More Globalization To Solve Japan's Prolonged Economic Stagnation: 2020 Tokyo Olympic, Establishment of Foreign Companies and Cultural Reform/Cultural Ramification Before Japan was globalized it was secluded from the rest of the world for nearly two centuries from1603 to 1868. This time period was called the Tokugawa Period. Even though Japan closed its ports to foreign trade, it was self sustainable and independent. This self sustainable society was maintained through its unique producer-consumer relationship and the "reuse recycle" practice in commerce due to the island's limited resources. Repair merchants such as tinker, ceramics repairers and truss hoop repairers supported a society where nothing was thrown away but instead carefully repaired and reused until the products were truly un-amendable. For example, tinkers used special techniques and charcoal heat to weld holes in pots and kettles with other metals; ceramic repairers glue broken ceramic pieces together with sticky rice and applied heat; paper makers buy used papers and blend them to make a variety of paper from writing paper to toilet paper (Staff). The Tokugawa Period served as a model of a flourishing sustainable society to the Japanese. After Japan was introduced to globalization during the Second World War, the nation benefited from becoming a export driven economy, business policies such as the lifetime employment policy promoted the efficiency of the company, and the cultural influences on business management such as respect for authority and reserved behavior promoted order in the company. However, after the financial bubble burst due to abnormal speculation in assets, Japan lost two decades to economic stagnation since 1990. The inability for Japan to recover from this recession reveals underlying problems of practicing out dated business methods. A negative impact of globalization is that it makes the process of globalization the only way for countries be competitive in the global economy. Globalization makes Japan, a country that holds onto traditional business methods, psychology and practices, fall behind in the global competition. The only way for Japan to recover from its economic stagnation and to be more competitive is through more globalization. A problematic aspect of the Tokugawa Period that was carried into and practiced in modern Japanese business is the culture of respect for the authority and introverted behavior. The social structure of Japan during the Tokugawa Period was organized as a hierarchical society in order to maintain harmony. There was the emperor, shogun, daimyo, and the rest of the ordinary people including samurai, peasants, artisans and merchants (Gordon). This culture of maintaining harmony, respecting higher ups and carrying out duty is still exhibited in not only the social life by in the management structure of Japanese corporations and companies. Ground workers are restrained from questioning the ideas and decisions of their superiors and if they do, they have to do it discretely. During business meetings and negotiations, the culture forces ideas to be expressed indirectly in order to remain humble and it condemns open disagreement viewing that action as being arrogant and brash (Doing Business in Japan). Decisions were rarely made in one meeting so several time consuming meetings needed to take place to discuss and form a decision. This reserved cultural behavior impedes the pace of business. The influence of the hierarchical culture from the Tokugawa Periods makes the management structure less efficient in terms of reaching consensus and negotiations in the globalized world. When globalization was introduced to Japan After the Second World War, it influenced Japan to establish practices, institutions and psychology that was appropriate and aided in the country's economic growth specifically for the postwar era. Some positive impacts of globalization on Japan after the Second World War was the globalization and development of technology, specifically automobiles, interaction/partnership with United States and participation in WTO. The creative entrepreneurship and innovation allowed Japan to achieve rapid economic development. Technology invented for the war were converted into innocuous objects for the peacetime economy. Wartime machine gun factories changed to make sewing machines and war time optical weapons factory changed to make cameras (Pyle). So although the war ended, production in manufacturing still increased by twenty four percent, steel by forty six percent, metals by seventy percent and machinery by two hundred fifty two percent (Dower). In the present Japanese automobile industry, ten out of eleven main automobile manufacturers came out of World War II technology. Even before the war in 1936, a legislation was passed that had Toyota, Nissan and Isuzu replace American automobile manufacturers, Ford and General Motors, as the primary producers of trucks for the military driving them out of the Japanese economic market (Dower). The close client and friend relationship that developed helped the Japanese to form an "asymmetrical" trade relationship with the United States. The American market was open to Japanese exports and goods while the Japanese markets were closed to imports from America (Pyle). Even though Japan limited imports from foreign countries, high demand for Japanese automobiles from western nations enable Japan to benefited from the export driven economy. The association with WTO also helped support the export driven economy; Japan benefited from the low tariffs when trading in the international market, low prices for oil and raw material for its domestic industrial development (Pyle). This positive impact of globalization strengthened Japan's technological success, gave it a working export centered economy and gave the country its competitive edge in the global economy during that time period. However, the export driven economy has its limits when globalization makes countries interdependent on each other. Countries that are export driven such as Japan suffer the most when a global economic crisis occurs. For example, Japan's economy hit hard during the 2008 global economic crisis. Japan's GDP contracted 12.1% while the GDP of United States only contracted 6.3% (Yuan and Fukao). This contraction was exceptionally bigger for Japan than United States because of the sharp fall in external demands. Still today, over seventy percent of the manufactured products are exported abroad (Pike). While the decrease in net export accounted for 11.8 percentage points of the decline for Japan, the decrease in net export was only 0.15 percentage points of the contraction for United States (Yuan and Fukao). This shows that the increase of interdependence and reliance on different economies on a global scale due to globalization forces the export driven economy of postwar Japan to become outdated and not as successful. Another practice that suited the postwar society but becomes outdated is the lifetime employment policy. Lifetime employment was preferable during the economic growth period after the Second World War because of the abundance of job availability. College graduates were recruited by large companies that offered lifetime employment and trained and assigned to posts in the company's best interest. The employee is not allowed to quit for a higher paying job and the employer is not allowed to fire the employee (Lifetime Employment). The continuation to practice and conserve the lifetime employment policy had created generational inequality in the Japanese society. During recessions, companies would first get rid of the buffers also known as the part-time/temporary young workers. Some businesses become reluctant to hire younger recruits but the ones that do hire young people offer low paying/dead-end jobs to shoulder the cost of preserving better jobs for older employees (Fackler). With just 56.7% of university students receiving job offers before graduation, many university seniors experience limited secure careers in the job market when they graduate. In addition to low job availability, in 2010, 45% of Japanese between the ages 15 to 24 held irregular jobs in the workforce compared to 17.25 in 1988 (Fackler). In preserving the outdated employment system, Japan has become a "zero sum game" where the older generation are the winners and the younger generation are the losers. Although Japan has the world’s third largest economy, it is struggling to escape the economic stagnation that faced its nation since the late 1980s. Some of the reasons that Japan's economy remained stagnant for almost two decades was due to the retaining of the effects of globalization that specifically benefited the Japanese economy and cultural practices that were temporarily suitable about four decades ago during the post war era. By retaining the export based economy, lifetime employment policy and conservative cultural influences on business management which did work once, made Japan less competitive during the last decade of the twentieth century and the start of the twenty-first century when more developing countries, willing to assimilate and adapt all parts of globalization, entered the international market. In order for Japan to keep up with the pace of the rest of the emerging countries, it requires more globalized influences to update its cultural practices and business policies/management that is appropriate for the twenty-first century. Three steps to reboot Japan’s economy include; hosting the 2020 Tokyo Olympic, introducing/establishing foreign companies in Japan and lastly needing cultural ramification/ breaking away from traditional reserved behavior to generate innovative/young entrepreneurs. A tangible opportunity that Japan should take advantage of is the 2020 Olympic that will be hosted in Tokyo. The Olympic is a global sports event that has the potential to bring Japan great economic benefits and solve the country’s stagnant economy by providing new jobs and attracting foreign investments. The reality of 2020’s Olympic bringing Japan economic growth is high using the 2012 Olympic in London as an example. Within one year after the 2012 Olympic, the UK economy has already seen a GBP 9.9 billion trade and investment boost from hosting the Games (London 2012 News). The large number of tourists who traveled to London for the global sports event helped lift the British economy. The Office of National Statistics showed that 590,000 people who visited who went for the games spent an average of GBP 1,290 during their visit compared with GNP 650 by other visitors (International Olympic Committee). In the process of preparation for the 2012 Olympics, Games related projects created thousands of jobs in the UK with 70,000 workless people in London employed in Game-related jobs, reducing the unemployment rate by 1.2 percent in early 2012 (London 2012 News). Based on the 2012 London Olympic statistics, the capability of the 2020 Tokyo Olympic to bring Japan economic benefits is realistic. The tourism will increase domestic spending and the generation of Game related programs will provide more job availability. Not only will the abundance of jobs provide confidence for the Japanese youth, but it will also minimize the tension between the generational inequality that was created in the first place by the limited number of job availability. Although the Olympic has a high chance of improving Japan's economy and potential in lifting the country out of economic stagnation, it is important to examine the impacts of the Games on the economy after ten years. The preparation for the Olympic might help Japan generate numbers of jobs and investments sporadically, but what will happen to those jobs after 10 or 20 years when they lose their relevance? A better example would be the construction industry. The increase in demand and labor for construction will be seen only during the preparation for the Games. After the Games when the demand decreases, the abundance of laborers will either get laid off or get lower wages. So although this sports event might provide economic benefits for Japan, it is temporary and other long term measures must be taken to ensure Japan's economy would not fall back into recession. Unlike the 2020 Olympic, a more long term method in helping Japan generate jobs and increase domestic demand is the establishment of foreign companies/industries in Japan. In order to attract foreign investment and corporations, Japan has to lower their corporate tax rates. Although the tax rates decreased from 40.69 percent in 2006 to 35.64 percent in 2014, it is still a lot higher compare to developing countries such as China which corporate tax rate is at 25 percent and even industrialized countries such as Ireland with its corporate tax rate as low as 12.5 percent (kpmg.com). A relationship can be seen between Foreign Direct Investment (FDI) and corporate tax rates. For example in 2012, Ireland with low corporate tax rates had FDI surplus of 31 billion Euros while Japan with higher corporate tax rates only had FDI of 18,760 million Yen (Trading Economics). Lowering corporate tax rates has the potential to attract foreign industries/corporations to set up their companies in Japan. With more companies, not only will they provide jobs and alleviate the tension between the older generation and the youth, they can help better the domestic economy and balance the import-export economy too. Right now the top three Japanese export products include vehicles which accounted for 20.8 percent of the total exports, machinery which accounted for 18.9 percent of total exports, and electronic equipment which accounted for 15.1 percent of the total exports (Workman). Because Japan has a export driven economy, it is dependent on the demand of foreign nations and becomes vulnerable to global crisis when demands decrease. The establishments of foreign companies in Japan can minimize the country's export centered economy. The construction of many new foreign companies require machinery and electronic equipments for the offices/plants and they require vehicles for transportation. By introducing new companies to Japan, the percentage of certain products being exported can be lowered and an increase in the domestic demand will make Japan less vulnerable to global crisis in the long run. Although the introduction of foreign companies in Japan can benefit the country's interior growth, there are limitations in terms of the government's current financial debt, the long tedious process in establishing a business, and the cultural barrier. As of 2011, the government's national debt is over 200 percent of its GDP (U.S. Commercial Service). With the debt increasing, it is unrealistic for the government to lower the corporate tax even more. In doing so, individual Japanese would experience more anxiety when the personal income tax rates are increased to balance out the decrease in corporate tax rates. In 2013, the income tax rate was raised to 50.84 percent which is over half of the total income (Trading Economics). Also because Japan is very bureaucratic, in order to start a business proposers are required to communicate with the Ward office, the Legal Affairs Bureau of the Ministry of Justice, the District Tax office, the local tax office, the Labor Standards Inspection office, the Japanese Pension Service and the Public Employment Security Office (TMF Group). After the proposal is approved, it takes 193 days to arrange construction permits. Then it takes another 105 days to connect the company to the electricity plant after the arrangement for a construction date, submission of application and the wait for connection works (TMF Group). In the fast paced globalized world, the meticulousness of the process is too time consuming and can discourage foreign corporations from establishing companies in Japan. Another challenge for the establishment of foreign companies is the cultural barrier. Foreigners who are used to an open modern environment may find it challenging working within Japan where the business culture in is deeply influenced by the society's conservative culture. According to Carlos Ghosn, it is important to protect individual and cultural identity. Therefore, foreign companies cannot challenge the seniority system and place the younger workers in top jobs in Japan (Snyder). This is easier said than done because many global executives and managers hire their employees based on skill and potential rather than age for full productivity and efficiency of the company. Even though maintaining cultural identity is important according to Ghosn, some aspects of Japan's culture need to be reformed in order for the Japanese companies to be more effective and for the nation to generate young entrepreneurs/new minds. The conservative culture forces the younger generation to conform, think and act like the rest of the society, obeying rules and being reserved. In order for the society to generate young entrepreneurs and stimulate economic growth through innovations, the Japanese culture needs to be globalized and reformed with Israel's culture as a model. Japanese youth needs to learn to develop what the Israelis call "chutzpah" which means to have audacity (Senor and Singer). Israel is a small resource lacking country just like Japan, but it has the world's most dynamic economy because of its culture. Its culture of tenacity, questioning authority, not being afraid of failure allows Israelis to be so innovative. For example, to solve to lack of water problem, Israel's Water Research Institute is currently building a water wise building to meet 80 percent of the laboratory's water needs by harvesting rainwater on its roof and recycling "gray" water from the laboratory's showers and sinks (The Diplomat). By teaching young Japanese to think like entrepreneurs instead of programmed office workers and to take risks, the younger generation can provide Japan with new innovations that make the resource lacking island country more sustainable. Innovations such as aquaculture and indoor plantations can help Japan become more sustainable and less dependent on countries such as South Korea and China for agricultural goods. For Japan to compete more successfully in the global market in terms of innovations, cultural ramification is needed. However, cultural reform is still very unlikely and too early in Japan. With a huge graying population in Japan where the average age is 46.1 years old, breaking from tradition and beliefs which is subjectively imbedded in individuals is almost impossible. More globalized interactions are required before the new generation of Japanese can adopt "chutzpah." Japan is stuck in an economic stagnation for two decades which it cannot pull itself out of. The effects can be seen when its rank as the second largest economy in the world was dropped to the third largest economy in the world in 2011. The main cause of this stagnation is that Japan retains and still practices outdated business policies, structures and culture that was once appropriate during post Second World War era. While the influence of globalization in the mid twentieth century allowed Japan to practice its conservative hierarchical culture in business, employ its lifetime employment policy and prosper with an export driven economy, the growth and expansion of globalization in the late twentieth and early twenty-first century made these practices unsuitable. The conservative hierarchical culture in business slowed down progress, the lifetime employment created generational inequality, and the export driven economy made Japan vulnerable to global crisis. In order to end Japan's economic stagnation and to prevent its economy from falling back into recession, Japan must globalized itself more. It must take advantage of the short term economic benefits of 2020 Tokyo Olympic to reboot the nation's economy. Then to make sure Japan's domestic economy does not fall in the long term, the government has to lower corporate tax rates to attract foreign businesses. However, the most important solution is to generate young Japanese entrepreneurs through cultural reform to not only compete with countries like Israel but to create innovations that can make Japan more sustainable.

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