Japan - Resurgence or Relapse?
Steven Kusumi
Representative Director
& President
Aon Hewitt Japan
Q. There is a growing symbiotic relationship between India and Japan as both countries
share large comparative advantages and are embarking upon significant market-opening reforms under
‘Abenomics’ and ‘Modinomics’. Given how Japan has recently transitioned back to a
fast growing economy, what in your opinion are the top business priorities for the firms to leverage the
changing scenario?
A. The popular sentiment is that the question still looms whether
Abenomics has been successful in returning Japan to a fast growing economy. Of the “3 arrows”
of Abenomics – fiscal stimulus, monetary policy and structural reforms, many observers of the Japanese
economy would probably agree that specific steps taken to address the first two have had some effect.
However, Prime Minister Abe has struggled with the third which covers a very broad range of issues
including the need for reforms related to labor practices – including a white collar exemption and making
it easier to make permanent workers redundant. It is clear that these matters will continue to be met with
fierce opposition.The consumption tax was increased from 5% to 8% in April. Although it was expected to
have a dampening effect on the economy, the outcome has been somewhat more severe than many thought it
would be, as consumption did not manage to recover substantially in the subsequent months. Mr. Abe is now
faced with having to make a decision to raise it further to 10% in the coming year, which would be in
accordance with the original legislation. However, this is thought to be too risky by many people in Japan
in light of the result from the first rise.There is continued activity by Japanese firms in making
acquisitions in the overseas markets despite the weaker yen and lingering doubts regarding the economy, as
noted earlier. However, the motivation for this activity is attributable to the pressing need of Japanese
firms to look overseas for revenue growth as prospects continue to be dim at home due to a declining and
diminishing population.Although significant numbers of Japanese firms have operated in the overseas
markets for many years, they are often still challenged by HR management issues in these locations. It is
imperative that firms implement processes and policies in order to sustain the engagement levels of
overseas staff to allow the firm to leverage their skills and competencies and contribute fully to the
delivery of financial results and global business strategies. The head office urgently needs to gain a
better understanding of global best practices in human capital management.
Q. There is a growing symbiotic relationship between India and Japan as both
countries share large comparative advantages and are embarking upon significant market-opening reforms
under ‘Abenomics’ and ‘Modinomics’. Given how Japan has recently transitioned back
to a fast growing economy, what in your opinion are the top business priorities for the firms to leverage
the changing scenario?
A. The popular sentiment is that the question still looms whether Abenomics has been successful
in returning Japan to a fast growing economy. Of the “3 arrows” of Abenomics – fiscal
stimulus, monetary policy and structural reforms, many observers of the Japanese economy would probably
agree that specific steps taken to address the first two have had some effect. However, Prime Minister Abe
has struggled with the third which covers a very broad range of issues including the need for reforms
related to labor practices – including a white collar exemption and making it easier to make permanent
workersredundant. It is clear that these matters will continue to be met with fierce opposition.The
consumption tax was increased from 5% to 8% in April. Although it was expected to have a dampening effect
on the economy, the outcome has been somewhat more severe than many thought it would be, as consumption
did not manage to recover substantially in the subsequent months. Mr. Abe is now faced with having to make
a decision to raise it further to 10% in the coming year, which would be in accordance with the original
legislation. However, this is thought to be too risky by many people in Japan in light of the result from
the first rise.There is continued activity by Japanese firms in making acquisitions in the overseas
markets despite the weaker yen and lingering doubts regarding the economy, as noted earlier. However, the
motivation for this activity is attributable to the pressing need of Japanese firms to look overseas for
revenue growth as prospects continue to be dim at home due to a declining and diminishing population.
Although significant numbers of Japanese firms have operated in the overseas markets for many years, they
are often still challenged by HR management issues in these locations. It is imperative that firms
implement processes and policies in order to sustain the engagement levels of overseas staff to allow the
firm to leverage their skills and competencies and contribute fully to the delivery of financial results
and global business strategies. The head office urgently needs to gain a better understanding of global
best practices in human capital management.
Q. What are the corresponding HR imperatives for CEOs and People Officers to
support the positive business sentiment and growth trajectory?
A. Given the pressure for substantial global expansion, Japanese companies
are grappling with the need to review their HR policies for overseas staff. From the outset (many years
ago), it was clear that domestic HR policies (especially compensation) would not be acceptable in
retaining and attracting talent in many overseas markets. Firms often struggled to understand the details
of practices outside of Japan, and in a fair number of cases allowed the overseas branches/subsidiaries to
operate with little direct input (laissez-faire) from the head office in Japan. Although this is not
necessarily a formula for failure, it has often led to doubts (often tinged with suspicion) at the head
office as to whether the “demands” from their overseas offices were actually aligned with
local market practicesLikewise, from the perspective of the overseas entity, it may have appeared at times
that the head office’s “inflexible stance” reflected a lack of appreciation for local
requirements.Going forward, it is clear that the CEOs and HR officers of Japanese firms will have to
develop a greater understanding of global pay and management practices in order to better “speak the
language” of their counterparts in their overseas entities. One continuing challenge at a fair
number of Japanese firms is that the job rotation policy at their head office is an obstacle in
developing professionalism in the HR department.The prevalence of the seniority pay system is also a
lingering obstacle that will take time to overcome.
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