UK is Reliving Japanese Economic Woes

Last Updated Dec 17, 2009 11:17 AM EST

Once upon a time we all had to learn the art of management from Japan. Now we are learning from them what a post credit crunch world looks like.

I built a business in Japan for three years. When I arrived, Japan was on the cusp of world domination. By the time I left it was in the permafrost of recession. I like to think I made a difference. The similarities between what they faced then and what we face now are uncannily similar:

  • A massive property and asset boom ($1 million golf club memberships, anyone?) stoked illusory wealth and a spending boom.
  • The subsequent property bust wiped out banks which became bankrupt, in all but name.
  • The government poured billions into the banks in the hope that the bad loans would eventually disappear.
  • The government reduced interest rates to zero in a further attempt to help the banks, stimulate the economy and stave off recession.
We are, more or less, following the Japanese movie. And what happens next is not pleasant. We are propping up the banks which are still sitting on piles of non-performing loans. Everyone is hoping that somehow they will vanish all by themselves. So here is how the rest of the movie will play out if we follow the Japanese plot:
  • It will take fifteen years of anaemic, spluttering growth before the banks become relatively sound and the economy can start to recover.
  • The government will become increasingly indebted, leaving a more or less impossible debt mountain as its legacy to future generations.
  • The stock market will fluctuate widely, but be far lower in fifteen years time than it is today: zero interest rates will feed speculation leading to the yo-yo effect on prices.
  • Investors will no longer ask about return on capital: they will be more interested in achieving a return of capital.
  • Housing will no longer be a free retirement plan: prices will steadily go down. Welcome to poverty in old age.
But at least there is one thing we can still learn from Japan: how to do Christmas. As a Buddhist/Shinto nation they revel in Christmas. They have carollers singing outside Tokyo station, high tech Christmas trees, artificial snow and they eat Kentucky Fried Chicken on Christmas day.

Happy Japanese Christmas!

(Pic: ~ezs cc2.0)

  • Jo Owen

    Jo Owen practises what he preaches as a leader. He has worked with over 100 of the best, and a couple of the worst, organisations in the world, has built a business in Japan; started a bank (now HBOS business banking); was a partner at Accenture and brand manager at P&G. He is a serial entrepreneur whose start-ups include top 10 graduate recruiter Teach First and Start Up, which has helped over 250 ex-offenders start their own businesses. He has and has spent seven years researching leadership, strategy and organisation in tribal societies. His books include "Tribal Business School", "How to Lead and How to Manage." He is in demand as a speaker and coach on leadership and change. His websites include Tribal Business School and Leadership Partnership