mini传媒

Published on December 27, 2022
Job titles and other details are as of the time of publication.
(The interview was conducted in Japanese and was thereafter translated into English.)

Work experience and research shedding light on the cause of Japan’s business stagnation

My areas of specialization include mergers and acquisitions (M&A), valuation, corporate finance, and corporate governance. Underlying all my interests is an awareness that the Japanese economy faces the challenge of improving its productivity. I have engaged in M&As and other practices at a Japanese financial institution, a US law firm, and an international organization. In doing so I have learned to look at foreign companies from the perspective of Japanese companies and vice versa, and as a researcher I am now in a position to conceptualize and teach students what I have learned from these experiences. This series of career steps has shed light on why Japanese businesses have stagnated over the past 30 years.

Simply put, Japanese firms have failed to adequately train their managerial talent. I will explain later what is required of managerial talent, how they should be trained, and why this training has been lacking.

From international finance business at the Industrial Bank of Japan to overseas study at a law school and engaging in LBOs at a law firm

My career began at a financial institution previously known as the Industrial Bank of Japan (IBJ), as mentioned at the beginning. I was not interested in finance but in businesses operated by the IBJ. The bank then had great visions of “discussing what is good for the national economy” and “partnering with industry to that end,” as described in the book “The Industrial Bank of Japan: A Novel,” which I read when I began working at the bank. In fact, IBJ managed major projects across a number of industries and expanding abroad. I decided to join the bank for the opportunities it would provide to become involved in various businesses and to broaden my horizons by working abroad.

Initially, I was assigned to the International Finance Department. Other talented colleagues proficient in foreign languages joined the business groups in charge of businesses in the United States, Europe, Asia, and other regions, while I, with only the English language skills required for Japan’s university entrance exams, was consigned to the general affairs group that mainly provided supporting services. I was later transferred to one of the business groups and tasked with New Zealand, a small country. Unexpectedly, however, a series of large projects emerged in the country. While negotiating with overseas companies and working with the Tokyo office of a major UK law firm for documentation, an experience that was a stretch for me, I became acutely aware of the need to understand both business and law in order to fully engage in global business. I was later offered the opportunity to study at Harvard Law School, and had no hesitation about flying to the United States, where I earned an LL.M. degree in 1989 and passed the New York State bar exam as well.

I worried about my English language skills, but technical terms and expressions turned out to be easier to master than everyday conversation since the terminology and context are more defined. I was able to quickly follow the law school classes, but had the most difficult time communicating with a woman at a nearby dry cleaner because of her Boston accent.

I remained in the US after completing law school, and worked as a lawyer for about one year at a New York law firm that offered me a position following campus and callback interviews. I worked for a senior partner whose major client was a private equity fund dealing with a number of leveraged buyouts (LBO). The fund was established by a former Morgan Stanley executive, and I was provided with guidance on M&As by ex-Morgan Stanley bankers, which was a great experience. After returning to Japan, I underwent “real-world MBA” training at IBJ’s prominent Credit Apprisal Department for four years before becoming a coverage officer for major corporations. I was interviewed and hired by the International Finance Corporation (IFC), a member of the World Bank Group, shortly after the 1997 Asian financial crisis, and was appointed project manager in charge of advisory services focusing on strategic partnerships in the restructuring of a major Asian conglomerate. Leading a multinational team was an exciting experience.

Ninety-nine percent of the M&A business can be theoretically explained, but the last one percent determines the outcome

In a new environment, I cannot help bursting with excitement about what my eyes see. I am probably just that type of person. In addition, I have developed a strong interest in how the world works since beginning my career at IBJ. I really enjoyed understanding the principles that make the world go around, reading situations, and taking the initiative in major projects and M&A transactions.

These principles are also applicable to the human factors in business. You may not be able to fully grasp people's emotions in private, but when it comes to deals, human emotions can often be predicted theoretically. Major M&A deals fuel considerable speculation as companies dispatch their most talented personnel. But understanding the principles of human factors can help predict the next step with a high probability. Even if the prediction proves wrong, the next move can be made by swiftly forming another hypothesis. In these ways, 99 percent of what happens in M&A can be theoretically explained, though the figure may be overstated, but when it comes to high-level transactions, the last one percent determines the outcome. This is also the appeal of the M&A business.

However, at that time, I was not able to articulate things in this way. My experiences of engaging in practical work after learning theories at law school and IBJ’s Credit Appraisal Department played major roles, but more importantly, as I increasingly became involved with Hitotsubashi University as a visiting professor from 2005 onward, I recognized the need to articulate and explain concepts to my students. My research focused on theories behind business practices played a part as well. Through this process, I began to see the reasons behind the stagnation of Japanese companies.

Business portfolio strategy and corporate governance are essential for executives

I became a full-time faculty member at Hitotsubashi University in 2017, after working as a visiting professor and engaging in business at the same time. The cause of the stagnation I perceived was the lack of proper training of managerial talent, as mentioned earlier.

Executives must be versatile in all subjects. They cannot excuse themselves from responsibility due to a lack of knowledge in certain areas. In order to transcend the boundaries of these subjects, managers must receive comprehensive specialized training required for their positions. Overseas companies assess the abilities of people with potential to assume future leadership positions, and then, for example, assign these prospects to the heads of small, low-risk affiliated companies or divisions. The companies train these candidates to be managers by offering larger stages each time they produce good results. The principles of financial literacy and human factors are also acquired in this process. Moreover, to reach top management, it is essential to acquire two indispensable skills: “business portfolio strategy” for determining resource allocation by looking at business operations as a whole rather than individual business units, and “corporate governance” for understanding the relationship with shareholders and the board of directors.

I absolutely do not believe that Japanese business people inherently lack the ability to become globally competitive managerial talent. However, while Japanese companies claim to develop “generalists” by rotating through various job functions, the essential training for becoming a manager is often insufficient. If the structure remains where managers are merely “representatives of business unit coalitions,” Japanese companies and the Japanese economy may not be able to escape long-term stagnation. This is the core issue underlying my research.

Start by obtaining information from the English-speaking world and change the sense of what is “normal”

I repeat again that Japanese business people do not lack managerial potential. The problem is the lack of proper training compared with their global counterparts. Management development, as mentioned earlier, is one of the essential training elements; another is training to gather information from the English-speaking world.

The English language is used on the global stage to exchange important information by both native and non-native speakers. Obtaining information from the English-speaking world can also lead to the relativization of the information gained from the Japanese-speaking world. This approach can change mindsets for what we take for granted. The information gathered by global business people is not limited to work-related matters. Executives abroad eagerly absorb a wide range of information across boundaries such as a divide between humanities and sciences, and between business and academia, and adopt whatever elements they think useful to their practical work. You don't need to be overly anxious about striving to succeed abroad or competing with global peers. Simply learn what needs to be learned, observe the world with an open mind, and try to understand its structure. This attitude is essential for Japanese companies to develop outstanding leaders in the future.

My classes and seminars are offered to a variety of people from executives of Japan's leading companies to graduate and undergrad students at Hitotsubashi University, but the message I convey remains the same. I expect them to avoid becoming “frogs in a well” and to develop the skills that will enable them to stand shoulder to shoulder with counterparts around the world. That’s all there is to it.