Breaking bad habits. Photo: iStock
Breaking bad habits is never easy, but it's worth the effort. Photo: iStock

If you’re trying to figure out why Japan Inc. isn’t more dynamic five years into Abenomics, you could spend hours poring over data, charts and case studies. Or you could take a deep breath – literally.

That ubiquitous cigarette smoke you inhale in Japan says it all about the timidity with which Tokyo confronts problems that other global cities fixed long ago.

The fact Tokyo is still a puffer’s paradise is a piece of why Japan came in dead last in the 2017 IMD World Talent Ranking of Asian capitals most attractive to skilled foreign talent. The force with vested interests is stronger than Prime Minister Shinzo Abe’s determination to raise Japan’s economic game.

Japan’s quality-control problem tells a similar story – and a fast-developing one at that

In the last few days, Mitsubishi Materials Corp. joined a growing list of disgraced Japan Inc. icons caught fudging data, in this case on parts for cars and airplanes.

In disclosures eerily reminiscent of those that tripped up Kobe Steel last month, Mitsubishi Materials is scrambling to discern which of the more than 250 customers who received flawed deliveries are in jeopardy, including Airbus SE and Boeing Co.

That’s on top of Nissan Motor Co.’s vehicle-inspections scandal, Subaru Corp.’s uncertified-workers troubles and, long before that, Takata Corp.’s deadly airbags. The list of shame includes Toshiba Corp.’s creative accounting and Tokyo Electric Power Co.’s negligence behind the radiation cleanup in Fukushima, along with myriad others.

On Friday, Japanese Trade Minister Hiroshige Seko called the matter “extremely regrettable.” That’s Tokyo speak for “move on, there’s nothing to see here.” And it, just like that second-hand smoke, puts the lie to hype about Abe dragging Japan Inc. kicking and screaming into the 21st century.

It’s high time he did.

Abe’s October 22 election victory was a reminder that voters support his reflation program. In 2012, he pledged to loosen labor markets, increase productivity and give the salaryman the biggest raise in decades.

Abe thought (wrongly) that excessive monetary easing would be enough to fatten paychecks. He believed (wrongly again) that introducing a UK-like stewardship code and encouraging boards to add outside directors would internationalize business practices and boost competitiveness.

Japan’s dismal IMD World Talent Ranking grade – 51st out of 63 nations – is a piece of this problem.

To compete, Japan’s aging, shrinking workforce needs more foreign talent. A daunting language barrier is one impediment. Rigid business practices also are repelling foreign ideas and energy.

But so is an insular and opaque culture that enables corporate malfeasance. Just as it takes a proverbial village to raise a child, it takes an entire system to produce a Mitsubishi Materials, a Kobe Steel and a Takata.

It’s breathtaking, for example, that Takata CEO Shigehisa Takada still has a job. One explanation why circles back to the kabuki surrounding Trade Minister Seko’s “extremely regrettable” comment.

After Olympus’ accounting scandal in 2011, executives apologized profusely, bowed for the cameras and then returned to business as usual.

Oddly, Olympus shareholders seemed angrier at Michael Woodford, the company’s first non-Japanese president, for going public with the scandal than the $1.7 billion fraud itself.

Tepco still hasn’t paid a price anywhere near commensurate with its negligence in Fukushima. Nor have Takata’s leaders been called to account for tarnishing the Japan brand.

Abe should be asking for reciprocity from corporate chieftains making a bundle from the Bank of Japan’s largess.

He should impose a tax on companies sitting on some $2 trillion of cash reserves that could be used to increase wages. Or, extend tax incentives to companies that share profits with workers.

Equally important, Abe should give his corporate-governance upgrades some teeth. That includes beefing up enforcement efforts, imposing serious fines and doling out stiff punishment to offending executives.

For a decidedly top-down, rules-driven government, Japan is paradoxically laissez-faire about corporate misdeeds to the detriment of its global standing.

Why not create a corporate responsibility board to police executives independent of ministries too close to exercise impartiality and business lobbies?

That would surely clear the air and breath new life in Japan’s recovery. Now, back to those cigarettes…

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