The Journal The Authority on Global Business in Japan

The American Chamber of Commerce in Japan (ACCJ) honored Atsushi “Andy” Saito as the 2017 Person of the Year at an event on March 20 at Tokyo American Club. After an overview of the history of the award by ACCJ Financial Services Forum Chair Andrew Conrad, ACCJ Chairman Christopher LaFleur welcomed Saito to the stage with a warm introduction.

“It is my distinct honor and pleasure to introduce Mr. Andy Saito, our 2017 recipient of the ACCJ Person of the Year award,” said LaFleur, welcoming the commissioner of the Nippon Professional Baseball Organization and senior fellow at KKR Global Institute, which is part of leading global investment company Kohlberg Kravis Roberts & Co. L.P.

“The ACCJ presents its Person of the Year award to individuals who have significantly impacted the global business environment in Japan. Our 2017 recipient could not be more emblematic of this,” said LaFleur. “Today we are honoring Andy for his contributions to the Japanese financial market and the Japanese economy overall as president and chief executive officer of Japan Exchange Group.”

In his acceptance speech, Saito talked about how inefficiency, stagnant growth, and aversion to change can affect Japan’s future, and how the Tokyo Global Financial Center Promotion Council is working to promote the city as one of the world’s top financial centers. He highlighted the critical changes Japan must make to overcome the issues it is facing, increase competitiveness, and promote future growth.

COMPETE
For the past two decades, Japan has fallen short against global rivals. But, a turning point has been reached, Saito said, and the gap in productivity per hour worked between Japan and the United States has grown to an astonishing 31 percent. The profit margin of Japanese manufacturers, which has long lagged that of US counter­parts, has worsened by two or even three times.

“Japan has, unfortunately, failed in its efforts to implement ways to improve productivity and international competitiveness,” said Saito. He explained that, while Japanese companies invented or developed many of the technologies that now dominate the global electronics industry, they have not been successful in commercializing these great inventions.

An example given is the lithium-ion battery, which was invented by professor Akira Yoshino of Asahi Kasei Corporation. The QR code, created by Aichi Prefecture-based Denso Wave Incorporated, is another example.

The continued success of these companies, Saito said, can be credited to good management capabilities and the business knowledge of their managers. But, by keeping to traditional ways that incorporate diversified values and globalization only to a limited extent, Japanese companies have cut themselves off from the rest of the world.

REFORM
When Saito became president and CEO of the Tokyo Stock Exchange, he learned that investors abroad were not attracted to Japanese stocks—mainly due to low return on equity (ROE) and ambiguous corporate governance.

“Japan must change and disrupt the tra­ditional customs, way of thinking, system, etc. We don’t have time [to waste],” he urged. To be truly competitive in the global arena, Japanese companies must live up to the valuations and expectations of the financial market, where portfolio selection is based on peer comparisons on a global scale.

Often stated as the persistent weakness of Japanese companies, efficient capital use—especially improved ROE—is the key to winning confidence from the market. Aware of this, Saito has devoted himself to tackling the challenge that has been left untouched for too long in Japanese business circles: reforming corporate governance to improve the capital efficiency of Japanese companies and their enterprise value.

CHALLENGE
With Saito’s help and continuous dedica­tion, things are moving forward and strong advice concerning these issues is becoming available. “The actual amend­ment of the Companies Act and the intro­duction of the Corporate Governance Code and Stewardship Code come across as new guidance for Japanese corporate managers,” Saito said. He optimistically observed that Japan’s move to address corporate governance seems like a miraculous turn of events.

Returning to the Tokyo Global Financial Center Promotion Council, Saito outlined how he and other members have dis­cussed ways to transform Tokyo into a financial center and revitalize growth. He said they will continue to raise awareness and understanding of the codes, and highlight efforts by listed companies to achieve the stated goals through growth-oriented governance.

Recommendations for achieving these goals include improvements to Tokyo’s business and living environ­ment, launching platforms for English-language consulting and tax incentives, finding measures to attract overseas financial companies, and empha­sizing customer-oriented business practices.

In response to rapid technological changes around the world, Saito and his colleagues advise the Tokyo Metropolitan Government to change the labor laws, which at the moment are very in­flexible and based on a seniority system. To implement a white-collar exemption to the labor laws covering overtime work within metropolitan Tokyo, Saito recommends utilizing the tokku framework that recognizes the functional labor structure and dynamic nature of global financial services. Today, Japan is facing a rapidly aging and declining population; and Saito said that, although it will require considerable time, talent, and financial commitment, it is crucial that the country address these time-consuming challenges. “Without painful challenges, we cannot survive for the future.”

Mona Ivinskis is a writer at Custom Media, publisher of The ACCJ Journal.