[paper] Considering a Grand Vision for Japan

Yoshinori Yokoyama: Director of McKinsey & Company

Yoshinori Yokoyama graduated from the Faculty of Engineering Department of Architecture at Tokyo University in 1966. He received a master's degree in urban planning at the graduate school of Harvard University in 1972 and received his MBA from MIT in 1975. He joined McKinsey & Company in 1975, assumed the position of Director in 1987, and was the General Manager of the Tokyo Branch from 1989 to 1994. His major published works include Seichou Soushutsu Kakumei, McKinsey Gasshou Renkou Senryaku, and many other translations and theses. He is also a part-time instructor at Touhoku University and the Graduate School of Hitotsubashi University.

There are opinions that nothing specific can be seen when talking about structural reform. However, Yokoyama, Director of McKinsey, clearly defines structural reform as being an improvement in productivity and a change in the design of the social system.

The productivity of the domestic industry of Japan (rather than the export industry), which specifically includes construction, food and distribution, remains about two thirds of that of the U.S. He points out the reason for this is not only the restricted barriers to entry, but also the exit barrier from which the life of companies with low productivity are expanded through subsidies and protective governmental measures. Competition is lacking among industries where information on price value (price for the value of service) is not provided, such as the medical and financial industries, also resulting in low productivity. Thus, he concludes that the productivity of Japan should recover if there is progress in removing the exit barriers and providing information on price value.

Also, Japan still drags on the social system for a developing country. This system is not only unworkable in this wealthy and matured Japanese economy, but also serves as a disincentive for structural reform. Specifically, a system for a developing country entails public corporations and government-affiliated financial institutions, or health insurance and pension plans which rarely avoid failure. For example, from the end-user point of view, a total healthcare system including not only the medical institutions but also the firms to design and construct hospitals, life insurance companies, medical information providing services, etc. is required. There is an urgent need to redesign the social system to match this kind of wealthy society.

Some people point out that the Koizumi administration does not have any vision after structural reform. Mr. Yokoyama presents the concept of "wealthy decline" for this vision. In Japan, where the age of booming growth has come to an end and which now faces problems such as an aging society and depopulation, the idea of uniform and equal growth is no longer valid. A declining sector and developing sector are expected to coexist from now on, and he explains that under this condition there is a need for a "tourism-based economy" type of industrial structure that focuses on the service sector, and a formation of an enormous city-state which centers around the metropolitan area of Tokyo.