Japan – a country that gave up competition is back at the top
Has Japan succeeded in soft landing into a more sustainable and culturally rich economy?
Key points of this article:
- Japan ranked first in the Ipsos National Brand Index, becoming the first non-Western country and the first country other than Germany and the United States to achieve this.
- Japan can be seen as a successful model case of a developed economy’s soft landing into a more sustainable and self-efficient, stable economy after an economic hype, a new model of economy was never-ending competition and chasing topline sales are no longer the national KPI, but rather, the quality of life and culture are the new national objective.
- The high brand power of Japan is often felt when abroad, but it may go unnoticed when in Japan. The “lost 30 years” were a period in which the Japanese people quietly and steadily improved the quality of culture and life while valuing the protection of the environment and local culture.
- With infrastructure and technology reaching a saturation point and no longer being able to produce products that emerging countries cannot, competition has shifted to the design power of creating high-value-added products and services in a creative and innovative way. As the Ipsos survey has shown, Japan has received the highest recognition in the ability to create “something that no one else can imitate” in terms of design and arrangement.
In a previous post, I delved into Japan’s achievement of ranking first in the Ipsos National Brand Index, a feat that no other non-Western country, other than Germany and the United States, has accomplished. You can find more information about the survey here.
Last year, I had the opportunity to visit a city in Europe that represents the epitome of European culture. I made use of my weekend time to enjoy some shopping, which also served as trend research. What struck me was the presence of groups of Asian and Gulf-region tourists in luxury department stores, occupying the shops with loud voices and many with manners that do not really pay attention to the fact that they are in a public space and need to be mindful of and respect others, while the local shop staff looked tired and troubled.
Amidst this scene, when I visited alone, the fact that I was alone and could speak the local language to some extent led to conversations with the shop staff. As soon as they found out that I was Japanese, their faces instantly brightened up, and they were genuinely delighted. Uniformly, they all said things like:
“I’ve always wanted to visit Japan at least once!”
“It’s a country I admire!”
When I asked why, they all responded with similar sentiments:
“Because the culture is so different from anywhere else, and everything in Japan is of such high quality and refinement. Everyone grows up watching Japanese anime here. I love Japanese cuisine, and I’ve heard that the nature there is also amazing. Japanese people are polite and kind. It’s a dream of mine to visit Japan at least once.”
This was the reaction from people of all genders and generations. Even a salesperson, who is at the top of the world in a city with one of the highest brand powers in Europe, expressed the same sentiment.
If they think I’m Japanese, they treat me kindly and give me special treatment. I was so surprised by the popularity of Japan when we start talking. They also mentioned, “Japanese customers are rare; most of them are from oil-producing countries in the Middle East or of Chinese descent!”
This situation made me feel a sense of generational change.
The reason being that during the peak of the bubble era, I was living in Europe and visited this city about once a year. In the late 1980s, when the yen was strong, a large number of Japanese people came to this city to buy luxury brands. I vividly remember being treated with great disrespect in the stores of Louis Vuitton or Chanel. Now, there are similarities in the way shop staff treat Chinese and Middle Eastern tourists and the way Japanese bubble tourists were treated in the 80s and early 90s. Local people are usually not so happy with newcomer tourists when they come down them slapping locals faces with stacks of cash and gold/platinum credit cards, buying off everything on the shelf that local middle class people can no longer afford, or don’t like the taste, because luxury goods have catered to the nouveau riche taste; flashy, gaudy, in-your-face logos — hopefully the silent luxury trend would fix that…
Since the burst of that bubble with the bankruptcy of Yamaichi Securities back in 1999, a Japanese version of Lehman that came a decade or two early, the years have been referred to as the “lost” years, but when we look at Japan’s overall brand power today, it’s not so simple to say that.
The idea of simply increasing population and exporting mass-produced goods to earn money is no longer considered sustainable for the planet. As the economy grows and a stable middle class emerges, competing based on quantity and speed with cheap labor become no longer viable. If you can’t compete with copyable low-cost products, the only option is to compete with innovation, creativity, and the uniqueness and quality of design.
In that regard, Japan’s inherent sense of beauty, the craftsmanship that pursues things to the utmost, and its unique culture become incredibly strong weapons. When I interviewed one of the founders of Evernote about a decade ago, when I asked him the cliché Japan is the passé question; “Japan seems to be lagging behind in startups in the tech and digital field, how do you assess Japan’s potential?” he answered:
“My, it’s the other way around — now that all the infrastructure is in place, the game has changed to design. That’s precisely what Japanese are good at. I mean, I have a collection of Japanese Kamon (the emblem signs that signify each family that are elaborate, minimalistic, and creative), and the fridge of my office back in Silicon Valley is filled with Japanese green tea bottles. You can count of me; Japan will be back — with design.”
Back then, I don’t think I really understood what I meant. I was like “green tea? You mean this green tea bottle right here?” and he was like “yes, can’t you see it’s amazing? The quality and the design?!” and I was still “no…I think you and I perhaps don’t speak the same language.”
I was a business and finance reporter, and all I cared and heard about was how the strong yen was hurting the exporters, and even when the Abe administration tried to reform, that reform never happened, another disappointment. Another failure. But what I didn’t notice was the slow and steady change that was happening, fruits of which I myself have enjoyed, and still enjoying. It was too normal and too slow, and it has been years since I had returned to Japan, so those fruits have become something quite natural, and I lost a sense of appreciation.
Such are the streets of Nakameguro, Shibuya, fully renovated centuries-old Kyoto merchant house turned to Aesop shop that digital and design nomads flock to from all over the world. Such is the back-country skiing in Hakuba or Niseko and the French bistro with locally brewed white beers, fermented Bries, and whole-grain red-wine bread, with bisque made of Hokkaido shrimps.
Over the past 30 to 40 years, the Japanese people have been living at their own pace. They couldn’t care less about the rest of the world. They grew too fast, they ruled the world and Fifth avenue, they flew too close to the sun and got punished like Icarus. After the fall, the realized asking too much out of their means was never really the Japanese aesthetics. It was time to put things back together, but in a sensible way, in a way that makes sense “locally.” Afterall, we are the culture of beauty and perfection, and “comfort.”
For example, restaurant owners who decline to receive Michelin stars embody this unique Japanese trait. They prioritize their own satisfaction and the quality that resonates with their regular customers, rather than caring about global indicators and one-off inbound tourists. They have their own sense of pride.
The world is constantly changing, but many Japanese people have felt that if they can pursue things that are comfortable and enjoyable for themselves, that’s enough.
Japan may be lagging in areas such as deep tech, digital, and IT. However, there are actually many medium-sized Japanese companies that were born in the 1970s and possess innovative power that the world recognizes. These companies are considered more innovative than startups. They ARE actually startups. It was not just Panasonic or Sony, but myriads of SMEs sprung up right around the same time, and they are ones who supported the miraculous recovery after the World War II, they were all startups. Now, they’ve been around for a while. It means that they have funneled a population of engineers, technicians, and scientists through the society and the educational system. In Japan, there is a mature ecosystem of engineering, design, and technology. Nobel laureates cannot be borne out of venture capital of just over a decade. Japan achieved high economic growth much earlier than other Asian countries, allowing it time to mature its scientific and technological capabilities and integrate them into its culture and society. Those SMEs, are now being targeted by overseas funds and companies, taking advantage of the weak yen.
On the other hand, emerging countries that are only now seeing the emergence of a middle-class face risks arising from resources, climate change, and geopolitical conflicts. They may not have the luxury to leisurely mature their society and culture.
Once technology has evolved to a certain extent and the basic infrastructure is in place, it is said to be a battle of design, like that Silicon Valley leader said. The ability to create unique designs and arrangements by adjusting various things within the given framework is something that Japan has excelled at since the time it inherited kanji from China and developed its own hiragana culture and literature.
According to Ipsos surveys, Japan is highly evaluated in terms of its “brand power” in areas such as export strength, the appeal of its culture and content, talent, immigration, and investment. There are two items that have contributed to Japan’s ranking in first place:
“I trust products manufactured in this country.”
“This place is different from any other place.”
Despite boasting such brand power, the prevailing opinion domestically is that Japan is in complete darkness. However, I believe that Japan is currently at a crossroads. The brand power that was obtained by nonchalantly and humbly, as well as in an introverted way, turning away from the hustle and bustle of the world. However, the economic evaluation does not fully reflect the value of that brand power. Due to the historical weakening of the yen, Japan’s brands are being undervalued.
All the wonderful craftsmen, chefs, and people who work with pride in Japan are being undervalued due to the weak yen, and their work is not being properly recognized. This is clearly unsustainable in today’s globally connected economy.
The responsibility for this lies with the government, particularly the Ministry of Finance and the Bank of Japan. Over the past 30 years, the efforts of all those who have quietly and diligently contributed to enhancing Japan’s brand power have accumulated and formed this valuable resource. The government must not squander this brand power through its lack of action.
The government is trying to leverage Japan’s brand power to attract nomadic workers and entrepreneurs from around the world. However, if they do not correct the extreme weakness of the yen to a level that corresponds to the scale and quality of the economy, and if they do not increase the wages of those who should be recognized, talented individuals will continue to flow out of Japan.
We are at a tipping point.
This story is a sequel of this post.
