Blog 9 min read 21 February 2022

Japan’s “New Form of Capitalism”

A Right Idea Coming With Immense Communication Challenges

This article first appeared in Asia Times on February 21, 2022.

The big vision of Japan’s Prime Minister Fumio Kishida is to revive the Japanese economy through a “New Form of Capitalism”. He made this very clear during his address at the World Economic Forum in Davos in late January.

Kishida is aiming high, and he is not alone. In the motherland of capitalism, the Washington-based Aspen Institute has been promoting the idea of “long-term capitalism” since 2003.

It will take a lot for Kishida to deliver on that promise in Japan. It will include the right policies, successful collaboration with partners at home and globally in business and politics alike, substantial time, a lot of luck, and much more.

To start, Kishida must professionally communicate his vision to his key audiences and avoid the fate of one of his predecessors.  Back in 2006, when former Prime Minister Abe launched the idea of a “beautiful country” as his vision for Japan, it was as short-lived as his first term, which ended abruptly in summer 2007.

Global paradigm shift away from neoliberalism and shareholder capitalism

But different from Abe then, Kishida’s vison is much more attuned to the challenges that Japan and other democracies are facing today. We are indeed witnessing a potential paradigm change similar to the establishment of welfare states and big governments in the 1950s and 1960s followed by the rise of neoliberalism led by President Reagan and Prime Minister Thatcher in the 1980s and 1990s.

While some Western leaders admire China for its effective handling of the ongoing pandemic crisis and its impressive economic growth and technological advancement, it seems clear that these democracies will not look at China’s state capitalism as a viable blueprint applicable to their own societies any time soon

The coronavirus crisis has nevertheless accelerated the question of what comes next with regards to the role the state plays as seen by the Great Reset and shareholder capitalism discussions at the World Economic Forum since 2020.

Since long, societies and governments in the West have been struggling to address a wide number of socio-economic challenges such as climate change, digital transformation or the rapid widening of income gaps, all on top of the increasing frictions in geopolitics and geoeconomics resulting from the US – China decoupling. And it clearly shows in recent politics.

Against this background, Kishida struck the right tone but was also extremely ambitious when he stated in his Davos speech that “Japan is determined to lead the global trend with this `New Form of Capitalism’ and will demonstrate concrete examples of how capitalism can evolve”.

Major challenge to turn a global theme into a Japan-specific positioning

As a PR practitioner, I am not in the best position to comment on whether and how capitalism should change, or which specific economic policies are needed in Japan or elsewhere.

However, I do have a few thoughts on the PR challenges and messaging problems that come with Kishida`s concept.

A comparison with “Abenomics”, the famous and powerful theme of Abe’s second reign from 2012-2020, illustrates these challenges.

First, the theme “new form of capitalism” is not only vague by nature. It is also unspecific to Japan – very different from Abenomics, which was explicitly about Japan, and even carried the name of its creator.

Like Abenomics, the two programs “Build Back Better” and “NextGenerationEU” currently promoted by the US and the EU, explicitly target their respective country/region.

Probably the most important recommendation from a communications perspective is to switch from the current wording of “new form” or simply “new” to a qualitative description of what exactly it is that will define this capitalism. 

One such option could be “ethical capitalism”. This term is generally used in English to summarize the thinking of Eiichi Shibusawa, a Meiji era banker, industrialist and entrepreneur. Shibusawa is widely regarded as the father of Japanese capitalism and advocated for a new way for stock companies to address social issues under the Japanese term gapponshugi.

Other such terms with similar connotations include “community capitalism” or “sustainable capitalism”, the concept endorsed by Japan’s powerful business organization Keidanren.

Ken Shibusawa, a great-great grandchild of Eiichi Shibusawa suggests the idea of a “capitalism that cares”. It is an interesting view highlighting the need to simultaneously care about shareholders, environment and society incl. human capital – a correct description but not a messaging solution. 

Second, Abenomics clearly and very consistently spoke of three pillars, the famous three arrows of (1) monetary easing, (2) fiscal expansion, and (3) growth strategies.

By contrast, Kishida seems – yet – to be looking for such clearly defined pillars. In his Davos speech, he made reference to a green society, digital transformation, and investment in people but without calling these out as specific pillars or building blocks.

The danger to focus on distribution as Kishida’s key message

The third and probably most concerning point comes with the term “distribution,” to which Kishida refers prominently by explicitly calling for a “virtuous cycle of growth and distribution” – a strong albeit also dangerous soundbite.

Any focus on distribution spooks the business community. Even at home in Japan, Keidanren’s Chairman Tokura reminded Kishida in his New Year Speech that distribution and growth can be discussed as a set but only with growth always as the first priority.

Outside of Japan, an emphasis on distribution immediately reminds observers of welfare capitalism and of policies promoted by individuals such as Bernie Sanders. This is even more true if the idea comes from the leader of Japan, a country perceived to traditionally favor equality and stability over individualism and dynamism. 

These are all immense communication challenges, but they do not seem unsurmountable. For starters, think of a cosmetic change and reword to “virtuous cycle of dynamic growth and fairer distribution”. Similarly, a stronger emphasis on positively-connotated terms such as inclusiveness, openness and opportunities can help.

The communication focus must be on people

More important and powerful would be to shift the perception away from an abstract, state-steered distribution of wealth.  Focus should be placed on the specific actors that Kishida’s new form of capitalism will enable to contribute to the generation of growth. Rather than distribution, investment in human capital, i.e. in people is the key – one of the focus points Kishida correctly called out in his Davos speech.

These people to focus on include women, younger people, foreigners, founders of start-ups (and probably even shareholder activists). In Japan, all of them have traditionally been either ignored or even disadvantaged. Their activation by targeted and enabling policies would turn a a distribution of wealth into a distribution of opportunities and a people-focused catalyst for reform and growth.

And here might also lie a clue to solving the messaging problem. Just think of the term “people capitalism”. It is not difficult to imagine how such a framing could be easily filled with hard core economic arguments on the importance of human capital as well as emotionally proof points that could equally shape a future debate – in Japan as well as globally.

Messaging considerations determining the actual concept of capitalism, growth and distribution might appear as the tail wagging the dog. But there are few dogs without a tail that are eventually embraced and loved by a majority.

Targeted messaging till and beyond the Japan G7 presidency as key to success

First of all, Kishida needs to raise again Japan’s share of voice internationally. At present, neither Japan nor Kishida feature prominently in the discussion of global challenges and their solutions. Many bankers on Wall Street, in London or Frankfurt will even struggle to correctly name Japan’s current Prime Minister.

Kishida’s basic narrative is yet fuzzy but nevertheless relevant and valid. He only needs to shape his messaging and start selling it and thus Japan. Japan’s upcoming G7 presidency in 2023 will provide him with a prominent platform to do so.

And if Eiichi Shibusawa and his concept of gapponshugi feature prominently in this narrative from Japan, 2024 offers another PR hook. It is the year, when Eiichi Shibusawa`s portrait will appear on 10,000 yen notes in Japan.