Financial Management in Japan

　I teach corporate finance, international finance and Japanese business. My long-term research interests are banking, corporate governance and the stock market. Recently I have been looking into the relation between the composition of stock ownership and corporate performance. I have also written about corporate governance failures such as the window dressing and mismanagement scandals at Toshiba Corporation. My current research is focused on Japanese business.
　Japan's economy and its business practices are often thought to be exceptional or at first, miraculous and recently completely hopeless. There is a wide-spread impression that Japanese business violates conventional economic thought. Japan has negative interest rates. In spite of significant labor shortages, wages do not increase. Similarly many think that Japan's business practices are not consistent with the laws of supply and demand, or that firms do not seek profits. My view is that these ideas are largely wrong. Japan's economy and its business practices certainly do have unique aspects. Nevertheless and in my humble opinion, Japan's economy is best understood using fairly conventional tools of economic analysis. For those things that "seem" to diverge from conventional global economic practices, I would explain these by emphasizing Japan's economic history. Japan's recent and current economic situations are partly path-dependent results of its experience with isolation, industrial development, Bretton Woods, the cold war, rural to urban population shifts, globalization and demographics.
　In my opinion, there are three extremely important issues that will make a huge difference for Japan's economy over the next few decades. The first of these is its large public debt. The second is Japan's corporate governance system. The last of these issues is Japan's demographic situation. Japan's declining population will have huge impact on its economy. A reader of the public record and even scholars of management in the late 1940s would have had the impression that Japan was forever doomed to be very poor and agricultural. Yet, Japan's economy recovered and its business culture proceeded to develop world-beating production improvements. The situation now is similar in some ways. Yes, Japan faces huge hurdles in the form of its public debt, poor governance and demographic decline. The world's moves away from open-economy trade in goods, services and intellectual property also pose daunting threats. I believe that it is the job of management researchers to develop solutions to these problems. These solutions will mirror the innovations that solved the problems of the 1940s. Japan's current experience foretells what may happen to other economies as they eventually face similar problems. Japan will be a model for success. It is our job as management professors to explain these solutions.