The Journal The Authority on Global Business in Japan

The business environment in Japan, Prime Minister Shinzo Abe’s greatest challenge, and the benefits of engagement with the American Chamber of Commerce in Japan (ACCJ)—these were among the topics covered by Debbie Howard and Jesper Koll in a wide-ranging interview with The Journal in April as they approach their 30-year anniversaries of living and working in Japan.

After four years working for McCann-Erickson, Howard began her own market research company in 1989, which merged in 2012 with The Carter Group, where she is chairman. She served as a member of the ACCJ in leadership roles for 20 years, including vice president and then president (2004–05) and chairman (2006–07). She currently serves as president emeritus of the ACCJ.

Koll, an economist and Japan expert, long has been a contributor to the ACCJ, most notably in terms of his annual thought-provoking speech—Jesper Koll’s Annual Business Forecast—delivered to ACCJ members for the past 15 years. Describing himself as Japan’s Last Optimist, Koll was the head of research for JPMorgan for the past six years, and recently resigned to set up the Tokyo-based Asia headquarters for a US asset management firm by this summer.

Highlights of their instructive interview—in which Howard and Koll spoke candidly about the time they have spent in Japan—follow. To watch the interview in full, readers may visit the ACCJ’s channel on YouTube.

How has the Tokyo business landscape for skilled professionals changed since your arrival? Could you talk about your respective fields in particular?

Koll: In the world of finance in the mid- to late-1980s, literally anyone who could speak Japanese was able to get a job . . . So, initially, it was the expertise in the language and in cultural understanding that marked people; the professional experience was secondary.

That changed dramatically in the 1990s, where it was the professional expertise—the accounting expertise, the professional analysis, the sales and marketing expertise—that became more important.

Here we are in 2015, and there is a huge shortage of skills in terms of understanding Japan’s financial framework and financial analysis skills, and also in terms of people who have the connections with corporate Japan and in its investment community.

Howard: I would agree with that. We are seeing a need for skills now, especially as Japan tries to be more global. Back in the ’80s, it was pretty easy to get a job even if you didn’t speak Japanese.

Now we are seeing both a demand for Japanese language skills, and also a nice mix of non-Japanese speakers being allowed to participate in the Japanese business world.

What advice would you give those who wish to set up their own business in Japan?

Howard: Japan is an expensive and highly competitive market. This means that “basic business rules” become even more important here, especially for would-be entrepreneurs: do your homework and know who your market is; know what your concept is; have the expectation that you may not make any money [in your first year of business], and be emotionally and financially prepared to take care of that.

And, be resourceful in terms of gathering support—not just people, but also information.

Koll: I would say it is definitely [a culture of] customer first. This is not an easy market, and the reason is that the Japanese customer is very discerning and very focused on attention to detail . . . So be very focused on what special, little extra asset you can bring to the market.

Have staying power and be focused on the customer. This is not a market where you will be able to make a quick buck. This is a market where duration—establishing partnerships, establishing relationships, showing your commitment, and proving your commitment to detail—is what will make it work.

What role has the ACCJ played in your careers?

Howard: For me, in the early days, it was networking. And then it became more a matter of being able to expand on my business skills: speaking, managing groups, and learning how to run meetings.

I had some of those skills already, but learning how to use them in the service of foreign businesses in Japan was a real challenge. And one of the areas for me that was so interesting was the advocacy aspect of the ACCJ, because that is not really my field. Once I got involved in it, I realized that it actually involves quite a bit of PR and communications.

Koll: My world is that of finance, economics, and policymaking. And there is no question that the networks and insights that you get from the communications of the [ACCJ] are absolutely second-to-none.

And it is very interesting that in 2015, Japan stands at the beginning of a renaissance. There is fundamental change that is happening, and the [ACCJ] has played an absolutely important role in that.

What do you consider to be the top three issues facing Prime Minister Shinzo Abe’s government right now?

Howard: The rapid aging of society is huge; it permeates everything that is going on in Japan. The second [issue] is how to incorporate women in the business environment in a meaningful manner, not just [to pay the idea] lip service.

The third one, honestly, I think is Japan’s “PR problem” in the world. “Japan Inc.” doesn’t have a good sense of how to sell itself, and this is a very important aspect of leveraging as a leader in Asia. I think that is a big challenge for the Abe government.

Koll: I very much agree with that. But I would take it a level higher. I think the number one issue is that Japan is in danger of becoming a second- or third-rate power.

Basically, 20 to 30 years of stagnation; 20 to 30 years of losing global competitiveness . . . and the only way that you’re going to stay a member of the club that makes global rules is by being economically successful.

The second is consistency of power. I mean, you talk about Abenomics, but what this really means is that you have all parts of the country—you have the bureaucrats, the business community, the central bank, the media, literally everybody— working together towards a common goal. This is the biggest challenge that Prime Minister Abe faces.

And then, finally, in economic terms, Japan is no longer a net creditor country. This is very important. Last year, for the first time ever, the household sector savings rate went from positive to negative . . . There is, actually, a shortage of capital. As a result, corporate Japan is going to have to sweat assets much, much harder.

Does Japan have an edge on other Asia-Pacific nations in terms of the fight for foreign direct investment (FDI) and global talent?

Howard: I don’t think so, at least not right now. I think that it could have an edge . . . but again part of it is PR, and part of it is leveraging on these items that we’ve been talking about.

Koll: It is very interesting that Japan has a great attribute of technological innovation; there is a wealth of patents across a wide spectrum of industries.

Now, where Japan does open up for FDI—let’s call it foreign and international partnerships—is [in the area of] intellectual property . . . all these patents that Japanese companies have, which are being under-utilized. Using those assets more aggressively is where global partnerships and global joint ventures can help tremendously.

In what way have Japanese consumers become savvy? How are businesses either failing to address the changes, or succeeding in doing so?

Howard: When I think about Japanese consumers from the mid-’80s to now, they are much more individualized and independent in the way they make their decisions.

Back in the ’80s, women would go to department stores and buy an outfit from top to bottom—all the way from shoes to handbags and clothing. Everything was the same and from the window.

And they didn’t have the confidence to mix and match on their own. But now, of course, you will see Gucci bags, Uniqlo jeans; you’ll see Japanese women are fashion leaders in the world . . . We are also seeing more segmentation, and more willingness [on the part of consumers] to make their own decisions based on the inherent quality of a product, and not just the make or the name of the maker.

So that’s a big change, and that filters into all categories, and all types of products and services.

As a noted, perpetual Japan optimist, how do you feel about Japan’s future?

Koll: I find it very difficult to curtail my enthusiasm. I find that Japan does stand at the very beginning of a secular up-trend; a true renaissance, I think, is happening here.

That doesn’t necessarily mean the economy is going to grow by 2.5 or 3 percent, but we definitely have the end of deflation. You do have the start of a labor market generating wage growth that is positive, for the first time in about one generation; on top of that, you have a wealth of assets that have been left by the Mick Jagger generation, the retirement generation.

So what is very interesting for me is that, in Japan now, 45 percent of all Japanese over the age of 20 have no debt: no credit card debt and no mortgage debt. But that 45 percent own, fair and square, the home they live in. So it’s quite spectacular.

And then you have a young generation that is graduating from university that has no student debt, while the quality of jobs that they are getting is beginning to improve quite dramatically . . . So let me put it this way: I believe Japan is going to be one of the very few advanced economies where a new middle class is going to be created; and that’s where I want to be.

I want to be in the retail business here in Japan; I want to be providing services to the retired generation here—that is very rich—and the young, emerging generation [too].

After 30 years in Japan, what have you learnt?

Howard: I’ve learned that I’m not as smart as I thought I was when I first got here! . . . Japan challenges us all in very many ways. It is one of the things that has kept me completely engaged here . . . I’ve also learned to reserve judgment. That might have come with age (laughs). Things aren’t always what they appear.

And it’s always important to consider a variety of different viewpoints and a lot of different inputs into what you’re trying to do.

Koll: Two rules. First rule: never ever underestimate the ability and willingness of the Japanese people to suffer together. And rule number two: never ever underestimate the ability of the ruling elite to make sure rule one is applied.