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Workers key to Japan Inc

ECONOMY AT STAKE:Better use of human resources and Japanese expertise in robotics and 3D printing can halt the nation’s slide in productivity, a report said


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.

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