuring is having a direct effect on the way Japanese companies are doing business--most significantly, in the way they are treating their employees. To quote Lucy Craft's report: "Traditionally, Japanese companies were run for the benefit of employees, not shareholders. But fuzzy accounting, seniority-based pay and rubber-stamp boards of directors -- the hallmarks of Japanese-style capitalism -- are starting to give way to a more western bottom -line-oriented corporate culture. " She adds that the companies are "... focusing on making money."

As a result, according to a mid-July survey of 1,164 firms by Nihon Keizai Shimbun, the average salaried Japanese worker's summer bonus dropped by nearly 5.8 percent from the year before. The drop was the largest since the leading Japanese economic daily began conducting such surveys in 1975 and was the first fall in five years.

While the smaller summer bonuses likely will keep consumers in a cautious frame of mind, the fact that companies now appear to be least pessimistic is yet another indicator that Japan's economy may be turning around.

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SOURCES:

Lucy Craft, Nightly Business Report, 11/10/98; 6/25/99. Yahoo News Asia, Agence France-Presse (AFP). Yahoo! Finance, Reuters. Whymant, Robert. "Japanese Firms Rewrite Rules of Employment". Times Newspapers Ltd, August 2, 1999. Yahoo Yahoo: The Japan Institute of America, "Spin on the News", July 21, 1999.

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LESSON PLAN:

GRADE LEVEL/SUBJECT: 10-12/Economics, International Relations, World History, International Bachelaurate Programs(IB), Current Events.

PURPOSE: to present activities to be used at a variety of classroom situations in order to enhance student understanding of Japanese economy and its significance globally.

OBJECTIVES: Students will be able to:

1. explore the present state of Japanese banking.
2. the effect of the banking crisis on multinational businesses.
3. the role of government in the economic growth of a nation.
4. describe the short term and long term goals of the policies adopted by the Japanese government to change the course of economic events.
5. define Gross Domestic Product (GDP), deregulation, globalization, restructuring, asset liquidation, low-margin banking, profitability, cash flow.
6. explain how the state of the banking industry is related to economic recovery in Japan.
7. compare and contrast labor/management relations in Japan with those of the United States.

MATERIALS:

1. Background information provided.
2. Resources on Japan available at your school's Media Center and the Public Library System in your area.
3. Background information available through Internet "search engines".

ACTIVITIES: May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.

1. Develop a time-line listing the events which led to the banking crisis in Japan.
2. Chart the Japan's GDP (Gross Domestic Product) for the past 5 years. Draw conclusions from this information.
3. Research and report on the latest information about a major bank or a multinational corporation and report on the restructuring it has undergone. What has been the result of the changes? Speculate on short term and long term consequences. Students may illustrate this report by using graphs and charts.
4. Research and report on similar financial crises in other nations throughout history. How can Japan profit from these events? What recommendations would the student/group make to resolve the crises based on policies from other times and places?
5. Following student/group reports, the class may use the information already gathered to create a future domestic and global scenario for Japanese business.
6. Create a pamphlet to advertise how your bank is changing to meet the economic needs of the nation.
7. As a Japanese entrepreneur, write an editorial for the newspaper expressing your views on the state of the economy.
8. Role play the parts of important players in this crisis: The CEO of a securities corporation, the president of a bank, a consumer who needs a loan to buy a home, the head of the banking regulatory agency, etc... Hold a panel discussion where these people can answer questions and explain their positions on the issues at hand.
9. Write editorials from the point of view of a variety of individuals at different strata of the economy. Express how each is affected by the stagnant economy and the subsequent banking crisis. Example: Someone trying to purchase their first home; the owner of a small business; an unemployed professional; an unemployed laborer; a woman in the work force, etc...
10. Role play a labor/management conference in Japan and in the United States.

EVALUATION: Individual assignments should be graded by the teacher using established criteria. Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale:

Content 1= Superior (A) Creativity 2= Excellent (B) Clarity 3= Good (C) 4= Fair (D) 5= Poor (F)

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