http://en.toureast.com/portals/0/img/country/japan/japan_header.jpg

Ever since the 90s it has been no surprise to the world that Japan has not only had a problem innovating with new technology, but keeping up with holding its spot as a top economy. As it sits now, Japanese companies are losing money, but have saved so much that they can stay alive. However this won’t work forever and the real problem in my opinion is with innovation. Venture capitalism was billions of dollars less in Japan than in America, which leads to a lack of support for possible new industries and companies to come about. There is a large problem and I want to propose what I think it is. 

So I have actually thought about this a lot and I think the problem we see with venture capitalism in Japan is that its much harder for smaller companies to break into the mainstream in Japan than it is in the US. Japan has something called a kairetsu, which is basically the idea that there are interwoven companies within the economy that support each other and can trade and exchange workers during economic hard times.  Unfortunately the kairetsu in Japan is widely protected by the government to the point where they are given large tax incentives, and support if they start to hemorrhage money. The government sees it as a good bet keeping the big and powerful companies alive, but in reality keeping these companies alive is not helping people in the long run. 

https://www.youtube.com/watch?v=_1rXqD6M614

If you look at the US the companies doing the real innovation and disruption are the small firms that eventually become massive over time and sometimes are eventually taken over themselves. If we look at the computer era in the US, Xerox and IBM had the tools, patents and even products to essentially run the entire industry, but instead they were beat out by tiny firms (at the time) like Apple and Microsoft. For some reason when companies start to become so big, they no longer innovate or take risks in the ways that they used to. It might come down to how the company is run, or that the best ideas don’t make it through the bureaucracy, but it is a problem that almost every company foreign and domestic, faces. Steve Jobs did an interview once and he has a theory to why this happens, which I found pretty interesting. 

Japan's government has to stop protecting businesses that are hording their money and slowly dying and let small innovative firms have a chance at breaking in. The system they use now worked for a long time when they were a manufacturing nation, but with goods being produced much cheaper in China, India ect. they need to look at creating innovative products. They did at one point, but it was because the companies doing it at that time like SONY, Mitsubishi, ect werent the massive companies they are today. They were still fighting for their place in the world and taking the bold steps needed to do so. Floppy disks, the walkman, ect all came from Japan and were massively successful, but it seems like that connection with the consumer has been lost. I don’t believe it is a Japanese problem but rather a company problem. If the current companies in the kairetsu are not creating the type of innovation that is needed in a post industrialized Japanese era, they must be replaced by companies that do the job.

http://netdna.webdesignerdepot.com/uploads/vintage_tech/zip-drive.jpg

If Japan truly wishes to keep its spot as a top economy for much longer, they need to go back to what they have always been good at, technology. To do this smaller companies in new industries need to be fostered and venture capitalist should be incentivized, whether its by taxes or some other way, to fund new and adventurous ideas. Japan hasn’t had an easy time and many of the cultural ideas like lifetime job security and bonuses, have taken a large hit. If Japan wants to stay competitive they must act like a competitive nation or else they will fail in the long term. I fully expect that if the nation continues without change, we will see the death of many of the large companies we have known to love from Japan for years. The Japanese people can adapt and quickly, we know that from history, but in my opinion the government must take the first step.

-Calaber24p