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2009.04/01


Radio Nippon presents, gSugahara Akikofs EDGE TALKh
Part1
Guest is Dr. Kenichi Ohmae

S:Today, we're here visiting Dr.Ohmae's office. There are indeed a lot of books here.

O:Yeah, I have written 200 books in total so far.

S:Wow. I'm a fan of yours so I think I may have read more than 20 of them.

I have always felt you have an ability to perceive where current trends are leading us and a passionate devotion to your field.

I'm always reminded of how you consider about the future of Japan and the people with such great seriousness.

Have you always had such drive?

O:It's probably got something to do with growing up in a poor family.

S:Really. I've always had the image of you being well off though.

O:Well, I was brought up in an ordinary fishing family so I had a normal upbringing. But luckily I managed to get a job with McKinsey & Company, Inc where I was given a chance to be active in a global environment. Well I feel I was incredibly fortunate. I started my career as a business consultant and I write books in the hope of sharing the experience I have gained in my career and make it accessible and useful to everyone.

S:When reading your books, this may sound rude but I feel that since your defeat in the election, you have gained a more substantial kind of geveryman-nessh that was not present when you were an executive partner at McKinsey & Company, Inc. Is that a fair comment?

O:Not really, during my time at McKinsey & Company, Inc that is for a period of 25 years, I helped companies develop business strategies and while it's not wrong to say that perhaps I knew very little about what was going on outside my own sphere of experience, one thing I can say for sure is that I was working very hard studying management and economics. In truth, when creating business strategies, I had to analyze the behaviour of consumers as people and that was also the kind of thing I was involved with. Well, in 1995 I entered the Tokyo gubernatorial election with the dream of changing Japan. During my last ten years with McKinsey & Company, Inc, I was also writing books like gThe Wealth of a Nationh and gHeisei Ishin - Zero-based Organization and Constitutionh . Well while I was with McKinsey & Company, Inc, I did make contributions as a Board member but I left wanting to change Japan and entered the electoral race, when I lost to Mr. Yukio Aoshima that was a blow. My desire to do something for Japan was strong however my message was not getting through to the general public, even if the spirit is willing, if you are not getting through to people, you are going to have problems. Mr. Aoshima managed to get 1.6 million votes through his promise of transparency in government with a minimum of campaign activities.

S:And he joined the race late.

O:In my case the public did not respond to mS:Today, we're here visiting Dr.Ohmae's office. There are indeed a lot of books here.

O:Yeah, I have written 200 books in total so far.

S:Wow. I'm a fan of yours so I think I may have read more than 20 of them. I have always felt you have an ability to perceive where current trends are leading us and a passionate devotion to your field. I'm always reminded of how you consider about the future of Japan and the people with such great seriousness. Have you always had such drive?

O:It's probably got something to do with growing up in a poor family.

S:Really. I've always had the image of you being well off though.

O:Well, I was brought up in an ordinary fishing family so I had a normal upbringing. But luckily I managed to get a job with McKinsey & Company, Inc where I was given a chance to be active in a global environment. Well I feel I was incredibly fortunate. I started my career as a business consultant and I write books in the hope of sharing the experience I have gained in my career and make it accessible and useful to everyone.

S:When reading your books, this may sound rude but I feel that since your defeat in the election, you have gained a more substantial kind of geveryman-nessh that was not present when you were an executive partner at McKinsey & Company, Inc. Is that a fair comment?

O:Not really, during my time at McKinsey & Company, Inc that is for a period of 25 years, I helped companies develop business strategies and while it's not wrong to say that perhaps I knew very little about what was going on outside my own sphere of experience, one thing I can say for sure is that I was working very hard studying management and economics. In truth, when creating business strategies, I had to analyze the behaviour of consumers as people and that was also the kind of thing I was involved with. Well, in 1995 I entered the Tokyo gubernatorial election with the dream of changing Japan. During my last ten years with McKinsey & Company, Inc, I was also writing books like gThe Wealth of a Nationh and gHeisei Ishin - Zero-based Organization and Constitutionh . Well while I was with McKinsey & Company, Inc, I did make contributions as a Board member but I left wanting to change Japan and entered the electoral race, when I lost to Mr. Yukio Aoshima that was a blow. My desire to do something for Japan was strong however my message was not getting through to the general public, even if the spirit is willing, if you are not getting through to people, you are going to have problems. Mr. Aoshima managed to get 1.6 million votes through his promise of transparency in government with a minimum of campaign activities. S:And he joined the race late.

O:In my case the public did not respond to my proposed policies which took me a year to analyze and formulate but they loved it when Mr. Aoshima said he would turn everything upside down and give politics an airing out. With that he won a landslide victory over Mr. Ishihara, not the current governor, but Mr. Nobuo Ishihara and myself. Then I left politics, realising I didn't have what it takes to be a governor. At the time if we say there were approximately 7million voters in Tokyo which meant 1 out of 4 voted for Mr. Aoshima. If you walk through the town you see dozens of people and unless one of those people vote for you, you do not get to be a governor, when I thought this, it kind of blew me away. Well not being suited for politics, I decided to focus on developing business people. I am involved in various projects and involved with around 10,000 people at any one time through my schools such as gIsshinjukuh which is a policy research school and gAttacker's Business Schoolh, a training school for business entrepreneurs and also at the gKenichi Ohmae Graduate School of Businessh nowadays. Studies focus on business management and economics of all kind as well as use of stocks and assets. In essence although I wasn't right for a political career, I was very experienced in cultivating human resources. During my time at McKinsey & Company, Inc, I gave intensive training to more than 500 staff members that are now active all over Japan. It would be such a benefit for Japan if Japanese businessmen were able to receive such comprehensive training. People often talk about what they achieve and leave behind, it might not be much but I feel that the people that I have had a hand in training are kind of what I can contribute even after my own career is over. In my career up to now, I guess you could say that my defeat in 1995 was a big turning point for me.

S:Yes and thanks to your experience, many of your works have had a common quality of being easy to understand and accessible to all and one of those is gEmpower Your Moneyh. O:I like to think so.

S:So there was another book about the psychology of economics that you wrote before gEmpower Your Moneyh. The book is notable because it goes into even greater detail than gEmpower Your Moneyh which I had a great time reading. As for the bit where you liken Japanese people to nursery school children in the way they use their money when compared with the norms in the world, is that something which you have believed for a long time?

O:In truth yes. If you look at the financial situation of an individual in Japan, you notice that they hate taking chances with their money. At the moment even though the Yen is so strong, Japanese industries and business is not venturing out into the world whereas in the 80s, another time when the Yen was also strong and the home economic was booming, Japanese people were buying up everything from the Rockefeller Center to hotels in Hawaii and were really pushing out aggressively. Japanese people think in terms of ups and downs and that they come in turn but at the present time, even though they have got the strongest currency in the world, they are behaving unbelievably timidly. They have as much as 1500 billion yen worth of total personal financial assets and yet they refuse to do anything with it. This is an awful waste. Fundamentally the basic principle of investment is to get hold of things when the prices are low and before anybody else is interested in them. However the typical Japanese way of doing things is to throw their hat into the ring at the wrong time, buying things when they are expensive like a hotel in Hawaii, in other words when everyone else is doing it, too and to cut their losses when a big crash hits. We can only describe this as utterly backward. I wrote the book to try and show people the error of their ways. As you mentioned earlier, the book gPsychological Economicsh indeed contains the economic thoughts that is most vital at the present time. For the past 100 years the economic theories and principles that academics, civil servants and politicians have been relying on are either those of Keynes' or monetarist theories which dictate that interest rates should be reduced in a bad economic climate or money should be pumped into the system, both of which make absolutely no difference. What is most important in a economic crisis is to get everyone to shift from a tense state to a relaxed one.

S:Everyone is very tense now. Even if you have got money to burn, people get stuck in the mindset of fear and anxiety which revolves around the idea of making a huge mistake with your money because you can not read the situation correctly and regretting it later. It is this kind of mindset that just freezes consumption.

O:Absolutely. This crosses over a little bit into your field of medicine doctor, but we find that as soon as people feel that the future might not be too bright, they immediately try to prepare for it. At the moment, the majority of the money in Japan is locked away for some coming raining day as part of this mindset. People are not sure what they are doing with the money but nevertheless it is put aside for some unknown rainy day.

 



Radio Nippon presents, gSugahara Akikofs EDGE TALKh
Part2
Guest is Dr. Kenichi Ohmae

O: I often ask older people what their idea of a 'rainy day' actually is, and they turn round and tell me the same thing. So we have this situation where we don't even know what our 'rainy day' might be but we put money aside for it anyway. We have pensioners who save about 30% of their pensions, this is entirely unheard of anywhere in the world except Japan. Sadly, Japanese people are at their richest when they die. If you ask people how they feel about the way they are leading their lives, people always come back at you with talk of rainy days and whatnot. It's only when people are coming to the end of their lives that they realize how much they have actually saved and think to themselves gWell, if I had that much money going unused, I should have taken a trip to Italy or somewhere like that or I should have done this or that. In the end, the last words of Japanese people tend to be of regrets.

S: That's truly a shame. Even though we as a nation are becoming a society of older people with money, we don't have the courage to use our money in the way that we want, moreover we don't know how we should be using our money and there's no one there to teach us or explain to us- it's kind of like three strikes and you're out.

O: Yeah, and all the politicians feed that mindset and situation by claiming that the economy is in a bad way and that we need to scrape together 20 billion yen or 30 billion yen or we're in trouble, this is all we hear on the news and such, but in all honesty when I look at the whole world, I honestly believe that there is nowhere with people who are better off than they are in Japan. Furthermore, Japan isn't like an America that has prospered through borrowing from all over the world, in Japan we have 1500 billion yen, held by individuals and we aren't a society based on credit and the idea of 'borrow now and pay back later'. The country has debts, but the people have got enough money, we sit back like that and don't move our money around through spending. This is the reason why the economy is struggling. We shouldn't be building new roads in Hokkaido or constructing bridges in Okinawa under the banner of 'Emergency economic measures'. Just as we entered the 90's when people were telling us we were in recession, individual savings for the nation totaled 700 billion yen. Fast forward to the end of the decade and we are at 1500 billion, not sure what was receding. There's no country in which individual savings double in the midst of recession.

S: The idea that individual savings can grow this much must seem incredibly bizarre to outside observers.

O: More than anything, it's a waste.

S: Absolutely.

O: If we harnessed all this capital and got everything together, we could buy grain to bolster our supplies which are insufficient and help companies to buy in ores and metallic elements that can't be mined here. Well, for instance, suppose an older person decides to move to an region abroad where labour costs are very low, like Thailand for instance, and build a second home there, on the current pension in Japan you could get roughly double for your money, but no one is interested in doing this. In places like Europe and America where the northern parts are cold, people work and save up and move somewhere warm after they retire. This is actually now a booming industry, however Japanese people don't move. Even so, people claim they stay where they are because they are used to the place but ironically if we consider the tragedy of the Kobe earthquake, living in the same house in your area for more than 30 years can be dangerous.

S:Yeah if possible, we don't want to see people living isolated in areas with a sparse population but rather moving in a more pleasant way and I think that there should be a suitable government policy making that possible.

O:Absolutely. If you don't have a community around you then the biggest problem of old age is not going to be money, particularly in the case of Japan. Rather it's loneliness and isolation which leads old people to gather into communities of thousands, full of old people who are very active and full of life. However, in Japan there is a tendency for old people to go straight into homes or sheltered accommodation, but the thing is that the portion of older people that actually need such care is actually just 1 in 6. The rest just pass away of natural causes.

S:Yeah we've been seeing this since the second half of the 80s.

O:Quite, and people worry about this. The question is what people must be thinking when even after retirement they probably have 20 more years of health and independent living left. For example if the government said to people who wanted to rebuild their homes that are more than 30 years old that they would give them 1 million yen to do so if they do it within the year, the economy would soon recover.

S:Yeah. It would be great if that kind of subsidy was available.

O:For instance, if you dished out a million yen to everyone, and Mr. Aso has already given out 2 billion on other things this year, if you had 2 billion yen to give out at 1 million a head, that would give us 2 million people with government money in their pockets. So if 2 million people built new homes, in terms of economic stimulus it would be like Christmas and our birthdays rolled into one. Another example could be cars, if you said you'd give 100,000 yen to everyone who buys a new car this year, you could spread the same 2 billion yen over 20 million vehicles. So that's 100,000 yen on each of 20 million vehicles, and that is your original 2 billion yen. If that happened, even Toyota wouldn't be able to keep up with the demand, about 2 million vehicles would be possible. On this basis, you could even give away 500,000 yen per vehicle. We saw Mr. Aso give out 2 billion yen with 12,000 yen going to each household and it had practically no effect. However if you said to people we'll give you 500,000 yen part-exchange on your old car, everyone who's been driving anything for about 9 years would rush to the dealerships.

S:And they're doing that in Germany.

O:Yeah, in Europe, depending on the country there's lots of things like that going on. If you had given out money on part-exchange deals for new cars, Toyota wouldn't have been announcing a 40% drop in profits compared to last year. Furthermore the components manufacturers and electronics manufacturers would all spring back to life. The way money is being used in Japan makes no sense.

S:Yeah if you're going to dish out money, it's best to direct it towards high cost consumer goods that have a large effect on the economy, houses are definitely the most worthy.

O:Definitely, houses and cars. This would have a huge effect for Japan. This is the kind of thing that I bring up in gEmpower Your Moneyh, the enormous effect that spending can actually have. In order to make money work, to do things like change society, we're in a recession now so in order to fix that, we have to encourage spending not on the part of the government but on the part of those who actually possess it. We've got 1500 billion yen, we don't want the government to be handing out measly sums of 5 or 10 billion, we want everyone to be going out and spending money and the government must support and encourage this. Directing funds towards construction projects and the like and spending huge budgets is what politicians do best but it really yields little in the way of results. We have seen this time and time again.

S:Yes. The government's plan is 40 years out of date.

O:Absolutely, and we're going back 150 years I'd say. Keynes wrote his theories just around 1900 so there are over 100 years old. His theories have never once succeeded, yet Obama in the States and Japan are following these principles.

S:And there's the danger that they will use these theories again, even in America.

O:They will. America has already produced a ridiculous amount of economic stimulus plans, and I feel that they will definitely fail. In places like Japan where individuals are holding all the money, we need to assist people who spend their money and we need to impose deadlines for this to get people to spend by the end of the year. Well another thing that really works is stopping inheritance tax.

S:As discussed in this book, the inheritance tax which we all know has been decreased and I feel that this is maybe a move in the right direction. The question is now whether or not we should take this step further and abolish it.

O:Absolutely. You can make it a tax on fix assets, thereby saying to people who have savings or assets that you will tax them 1% on their holdings each year and there are some countries doing this , under such a system the son would inherit the assets and also inherit the duty of paying tax on them. Therefore this has no influence upon actual inheritance.

 



Radio Nippon presents, gSugahara Akikofs EDGE TALKh
Part3
Guest is Dr. Kenichi Ohmae

S: There are countries which have inheritance tax and others which are moving towards its abolition, Japan has had inheritance tax since the olden days and as a result the government may even be considering raising it.

O: Yes, that's right.

S: Well, it's the quickest way of getting capital, by taking tax money when someone dies, however this is probably the worst thing for the economic stimulus that is necessary from here on.

O: Well, in Japan the assets of those over 60 are enormous. By contrast, young people are ridden with debts. It's these young people that want to use money the most and as long as they don't have it, consumption will not be stimulated. Older people generally have everything they want so instead of putting money aside if the young inherit money before their relatives pass away, consumption will pick up. For Japan which has an especially aging population in the case of people who have no heir to inherit their assets, we need to pass on their money to younger generations early and have these younger people use that money to enjoy themselves. This will give rise to cries of unfairness or that rich people are being prioritized, however there are countries such as Italy, Canada and Australia in which there is practically no inheritance tax and also countries like America where inheritance tax has been progressively cut over a period of around 10 years and also places in which tax is frozen for one year. In cases like these as the tax will then go up, if we are going to inherit anything, let it come next year. Obama didn't think this up himself but for some it will be a lucky break. Next year will truly be one in which money is moving freely for Americans.

S:So over that 1 year people are going to be flinging money at their children?

O:It doesn't have to be their children. In essence young people in general. People can even simply donate their money. Essentially, when there is no tax levied against money that is passed on and let's not forget that there are many people without heirs to inherit their assets, who they choose to donate their money doesn't really matter, when it comes to donations before death there is now something in Japan called a living donation, which is given to an heir before death. However, if someone's grandfather passes away, it falls to the beneficiary of his will to pay any unpaid debts and balance his books, so ultimately what happens is that the person who receives a living donation will hold on to it and not use it for fear of not being able to cover any expenses that may occur actually following death.

S: Wow, no matter what the heir chooses to do with their donation, do they still have to pay donation tax later on?

O: That's right.

S: Oh dear.

O: Yeah, in effect the government is saying to people that it's fine to make a living donation but when your grandfather passes away you are going to have to pay to balance his books so pay us an amount equal to inheritance tax.

S: That's going to be quite a sum isn't it?

O: It is, for those who inherit vast amounts. However, inheritance tax only amounts up to around 2 billion yen or so in Japan, a small sum if we consider it within as a part of the total of all tax revenue. In truth, if elderly people can pass their money on to younger generations without worry, then everyone is happier I believe. Society will really receive a shot in the arm. In general, it's always developed countries in which the elderly hold the majority of the money, however in places such as America and Europe the elderly go out and spend their money. If we take a look at the statistics for Italy, we see that when people pass away their savings are pretty much zero. In such cases, people can go out in style, however in Japan people's assets are at their peak at death and I feel that this is incredibly backward. Well, it's a question of people's mentality more than anything else really and truly. I've researched this Japanese mindset and no matter how much the government professes to be creating financial policies and that they are going to try and use our money in the best way possible, it has no effect whatsoever on the Japanese people. That's because our money is frozen. I often make the point of what people want to be able to say just before they pass away, that their life was a good one, that it was fun, maybe people want to pass away saying thank you and the like, or if they want to be saying things like 'if only I had' or lamenting what they would have done if they had known that they would be leaving this much behind or even that they wish they weren't leaving so much behind to their ungrateful son or whoever it is that never took care of them, because it's usually the latter kind of things that people end up saying. For this reason, I want to be able to pass away saying that my life was a good one and give thanks and if everyone can naturally do that, their money will flow back into the market. Well, of course putting aside those who like to steal money, ordinarily I believe that people feel that they want to enjoy their lives.

S: And it's that enjoyment of life that I feel there isn't enough of in the lives of Japanese people. You might expect that maybe of the elderly but in fact even the young are becoming increasingly introverted, thinking they don't have the money to enjoy themselves or the energy, I don't know, when I took a trip abroad, I saw people with happy faces despite not having any money who were singing songs together and such, well, compare that kind of vibrant fun on no money to young people here who've even stopped going skiing.

O: That's right. I mean, there are young guys around now who are in their 20's and known as gGrazing Peopleh. These guys, in contrast to carnivorous animals, don't desire or need anything, no phone, computer or even a wife, no car etc. It's people who are like this that I call the 'minimum generation'.

S: But what you're describing is an old man.

O: What we might call the power of possession and the desire for things is dying away within these young people. If you ask yourself what the reason might be, think of someone who is just about 29 at the moment, now, when they turned 10 ? the economic downturn started. The bubble of the economy burst in '89 and well, since then it's been 20 years. When it comes to these people, and their attitude towards assets, these are people who haven't heard a single good piece of news about such things since they were 10. This of course has a huge impact on their psychology. Casting your eye over newspaper reports from the last 20 years will tell you it's always been bad news, all of the time. On the other hand, consider the ten years before that, what a person of 39 years of age would have grown being exposed to, it's all crazy cloud 9 stuff. Things like we had bought the Rockefeller Centre or purchased Colombia, I mean, we were just on a world-wide shopping spree. As a result, people in their 30s have their heads in the clouds while those in their 20's are just gloomy. Going out into the world and to achieve things, they just don't set their sights that high.

S: Yes, and that's truly disturbing, isn't it. Why, they don't study English or have become unable to speak it, it's got to the point where you'd think that being able to speak English was just for the oldies. It's an unbelievable turnaround that's happening in Japan right now and you wonder if it's because they have no money or is that they don't have the opportunities they need even if they wish to go out and earn money.

O: No,it's not that. They simply don't have the stomach for it.

S: So it's a question of not having the guts?

O: For example, with English, the textbooks go on sale in April, the NHK English course ones, but if we look at the figures for May and June the sales drop incredibly quickly.

S: Has it got quicker then?

O: Also, NOVA went out of business. People pay up for a year's worth of lessons full of good intentions, but they quit after two months or they turn around demanding their money back only to be told that their money has already been used and it was that that broke NOVA. In other words, in contrast to what was expected, the number of people demanding refunds is rising astronomically. It's not a case of these people thinking to themselves that they might as well go as they have already paid for the year, rather, it's them turning round and wanting their money back because they won't go. And this is what it comes down to. Well, of course there were other problems with NOVA but we can see that people don't have the same grit anymore if we look at the background to what has happened, with people doing two or three months deciding it's not for them and then wanting their lesson fees back because they're out of pocket. Take commuting as another example, people in their 50's and 60's used to do commutes of an hour and a half as though it were nothing, but now anything over 40 minutes is too much. That's why we have the majority of new apartment buildings and the like being built within a 40 minute radius of workplaces. For a one-way commute of an hour and a half, seriously, unless we go back two generations, people just aren't tough enough. Saying things like let's work in a smaller place, or a nearer place, or just that we're shattered is the feel of the times these days. For this reason, we find ourselves looking around for the super-aggressive, go-getter Japanese that built this country up to number 2 in the world after the war, they're so few and far between that we wonder where they've gone.

S: Well, could it be a case of factors like the home environment? I feel that there are many problems in lots of areas.

O: Well, there are the factors of an over-sheltered society, of people believing that it's OK to get by eating ready-made convenience store food, it being fine to not want to move up in the world, that people can live well enough on the 42 thousand yen they get from a part-time job at McDonald's, a whole 84 thousand if their girlfriend does it too, it's a case of people thinking that this is sufficient. So, they really don't feel any desire to better themselves.

S: Yes, that's right. Well, it's been one interesting insight after another and I look forward to continuing our discussion next week.

O: Yes indeed, thank you very much.

S: Thank you

Translation by Yuka Yamashita