[LINK] "Japan Should Be More German"

[rfmcdonald]

William Pesek's Bloomberg View article caught my attention. I would note that the globalization and regionalism that has helped anchor Germany in a productive continental marketplace just hasn't been possible for Japan, for good reasons. Who is there to integrate with?

Plenty of economists are warning that Europe could soon look like stagnant Japan. In fact, Japan could stand to look a little more European -- or, to be more precise, more German.

Why has the "Made in Germany" brand thrived over the last 15 or so years, even as "Made in Japan" grinds toward irrelevance? All the more extraordinary, Germany has flourished in a savagely competitive global environment despite high labor costs, an overvalued euro and any number of regional financial crises. Its secret: adapting and innovating in ways Japan Inc. cannot even seem to contemplate.

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Innovation is everything. Adjusted for gross domestic product ($3.6 trillion annually) and population (80 million), Germany could still be considered the world's No. 1 exporter. It trails China and the U.S., of course, but more than holds its own in autos, machinery, electronics, pharmaceutical products, optical goods, plastics and other sectors. Its success draws upon a mixture of design prowess, an intense focus on increasing productivity and moving upmarket, aggressive investments in research and development, and old-fashioned risk-taking. In order to exploit its comparative advantages, Germany has skillfully balanced the tensions between upping competitiveness and maximizing employment.

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Small is big. The yen's 30 percent plunge in two years has tempered the urgency for change at Sony, Toyota, shipping giants like Mitsui O.S.K. and construction equipment goliaths like Komatsu. Instead, Tokyo should support companies like robotics innovator Fanuc, smartphone app creator Colopl, automation equipment maker Keyence and biopharmaceutical company PeptiDream -- the kind of businesses that make up Japan's "Mittelstand."

[. . .]

Think regionally. Germany trades plenty with America and China, which Daimler said today may become the biggest market for the Mercedes brand next year. But the evidence, Jen and Freire argue, "suggests that Germany’s rise as a global superpower in exports was due more to regionalization, or having unhindered access to the European Union, than to globalization, which Japan has relied on." While completing the Trans-Pacific Partnership trade deal with the U.S. and other nations would help to open up some of Japan's most ossified sectors, Abe should also be looking to mend fences in Asia and strike all the bilateral free-trade agreements he can, including with China.