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Take a bite of some sustained, economic inventiveness.
ABENOMICS

Japan’s economic overhaul is inspired by Uber and rainbow bagels

By Preeti Varathan

Japan’s tepid growth, depressed economy, and overworked population has been a problem for decades—but Shinzo Abe is confident his nation is on the brink of change.

“A year ago, was there anyone who imagined Aaron Judge would become so enormously successful?”

On Sep. 20, prime minister Abe addressed a hall full of suited, attentive financiers at the New York Stock Exchange to give an update on Japan’s economy. The muffled laughter and raised eyebrows suggested an inaudible “no” to Abe’s question. But, of course, defying expectations, the phenom broke the New York Yankees rookie home run record set by the legendary Joe DiMaggio more than 80 years ago.

It’s this kind of unexpected change Abe thinks will end the deflationary spiral and shrinking workforce plaguing Japan. “It’s absolutely possible to break down even a massive wall that everyone feels is insurmountable,” he said.

Without missing a beat, Abe then likened himself to another sports hero, Yoshihide Kiryu, the fastest sprinter in East Asia who broke the “10-second barrier.” Abe, too, wants to break the metaphorical economic barriers standing in the way of sustained, healthy growth. Abenomics, coined to describe Abe’s economic agenda—is definitely extreme. The Bank of Japan is pumping an extra ¥80 trillion ($711 billion) (pdf) into the system each year, with its total assets valued at a whopping 70% of Japan’s GDP.  (The size of the US and UK’s central bank balance sheets never surpassed more than 25% of their respective GDPs.)

But Abe, Japan’s prime minister since 2012, doesn’t think traditional stimulus packages will suffice. He’s envious of the kind of entrepreneurial, willing-to-fail mindset that dominates Silicon Valley, and the wildly successful companies that have emerged because of it. In Japan, big companies still dominate, so the dream for young, ambitious people is an established, tenured career.

Abe’s plan to disrupt Japan’s work culture is simple—bring other people in. Japan is accelerating visa screenings for professionals to under 10 days, and putting in the groundwork so that, once relocated, expats can easily acquire green cards.

But what’s so tough about enabling tech inventiveness is it’s often unforeseeable.

“Four years ago, who would have predicted that huge lines would form outside The Bagel Store in Brooklyn in order to upload a rainbow bagel on Instagram?” Abe asked the crowd of bankers and reporters. Would people have predicted Uber, either? he wondered.

His solution? Make Japan a “sandbox”—a place where the venture capitalists of the world can experiment, make a mess, and play. He wants to foster fintech in Japan by dropping the red-tape and regulations that hinder innovation in other countries, and give VCs a regulation-free, trial-and-error phase.

Japan, of course, has other reasons for wanting to bring outsiders in—by 2050, the Japanese population is estimated to have shrunk by 20 million. The workforce also struggles to support women (though this is beginning to change).

Abe is aware of these dismal demographic trends. His plan is to tap into the entrepreneurial energy of the aging workforce. Masako Wakamiya, who made an appearance at this year’s Apple conference, invented an app at 81. Abe also was quick to remind us that emoji, now universal and displayed as modern art, was the brainchild of Japanese developers.

He’s also redirecting social security, the benefit paid out to retirees, to the working generation. Abe aims to make education free for low-income households and send Japan’s young to Silicon Valley so they can bring its tactics home.

But make no mistake, Abe still needs foreign investment to flood Japan. Net foreign investment in Japan marked an all-time high in 2016, at ¥27.8 trillion, but it’s still below Abe’s stated goal of ¥35 trillion by 2020. He urged the audience to send capital his way, and insisted that living in Tokyo wasn’t all that expensive. The cost of living in Tokyo is lower than Singapore’s, he reminded the crowd. (Rankings from the 2017 Mercer Cost of Living Survey disagree.)

Abe ultimately seeks inspiration from an American hero. He shared the words of basketball icon Michael Jordan, “I can accept failure. Everyone fails at something. But I can’t accept not trying.”