Japan’s prosperity will depend on improving its lagging productivity, a report by McKinsey Global Institute that urges companies to boost their competitiveness by better use of their workers said.
Japan’s population of about 127 million began declining in 2011 and is rapidly aging, a trend seen in many industrialized nations, official statistics showed.
The nation’s gains in productivity — or the value added for each hour of labor — have lagged behind other wealthy nations in almost all industries, even advanced manufacturing.
That has hurt wage growth and also keeps returns on investment comparatively low, even for the largest Japanese companies, said the report released yesterday.
Japan’s labor productivity lags 32 percent behind Germany’s and 29 percent behind productivity in the US — a gap that is expected to widen to 37 percent over the next decade and ensure continued stagnation, the report said.
Only in real estate did Japan show higher productivity than the US.
“Many of the barriers and bottlenecks that have constrained growth are not imposed by regulation; they stem from traditional ways of doing business,” the report said. “Japan can reach 50 percent to 70 percent of its productivity goal by adopting practices that are already in use around the world, while most of the remaining improvement can be captured by deploying new technologies.”
The report suggests better use of women and older workers; improved access to financing for entrepreneurs; and a more aggressive approach to tackling global markets by making company management more global in nature.
At stake is the nation’s economic future: Without improvements, Japan’s per capita GDP is likely to fall to US$32,000, down from US$46,736 in 2012.
With major gains, it would at least hold steady at about US$48,000, the report said.
Japanese Prime Minister Shinzo Abe has made improving competitiveness a priority of his “Abenomics” growth strategy, which has so far focused on monetary stimulus and public works’ spending.
Abe’s government has also drawn up a sweeping set of reform proposals meant to spur growth, the third of his three economic policy “arrows,” but the administration has made little headway in what is expected to be a years-long battle against vested interests in many industries.
“There is a fourth arrow, in a sense, which is: What will companies actually do?” said Georges Desvaux, managing partner of McKinsey & Co’s Japan office.
Japanese automakers, such as Toyota Motor Corp and Nissan Motor Co, have done better than some other industries, especially consumer electronics manufacturers, in tapping into faster growing emerging markets.
Japan can better capitalize on its expertise in robotics and 3D printing to significantly boost profitability, Desvaux said.
In other areas, such as retail, there is ample room for improvement and an urgent need for quicker action given the strong growth in online commerce, the report said.
In financial services, productivity has been declining at an average rate of 2 percent a year, it said.
“What Japanese have not been able to do is actually move from components to software and services,” Desvaux said.
“Japanese companies tend to be very good around manufacturing and development, but not the rest,” such as sourcing, procurement, supply-chain management and pricing, he said.
Squeezed by competition from China, South Korea, Germany and other major exporting nations, Japanese manufacturers have sought to squeeze labor costs, mainly by shifting factories overseas and by slashing payrolls, but relying on temporary or contract workers who lack social benefits or long-term career prospects can hurt productivity, the report said.
“That is a real issue because it is a lack of investment,” Desvaux said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”