Toward the rebirth of the japanese economy and its corporate system

It is widely agreed that the Japanese economy has experienced the following three phases since the early 1970s: (1) ‘success’ from the oil crisis to the mid-1980s; (2) a ‘bubble economy’ from the mid-1980s through the early 1990s; and (3) ‘failure’ since the early 1990s. This article, however, suggests that the production system has remained ‘successful’ throughout the three phases, while the financial system has been a consistent ‘failure’. If we accept the conclusion that the true nature of the crisis facing Japan in the 1990s was a crisis of the financial system, and that the production system remained sound during that period, the prescription for curing the crisis is simple: reform of the financial system and maintenance of the production system. At the very least, the following four actions are crucial for the rebirth of the Japanese economy and its corporate system:skill-building in equity finance by both businesses and banks, overcoming the ‘investment suppression mechanism’ which came into effect after the oil crisis, shifting to an enterprise strategy combining product power with services in order to increase revenues, and building an economically rational international division of labor with East Asian economies and enterprises.