Corona Support Can Be Provided as Space, as Well as Money

Being based in Japan, I am regularly reminded of the value of space.

Most Japanese cities contain shopping and entertainment areas that cram incredibly high numbers of people into every square metre. Pre-Corona, this created a pleasant bustling, jostling atmosphere, but now it is a source of economic pain as social distancing rules and fear of infection have radically reduced the number of customers frequenting the shops, restaurants, bars and clubs in these areas.

Low testing numbers have compounded the problem. Uncertainty about real infection numbers means that many people take a "better safe than sorry" attitude and stay at home, regardles of government exhortations to travel and re-start business and social activities within the infection-prevention guidelines. The shinkansen between Osaka (where I live) and Tokyo (where I often work), previously packed with passengers, is now not even half full. The cozy little izakaya restaurants and the karaoke bars are echoingly empty.

Like the rest of the world, Japan is desperately looking for ways to help small businesses survive this prolonged crisis. Financial support has helped to some extent, but there is a limit to how much money can be handed out. Companies are searching for new business models and new areas of activity, but with the economy shrinking, there is a limit to how much this can help.

One possible solution to at least part of the problem is to tap into another resource that governments have available - space. Instead of just giving financial support to restaurants and shops and discount vouchers to customers who may or may not use them (I haven't used mine yet), why not also provide space for the small businesses to carry on their activities in a socially distanced and, where possible, open-air/well -ventilated, environment.

Most local goverments have empty buildings such as houses and warehouses and empty spaces such as riverside parks and industrial estates that could be used to host businesses temporarily in a low person per square metre density environment. Small restaurants could set up wider-area versions of the classic Japanese Yatai open-air stalls and larger ones cafe-terrace style dining. Clothing shops could trade in open-air covered areas or in warehouses.

Japan is a crowded country, particulalrly in the urban centres, but there is a surprisingly large amount of space available - now is the time to think outside the Karaoke Box and support businesses with space.

Osaka Coffee Shop Conversation

Over a year since the last post. We continue to live up to our title. It's a good thing no-one relies on Tsurezuregusa for up-to-the-minute commentary.

Amid the debate on television and in the press about how Japan needs to change, I popped into a coffee shop near my house, owner-managed and full of people living locally.

An older gentleman sitting at the counter engaged me in conversation in typical outgoing, Osaka fashion. For about half an hour we discussed his views on how Japan was changing and I think they are worth sharing.

As an ex-teacher you might expect him to have been worried by the large number of young people choosing not to go into permanent employment (freeters as they're called in Japan), but he actually found this encouraging. He felt that this was a healthy sign of people starting to think for themselves rather than just jumping on the corporate train and riding it till retirement. Certainly it does not entirely exclude them from conventional employment. I remember reading a couple of years ago that one of the large convenience store chains had started a scheme allowing the staff to buy into stores and run them as independent franchises. These staff are often freeters. Many will go on to find other ways of creating wealth in a changing society. The key thing here is to protect them from being stifled by the old social order.

He was also optimistic about the political scene, encouraged by the reduced dominance of the LDP and also by the public activism on restarting nuclear plants. The regular Friday night demonstrations outside the Prime Minister's residence may not seem particularly strong by Western standards, but they are persistent and break the mould of passive acceptance that was the rule for so long in Japan.

Perhaps the rising number of the young freeters and positive-thinking retirees can join with the likes of the anti-nuclear (anti-political-status-quo) groups and release Japan from the cold grip of the current political class. Considering that the politicians and bureaucrats have still not distributed 50% of the aid received after the Tohoku earthquake and that of the 50% distributed only half has gone to Tohoku itself, there is a clear need for change.

Changing Japan

Many people expected the events of March 11th and the subsequent mismanagement and deception by the government and TEPCO to provoke a revolution of sorts; a backlash from a long-suffering public against the corruption and incompetence of the ruling politicians and bureaucrats.

So far there is no sign of this happening.

A documentary on national TV exposing inaccurate calculations over many years by politicians and the bureaucracy over the official figures for the relative costs of nuclear and renewable energy which showed a far greater benefit for nuclear power than actually exists,  provoked little reaction. The Japanese media do not have a particularly good record of investigative journalism, but if nobody reacts to what you write or broadcast, why risk your career to expose the facts?

Protests at the mishandling of the aftermath of the tsunami at the Fukushima reactor have faded away. TEPCO is still in business with taxpayers' support.

Nobody wants to rock the boat, but in avoiding rocking it, it seems to have escaped most people's notice that it is slowly sinking.

Even with an enormous stimulus to action such as the recent disasters Japan can't change.

Or can it?

The reaction by ordinary people and businesses has been remarkable. The speed of the rebuilding efforts astounding. The flexible responses to the shortage of electricity exemplary - without any fuss, factories and offices have shifted the working week and now take days off on weekdays.

And in a quieter, less attention-grabbing way than the events at Fukushima, major changes are taking place in working practises. From highly-relaxed dress codes (to reduce the need for air-conditioning) to home working and shorter working days, the crisis has pushed organisations into a very different way of working.

Very nice for the hard-working salaried employees , but does it make any difference to the big picture? Surely this can't have any effect on the underlying problems of poor government? Consider for a moment though, that one of the reasons put forward for Japan's incredibly low voting rate in elections is that people don't have time to listen to politicians and choose the best candidate. If people have a little more time to think about the current state of affairs and a little more time to listen to and influence politicians, perhaps these changes will have unexpected knock-on effects. My Japanese friends believe that there are good politicians in both parties - the challenge is to break free of the current smothering political institutions (official and unofficial) and create a credible opposition (third?) party.

Maybe all the changes in working conditions will be reversed in the autumn, and people will go back to the same narrow environment they were constrained to pre-crisis, but maybe this brief pause and opportunity for reflection will be enough to provoke the changes needed to move Japan in a better direction...

Effect of the Economy

There is a lot of pessimism about the economy, but there may be a positive side to the disaster.

If the nuclear plant situation doesn't escalate, the sense of purpose and investment in re-building may have a positive effect in the slightly longer term. The contribution of the Tohoku area to GDP is only 1%. The major negative impact is from power cuts, but the Japanese are very good at matching consumption to supply.

Disaster Management

The events of the last four days have put an enormous strain on the government of Japan.

Politicians and TEPCO managers are struggling to find a balance between preventing panic and providing necessary information to the public at the same time as managing the multiple crises facing the country. They are hampered by a lack of credibility stemming from decades of misinformation and by a tendency to hide the truth rather than release the information necessary to allow the public to make informed decisions.

Looking beyond this unfortunate incompetence, however, we should remind ourselves that, in the face of a natural disaster of terrifying proportions, the social fabric is holding together and many brave, committed people are working to repair the damage in all areas.

Whether or not it was wise to build a nuclear power plant on a fault line in an area exposed to tsunami is a question for the generation of politicians and managers who took that particular gamble (continuing to operate it was, of course, a more recent decision), there is little the current team can do other than fight to bring the situation under control.

This morning's news that the Fukushima Daiichi plant No.2 reactor compression chamber is probably damaged following an explosion follows the news yesterday that the cooling water in the reactor had been allowed to run down, exposing the rods, due to human error. Poor management again compounding a serious situation.

The Japanese government has finally asked for outside help. Hopefully the combined efforts of experts from around the world can bring the situation under control.

Adapting to the Rise of China and India

Both inside and outside Japan there appears to be a widely held view that economic decline due to relative lack of competitiveness, hollowing out of manufacturing and demographic change is inevitable. This seems to me an analysis based on the current situation, extrapolated forward on the assumption that nothing will change in Japan. Whether this scenario becomes reality or not depends on choices that have to be made in the near future.

The Japanese economy has adapted to external change successfully in the past (oil shocks, currency shifts) and has consciously directed itself through internal coordination over many years Europeans complained in the 70's and 80's about METI's "laser-beam focus" targeting key industries and before that Japan surprised the world by successfully shifting focus from low cost to reliable quality in manufactured goods.

The capacity for change exists, the difficulty is in identifying how to change and this is a daunting challenge comprising very difficult choices. Encourage "guest workers" as Germany did? Allow immigration to rise? Allow off-shoring to continue, decreasing the size of the domestic workforce required? Continue to compete at all levels in manufacturing or focus on higher value-added activities? Continue to manage capital through the establishment or unlock it for use by small, entrepreneurial companies? Emphasise social discipline and absorption of facts in education or shift the focus towards the skills required to prosper in a world where flexibility and "cloud teams" are the norm.

The odd recent focus on the Galapagos effect (somewhat reveling in Japan's inward-looking economy and celebrating its creation of standards that prevent it from succeeding globally with otherwise good products) is  a step in the wrong direction.

Japan can create a socio-economic model built on existing cultural strengths (consistency, reliability, the ability to refine and innovate, for example) and can add a degree of flexibility to create an edge over emerging manufacturing and service industry competitors. Many businessmen who have worked both in Japan and outside have a similar view - the strengths are clear, but the will to make them the basis for change and growth is lacking. There is an opportunity for Japan to define standards, set benchmarks in quality and design of goods and services and play a leading role in global teams but, currently, the tendency is to turn in the other direction - to globalise manufacturing, but to become more insular culturally. 

Rather than allowing the current opportunity to be lost, Japan should look outwards, make changes within and embrace a role as a gateway to Asia and beacon of order in the region.

Yes we Kan

Mr. Kan replaces Mr. Hatoyama as Prime Minister and effectively Mr Ozawa at the head of the Japan Liberal party. Mr. Hatoyamaa and Mr. Ozawa were ousted for financial irregularities. Mr. Kan was also forced to resign a few years ago for a few missed social security payments in his student days. He then embarked on a pilgrimage around the temples of Shikoku island and has clearly atoned for his misdoings. Perhaps the LDP politicians who engineered the review of his contributions and the bureaucrats who  aided and abetted them should also go on a pilgrimage...

Hopefully, Mr. Kan can compensate for the embarrassing Hatoyama effect and allow the experiment with a non-LDP government to continue. The alternative is too horrible to contemplate.

As the owner of a Japanese business, I am praying that the Liberals will last long enough to push through the planned reduction in corporation tax. At 5% it's not world shattering, but sends a  very positive message.