The “Lost Decades” of the Japanese Economy
Reptile crisis in Japan started from speculative bubble bursts in the early 1990s and lasted until after the pandemic. The so-called lost decades she finished recently increased economic activityand a price-boosting dose imported inflation.
SME Problems
Small and medium companieswhich constitute 90 percent. Japanese economythey are facing rising costs of raw materials and components. At the same time, they face pressure from customers, often larger companies, to keep prices low. In Japan, asking for more money can be seen as greed. After years of low prices, most people resist price increases.
Pay rise only for the biggest ones
Apparently the label of a “greedy” corporation does not apply to giant corporations. Tokyo companies and other large cities that have no problem not only demanding price reductions from contractors, but also salary increasesThis spring, employees international corporations they received the highest annual salary increase for 33 years, amounting to 5.1 percent.
In smaller companies the increases were much smaller, which did not compensate for consumer inflationwhich amounted to 2.8 percent in June. The constantly rising prices of food and media, with salaries remaining unchanged, will increasingly stifle domestic demand. Thus inability to talk about money and costs it may soon lead to wave of bankruptcies in Japan.
Interest rate hike
In March, the central bank raised borrowing costs for the first time since 2007, ending 14 years of negative borrowing costs. interest rates. Another round of increases Bank of Japan announced in late July. They currently stand at 0.25 percent. Whether small and medium-sized businesses follow suit and raise prices will ultimately determine whether the much-hyped revival of the $4.2 trillion economy will be realistic.
The Lost Art of Negotiation
Throughout Japan, directors and managers are signing up for training courses where they learn how to negotiate prices. Bloomberg reporter Reed Stevenson listened in on the session, organized by a local foundation that supports entrepreneurship. It was led by 70-year-old veteran negotiator Ikkou Kanonji.
In his presentation entitled “Price Transfer Know-How” Kanonji he advised inexperienced negotiatorsto do their homework in advance: 80% of negotiations depend on the level of preparationhe said. “Understand what you can trade and what concessions you are willing to make, from payment terms and exclusivity to delivery dates and after-sales service,” he added.
Win-win principle
The purpose of any negotiations Is finding the best solution for both partiesKanonji explained to his listeners. Every negotiator has his own unique style and it is important to know it. “Understand whether you are coldly analytical or engagingly friendly,” the negotiator said. As examples different negotiation styles used historical figures of feudal war chiefs. “Set clear goals. Prepare alternatives in case things don’t go as planned. This is not fighting,” Kanonji added.
Ikasazu, korosazu
In his class, Kanonji also explained the reasons why smaller businesses in Japan are struggling. There is old Japanese saying ikasazu, korosazuwhich can be translated as “don’t let them live, but don’t let them die”. Originally, it defined the relations between feudal lords and peasants inhabiting their lands. Currently, the motto is much closer to modern Japanese industrial policy. Suppliers have long been expected to serve the giant enterprises that drive the Japanese economy and represent the country in the international arena.
And larger companies know all too well that they have the power. If they withdraw their orders, smaller companies could go out of business. “Fear is a deciding factor for business owners when they are negotiating,” Kanonji said.
Unhealthy dependency…
An unhealthy relationship then appears: smaller companies can keep their contracts, but they have to settle for poor conditions of cooperationWhen companies can’t raise the prices of their products and services, they can’t pass those profits on to employees in the form of salariesnotes Donald Low, professor of public policy at the Hong Kong University of Science and Technology.
In a country with limited state protection, it is the companies that maintain social safety net. People accept lower paid jobsbut in return they expect to maintain them. Work culture in Japan is more group-oriented and less focused on individual success and money than in hyper-competitive companies in the USwhere poor workers are routinely fired.
…weakens the economy
And without a steady flow higher salarieswhich translate into higher pricesthe economy is faltering. It is unable to start the classic wage and price cycleLow said. Only when higher yields translate into higher prices will the central bank see the healthy price growth it has long sought, Low added.
Business Negotiations and Monetary Policy
Negotiations are the daily bread for all Western business. In Japan feudal history and lasting for decades deflation caused most Japanese people to forget how to take care of themselves the economic future of the company. According to Kanonji, the demand for his training in the last 20 years has not been as great as it is now. First of all, among small and medium-sized enterpriseson which the entire Japanese economy is based.
Negotiations and price increases drive the lifeblood of every economy: inflation. It is important to be skillful monetary policy kept it in check and did not allow it to fall too much or exceed the reasonable threshold of 2.5%.
