Political and Economic System of Japan

Political and Economic System:

Economic and legal systems are influenced by the political system of a country (Hill & Hult, 2017).  Political systems are examined through two dimensions. The first dimension is assessing the type of behavior or culture of the country, either individualistic or collectivistic. The second dimension is to examine if the country is a democratic or totalitarian society. According to Hill et al (2017), the responses to these choices correlated, as countries with collectivism cultures are most often associated with totalitarian societies and those with individualistic cultures tend to be democratic.

According to Hofstede Insights (n. d.), Japan scores relatively low on being defined as an individualistic society. The results from Hofstede’s report indicate that Japan is considered a collectivistic society, meaning they put the group’s goals over the individual’s goals in exchange for loyalty (Hill & Hult, 2017). By Western standards, Japan is coined as a collectivistic society, yet as an individualistic society by Asian standards (Hofstede Insights, n. d.). Japanese society displays many characteristics of a collectivistic society; however, their traditional views and practices make them less of a collectivistic society in comparison to their Asian neighbors. It is also noteworthy that although Japan is considered collectivistic, they are a democratic society as opposed to a totalitarian society (Abramson, Moran, and Moran, 2014).

Characteristics of a collectivistic society include having a strong sense of shame for disappointment and maintaining harmony within interpersonal relationships. According to Moran, Abramson, and Moran (2014), group leadership is highly regarded over the individual initiative. For Japanese workers, motivation comes from group rewards and group work. At Toyota, the culture promotes experiments and employees attempting various methods to reach a goal. The Toyota Promotion Office Manager at the island Kyushu stated that ‘failure is acceptable, so long as it results in learning’ (Abramson, Moran, and Moran, 2014).

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The way scarce resources are distributed within an economy determines the type of economic system a country has (Hill & Hult, 2017). There are three types of broad economic systems: market, command, and mixed. A market economy is where prices are free of controls and private ownership is predominant. A command economy is predetermined, productive assets that are owned by the government. In this type of economy, the government is involved in everything from planning to redistributing resources. A mixed economic system is a blend of both economic systems. In many mixed economies, the market is typically free of government ownership, except for a few key areas like transportation or defense (Hill & Hult, 2017). The idea behind the development of a mixed economy was to use the best of the market and command economies, where it could incorporate policies that are socialist and capitalist.

Japan’s system of mixed economic management is without parallel in the world. The extent of direct state participation in economic activities in limited. Yet, the government’s control and influence over the business industry are stronger than most other countries with market economies (Watanabe & Jensen, 2018). Japan’s government involves itself through consultation with businesses about their involvement in banking (Watanabe & Jansen, 2018). The consultation process is done by joint committees and groups that monitor the performance of almost every branch of the economy (Watanabe & Jansen, 2018).

Japan is one of the world’s leading automakers, only behind the United States and China (Amadeo, 2019). Japan’s economy struggled to recover in the aftermath of World War II. The government encouraged smaller vehicles, called “kei-cars”, with limited engine size and dimensions. Japanese engineers started to look beyond rational functionality demanded by the government and started to include the greatest elements of Japanese design- architecture and consumer electronics (McIllroy, 2019). In the late twentieth century, the most remarkable growth was in the production of motor vehicles due to the high demand of these cars from the West (Amadeo, 2019).                

Legal System:

 The legal system of a country refers to the rules, or laws, that regulate behavior along with the processes by which the laws are enforced and through which redress for grievances is obtained. The legal system of a country is of immense importance to international business. A country’s laws regulate business practice, define the way business transactions are to be executed, and set down the rights and obligations of those involved in business transactions. The legal environments of countries differ in significant ways. As we shall see, differences in legal systems can affect the attractiveness of a country as an investment site or market.

 Like the economic system of a country, the legal system is influenced by the prevailing political system (although it is also strongly influenced by historical tradition). The government of a country defines the legal framework within which firms do business, and often the laws that regulate business reflect the rulers’ dominant political ideology (Hill & Hult, 2017). 

 In Japan, the legal systems for business  are reviewed in terms of the protections they offer for intellectual property, product safety, liability, and contracts.  Even before the beginning of what most historians term “modem” Japan, i.e., the Meiji Era in 1868, Japan had developed a system of commercial law based almost entirely on custom.  Despite the influence of traditional Chinese law on other areas of its legal system, such as public and criminal law,’ Japan’s commercial law system was almost entirely indigenous. These customs were known and used by the Japanese commercial sector; whenever a problem arose, commercial customs were enforced by various self-regulatory guilds, trade associations and, ultimately, by the courts.  After the Meiji Restoration in 1868, the new Japanese government took steps to import a Western law system.  It took this action to end the onus of two treaties imposed upon Japan by the Western nations. The treaties put Japan in a position inferior to the Western nations’ and were considered by the Japanese to be a slur upon the country’s sovereignty. One treaty dealt with customs and duties, imposed high tariffs on Japanese goods imported by the West, and imposed low tariffs on Japanese imports of Western goods.  The other provided that, because of Japan’s “barbaric” legal system, Westerners accused of crimes in Japan would be tried not in Japan but in their home countries; as a result, the worst penalty usually imposed on a foreigner was literally only a slap on the wrist (Hahn, E, 1983).

 Japan is a highly industrialized country and, as a result, has developed sophisticated product regulations and liability laws. The Product Liability Act has helped to establish a level playing field for plaintiffs and victims of product liability accidents. However, the number of court cases has not increased dramatically since its enactment.  The Japanese legal system lacks the main ingredients of a robust plaintiff-driven practice compared with what is available in the United States (e.g., jury trials, punitive damages and discovery). Japanese class action does not offer attractive options. Many manufacturers have been quick to settle complaints and claims with individual consumers rather than risk bad publicity and litigation. Product recall has increased, along with the ensuing publicity (especially in the automotive industry). Further, labelling and marking requirements have become stricter, in line with manufacturers’ emphasis on warnings and instructions across all industries (Iwata, G., 2018). 

Intellectual property refers to property that is the product of intellectual activity, such as computer software, a screenplay, a music score, or the chemical formula for a new drug. Patents, copyrights, and trademarks establish ownership rights over intellectual property. A patent grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention. Copyrights are the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit. Trademarks are designs and names, officially registered, by which merchants or manufacturers designate and differentiate their products (Hill & Hult, 2017).    Japan enforces all the major intellectual property laws including patent law, utility model law, design law, trademark law and copyright law. Intellectual property laws are thought to have played an important role in the development of the Japanese economy.   A patent is one of the most effective types of intellectual property for achieving economic development.  Japan has accelerated the nation’s intellectual property policy since the Japanese prime minister’s statement in 2002. The Basic Law on Intellectual Property was enacted in 2002. Based on this basic law, the Intellectual Property Strategy Headquarters was established, and the Intellectual Property Strategic Program2 has been published annually. The goal of the intellectual property policy is to transform Japan into an IP-based nation.  Toyota is one of the IP-based manufacturers in the automobile industry. The patent applications are of high quality, and this trend is very stable in the automobile industry. Also, R&D expenditures are the same trend as the patent application. Toyota’s IP strategy includes so called “the patent portfolio”, which has been applied to many automobiles because they are comprised of many intellectual properties. Toyota is advancing selected important fields by the analysis of the patent application trends. Intellectual property has been one of the most important factors for current Toyota’s success (Yasuda, F., n.d.)

Political Economy / Economic Progress:

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Cost of Doing Business:

The Japanese culture has always been very unique compared to most other cultures.  Japanese culture is enriched with traditions and norms dating back centuries.  Aspects such as religious beliefs, social status traditions, and ethnic beliefs are very important to the culture of a company, especially the Japanese culture (Hill & Hult, 2017).  Toyota, being a Japanese-based company, has implemented many standards coinciding with the Japanese tradition and culture.  A company must portray the culture embedded in the foundation it was built upon.  With Toyota, the morals and values of the Japanese culture must be laid in the foundation to provide a model and methodology to follow moving forward.

Two major standards that Japanese companies are known for and that Toyota maintains are lean management methods of business and the implementation of the “5S principles.”  Lean management is a systematic approach to manufacturing or producing services while reducing waste and eliminating unnecessary elements.  Jaca et al (2014) determined the use of the 5S principles from Japanese methodology of sorting, setting an order, shining or showing confidence in the work, standardizing, and sustaining the process is a valuable work environment utilized in many Japanese-based companies.  Toyota is no different in this sense and has a tight grip on manufacturing practices and other business transactions.  To further express the internal culture of Toyota, Jayamaha et al (2014) noted that Toyota has specific practices innately performed on the job such as the use of respect and teamwork above many other attributes.  While respect and teamwork are not fancy and lavish characteristics, the Japanese culture believes very strongly in those qualities to promote an even strong partnership.

Recently, Toyota has endured recall crisis events which entailed financial losses and reputation damage.  This situation, surprisingly, Toyota handled differently than their company’s foundational model suggested to as they decided to face the problems based on solely financial losses and reputation concerns instead of the major concern which was client safety (Choi & Lee, 2018).  By handling a situation improperly such as this, where morals were set aside and money and image were placed at the forefront, a poor example of the company was portrayed.  Toyota should have rested on its historical business morals and focused on the recalled issues since they affect its customer’s safety.  This type of business can substantially affect future clients and is a cost of doing business in such a poor manner. 

Political and economic philosophies are two other areas where culture plays a tremendous part in Toyota’s costs of doing business.  Campbell (2018) determined that Japan has enhanced its political and economic beliefs over the recent decades as the country has been forced to keep up with security requirements and other safety measures to compete with other countries.  Coming from an era where the country lacked security measures and other standards in daily practices, the improvements the country has implemented illustrate its flexibility.  Toyota shows these same traits as lean management has become its defining characteristic where Toyota’s applications and executions are stream-lined and vetted much more effectively. 

Another area of importance for culture within the workplace related to Toyota’s Japanese foundation is the educational aspects.  Japan is widely known for a very thorough and effective educational system throughout all levels.  Nakayasu (2016) noted that Japan and its governing bodies have assigned extensive resources to the educational system and place the belief in its processes as a high priority.  Toyota (2019) illustrates through its countless affiliations and programs that it is dedicated to progressing in educational opportunities with its employees and customers.  Providing educational seminars, interactive learning opportunities, and hands-on workshops for employees and customers allows Toyota to promote a level of education and opportunity that rivals any competitor. 

Toyota has been a very stable and successful company for the majority of the company’s time.  The recall crisis that occurred truly tested the company’s fortitude and illustrated some of the company’s downfalls from a managerial perspective.  In that instance, the Japanese culture and methods used previously were neglected.  Lean management characteristics, maintaining a culture of respect and collaboration, enhancing common practices to strong and secure standards, as well as promoting the most superior level of education and learning opportunities are aspects Toyota needs to continue to implement and build upon to be successful.  The cost of doing business in any other manner can be detrimental to the success of the company, as this Japanese-based company created a foundation built on these great qualities.

References

• Abramson, N., Moran, R., & Moran, S. (2014). Managing Cultual Differences (9th ed., Ser. 2014). New York City, NY: Routledge. doi:July 19, 2019
• Amadeo, K. (2019, June 25). 7 Reason’s Japan’s Economy Is Stuck. Retrieved July 19, 2019, from https://www.thebalance.com/japan-s-economy-recession-effect-on-u-s-and-world-3306007
• Campbell, J. (2018). Intimate rivals: Japanese domestic politics and a rising China. International Affairs, 94(4), 911–920. Retrieved from https://search-ebscohost-com.chamberlainuniversity.idm.oclc.org/login.aspx?direct=true&db=edswss&AN=000438340900014&site=eds-live&scope=site
• Choi, J., & Lee, S. (2018). Lessons from a crisis: An analysis of Toyota’s handling of the recall crisis. Journal of Public Affairs (14723891), 18(2), 1-8. doi:10.1002/pa.1688
• Futoshi Y., n.d. Impact of the Intellectual Property System on Economic Growth.  Retrieved from:  https://www.wipo.int/export/sites/www/about-ip/en/studies/pdf/wipo_unu_07_japan.pdf
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• Jayamaha, N. P., Wagner, J. P., Grigg, N. P., Campbell-Allen, N. M., & Harvie, W. (2014). Testing a theoretical model underlying the ‘Toyota Way’ – an empirical study involving a large global sample of Toyota facilities. International Journal of Production Research, 52(14), 4332–4350. doi:10.1080/00207543.2014.883467
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