Japan's economic success: Myths, facts and realities

Multinational Business Review, Spring 1994 by Herbig, Paul, Milam, Robert

An examination of the seventeen most common myths and the actual facts that are relevant to them follows.

MYTH: Japan has the highest Per Capita Income of the industrialized nations.

FACT: Per capita income was $19,553 (1988) in Japan and $18,570 in the U.S. (IMF International Financial Statistics 1989)

REALITY: Income is not indicative of quality of life. Since the revaluation of the yen in 1985-6, Japan's per capita income is now considerably higher than America's, but Japan's real living standard is far below the United States. GNP only measures a flow; therefore, to measure the level of development, one must also consider stock assets such as equipment, infrastructure and housing. From this point of view, Japan is behind many other industrialized nations (Godet 1987). For instance, in 1983 only 53% of roads in Japan were tarmacked compared with 951 in France and two-thirds of Japanese homes did not have complete drainage systems (compared to 35% in France) (Tully 1991). Japan averages 2.5 square meters of park per person compared to 45.7 for the United States and 30.4 for Great Britain (Smith 199t). Ninety-seven percent of Britain's houses have sewer service; 37 percent of Japan's do (Far Eastern Economic Review, 1990). Japan has 87 square meters per vehicle of express highways; the U.S. has 465 (Smith 1991). Central air conditioning or central heat is relatively unknown in Japan; space heaters are still the most prevalent way to heat residences. Japan also has a woefully antiquated infrastructure. Harbors are clogged, parks tiny, roads impassable, railroads jammed to capacity. Poorly engineered roads with narrow lanes and no road shoulders are commonplace. Japanese opportunities for recreation and leisure are limited because of lack of facilities. The United States, with twice Japan's population, has more than thirty times as many public libraries.

America has the world's widest choices of cities with job opportunities and good living at bargain prices (Tully 1991). The Japanese themselves, complain about their poor quality of life. What good are riches if you can't enjoy them? (Lehner 1991).

MYTH: Japanese have a much higher Savings Rate than the U.S. does.

FACT: In 1987, the savings rate in Japan was 15.1%; in the United States it was 6.6% (Bank of Japan Comparative International Statistics 1989).

REALITY: The statistics alone do not tell the whole story. Savings rates are defined as disposable income minus consumption, divided by disposable income. In the United States, housing stock is considered consumption and not savings. Japan's statistics are based on an accounting system advocated by the United Nations. The American figures are based on its own system, administered by the Commerce Department. The two are significantly different; if the U.S. statistics are converted to the international measure, the American savings rate jumps two to three points. The two savings rates move even closer if discrepancies such as the treatment of public pensions are removed. The American system treats public pensions as savings of the government rather than that of the private sector. In fact, if you took out all the accounting inconsistencies, the difference in savings rate between Japan and the Untied States would be only 5%. That is still significant, but not nearly as large as is generally perceived. In its adjustment, the Bank of Japan put the U.S. savings rate at 14.7% and the Japanese rate at 16.7%, a mere 2.0% difference (Ohmae 1990).

This high level of savings has been constantly decreasing since the early post-war years (from 23% immediately post-war to the 16% of today). That it is not culturally based can be assessed from the fact that the Japanese prewar savings rate was only 5%, no higher than the current United States rate. Therefore, the supposed higher Japanese savings rate (at much lower interest rates) is partly due to the necessity of recreating the savings stock, is in response to the lack of services and opportunities that are commonly available in the United States, and to a high degree is due to different measures and reporting techniques.

MYTH: Japanese are the most literate, highly educated people in the world.

FACT: Japan has a 99Z literacy rate; 94% of Japan's students go on to senior high school and 35 % proceed to some form of higher education. Japanese students attend school 243 days per year versus 180 for American students, 35% more days. By the end of high school, Japanese students have had at least one or two years more schooling than America's best students. They routinely score the highest in the world on comparative math and science tests. Twelfth grade achievement scores (International Association for the Evaluation of Educational Achievement 1987):

(Scores omitted)

REALITY: The education received in a Japanese high school is analogous to that expected in a United States college. It is intensive and pressurized while the education received in a Japanese college is similar to that of a United States high school- a period of time for socialization. The Japanese drive to excel has produced superior results in achievement tests in math and science. The Japanese educational system has created a highly literate, highly disciplined work force that is rightfully the envy of the world. The education system works to provide intense pressure to conform. It emphasizes a 'right' way to do everything instead of encouraging students to imagine different ways to solve a problem. Listening skills and obedience rather than debating skills are rewarded in Japan's educational system. Japanese students learn how to study, to memorize large amounts of data, and to take tests well, but not how to think, debate, criticize, derive original, creative ideas, or be well rounded and multidimensional. Few American students will willingly accept the level of conformity, harshness, and meaningless activity emulating the Japanese system appears to mandate. Any advantages Japanese students may have over American students at the secondary school level are gone by the time both have graduated from college.