Managing Uncertainty: Japan's Nemesis
The current economic crisis created by Donald Trump's tariff war is in some ways similar to a gigantic earthquake for Japan. The difference is earthquakes are predictable in terms of outcomes. A large earthquake destroys a region in a matter of minutes, search and rescue takes place and rebuilding begins. What Donald Trump has decided to implement is one continuous earthquake. How can anyone rebuild when the future assures constant tremors?
We know Japanese are at their best when everything hums along smoothly. Conversely, Japanese institutions (both public and private sector) are challenged when rapid decision making is required. Crisis breeds uncertainty. Yet even in the best of times, Japanese require time to form consensus on any path forward.
Add to the mix a destabilized world order where global alliances are in question, and it is certain Japanese leaders will suffer more than most as they attempt to steer the course. It's hard enough to decide on a path forward when waters are calm. In risk averse Japan, the challenge becomes monumental as decision makers are faced with an American President who is in it for himself and makes decisions that punish allies while rewarding adversaries.
In the end, no one seems to understand what the end game is for America because its being presented in a chaotic, ever changing way. The raising of tariff revenue and lowering of non-tariff barriers is supposed to reduce fiscal and monetary deficits? How exactly will that work?
Let's be fair. What comes next in Donald Trump's "kiss the ring" world is anyone's guess. His attempt to cause chaos in order to foment loyalty is his mandate. Who knows what to do? Will a tit-for-tat trade war lead to more wealth destruction or will the markets soon bottom and stabilize? I wouldn't rule out a "Trump saves the day" moment to counter the chaos he has caused.
Looking out, should Japan dismantle factories in Mexico and Canada and relocate more of them to the USA? That would take years and cost hundreds of billions of dollars. Should Japan pivot and establish more plants in China which, by comparison, is suddenly considered to be more stable? Or should Japan just sit and wait it out like so many in the business world are choosing to do? Whatever strategy is undertaken, the future is murky.
Even so, Japan may surprise if savvy business and government leaders use this time to adequately adjust their crisis management strategies to ride out the storm. Watch Toyota. They will lead the way.
Artisan / Scenic Artist at Theming | Creative Direction, Scenic Artistry
5moIt seems like the current PM is following the double-hedge approach, and to me it is clearly the wisest path, both in the short and long-term. A stronger Asian alliance couldn’t hurt Japan, but to throw the American baby out with it’s dirty bath water would also be imprudent.
Higher Education, Science, & Technology Internal Communications | Weaver of High-Impact Alliances & Events | Positive Social Impact
5moNot onboard with blanket characterizations such as, "...In risk averse Japan, the challenge becomes monumental", because such a claim ignores the nuances, it's way beyond just "requiring time to form consensus." The Japanese culture high level of uncertainty avoidance / "risk averse" tends to come from to a societal preference for stability, meticulous planning, and a cautious approach to change. However, when those preferences are met - and quite often are indeed met at differing paces across their culture. But compare this another risk averse culture - consensus building moves quickly. It's related to the inner-outer contexts and high/low contexts of information. Alternatively, German culture, which also ranks in high uncertainty avoidance / "risk-averse", but here the Germans tend to balance caution with a willingness to take calculated risks in spite of the challenges. Consensus takes on different connotations. Practical example? Compare business contracts from the two cultures, or compare marketing content of technical products. One culture is markedly longer and more detailed.
Global Strategic Communications
5moLet's see what comes from Japan's negotiation team headed to Washington DC. Expect a "win" for Trump and perhaps a clear path for what all countries need to do going forward to appease him. Thus far, zero tariffs, as offered by Vietnam, is not the magic formula...
Chief Executive Officer at American Geo Power
5moJapan has a lot of unused old factories in Japan, and since they changed the rules to allow un-skilled foreign laborers to come to work for a few years (Many are & will become illegal immigrants) Japan doesn’t have a labor problem. So I’d bet that any expensive pivoting of factories would be back to Japan. I do think 🤔 it’s going to get a lot lot worse before it gets better, if ever. Most SME’s in Japan are extremely dependent on constant, & stable bank loans to make ends meet. But I’ve heard from a lot of Japanese bankers that many of these SME’s without hard collateral, and/or personal loan guarantees, to pony up are about to be thrown under the bus the next time they apply for a loan. And that’s when the finiancial house of cards will really start to crumble. But the bankers will be okay 👌, they almost always are.
Chief Advisor at Kujaku Japan Advisory
5moGreat article David. Could not agree more.