Japan's Fiscal Crisis

DATE: 2012/12/10

I have oftened bemoaned the mendacity of my fellow American citizens
and our political leaders to demand and provide ever greater benefits
from government programs while financing such largesse not by taxing
current voters and beneficiaries of such, but with skyrocketing
public debt to be paid off by the current generation's children and
grandchildren. Public debt boils down to a taxition without
representation of our descendants.

It has been my fear that my adopted home Japan suffers from similar
fiscal irresponsibility, with the additional danger that citizens'
political apathy politicians' vested interest in the status quo
results in fewer people even aware of the problem.

In a recent interview, Michael Woodford, the former president of
Japan's Olympus Corporation who was instrumental in uncovering that
company's major accounting fraud scandal, revealed information about
Japan's finances and corporate culture that confirms my worst fears.

- Japanese business is dominated by a "perverted golf-club
  mentality". Executives of large corporations, banks, and insurance
  companies work together to protect each others' interests rather
  than those of their shareholders or ethical standards.

- Large companies are not allowed to fail, whereas in other
  capitalist nations strong companies would acquire weak firms and
  strengthen them.

- Currently Japan's public debt totals 235 percent of annual gross
  domestic product, the highest percentage of any nation in the
  world.

- Keidanren successfully lobbied against a government proposal to
  improve corporate transparency by legally requiring all public
  companies to have at least one external director.

- Japan's fiscal situation is much worse than that of Greece and
  Spain. Greeks are rioting because the government has been forced to
  address its public debt problem. No such force exists for Japan.

- Japanese media do no aggressive investigation. Corporate scandals
  are usually only reported by Japanese media after they have been
  reported by foreign media. (News monthly Facta and online video
  service Nikonico Douga are exceptions.) 

- Japanese corporate culture is obssessed with obedience and
  hierarchy.

- Japanese insularity is working against needed changes to make
  corporate governance more open, and the tendency is increasing with
  recent economic and social stress. 

- "The country is inward-looking and dysfunctional and it's getting
  worse."

- "They have to learn how to manage outside the hierarchical,
  obedient, servile and deferential approach to Japanese management
  -- to challenge with confrontation."

Reference: David Hickey. "Japan's whistle-blower supreme speaks
out". The Japan Times. December 2, 2012.