Henry Scott Stokes

Back to Contents of Issue: June 2001

The urbane author of A Hundred Samurai Companies discusses the state of financial journalism and the role of small and medium-sized companies in the Japanese economy.

by Stephen Mansfield

Henry Scott StokesHenry Scott Stokes wears many hats. He's known for his past work as a journalist and media consultant for The New York Times and as Asia editor for its TimesFax digest, as well as for his present involvement with The Economist and several Japanese financial publications. He wrote the 1999 book A Hundred Samurai Companies and had the prescience to set up the Financial Times' Tokyo Bureau in 1964. Scott Stokes is known to another group of readers as the author of the biography The Life and Death of Yukio Mishima; as the editor of The Kwangju Uprising, an anthology of memoir-pieces by journalists who covered the massacre in South Korea in 1980; and as the Japan impresario for the artist Cristo and his well-publicized "Umbrellas" project linking California and Japan.

Photojournalist Stephen Mansfield met over green tea with the urbane writer at his Roppongi high-rise apartment, where they discussed the state of financial journalism and the role of new small and medium-sized companies in the Japanese economy. Excerpts from that interview follow.

You have borne witness to many events, changes, and shifts of mood during your time in Japan. How have these affected your perception of life here?
Oddly enough, I have become more and more optimistic as time has passed, always within the framework of Thomas Hobbes' observation that life is self-definingly nasty, brutish, and short. It seems to me that the future here is more interesting now than it has been at any time within the last 50 years.

Obviously, the accent now is on technology: The Japanese are either going to show their faces and understand the world again or not. The consensus among my colleagues and the financial writers I know is that Japan is finished. The view is that somehow the world's second-largest economy is going to disappear in smoke [laughs], go over a precipice, or blow up like Mount Fuji. I don't believe that at all.

How will the economy revitalize itself then, in your view?
I think we are going to see a myriad of little companies sprout in a newly liberalized atmosphere thanks to deregulation. My self-designated job is to track these new entities as they burst forth. They're not necessarily all future Sonys or Hondas, but we've got an atmosphere here now which militates in favor of initiative and free enterprise of the kind we haven't had for 50 years. Things have gotten congealed or hardened over in both the arts and business. With the deregulation which many of us insist is happening, the scope for new companies to arise, acting as catalysts to larger ones, is very great.

Reading the Mishima biography made me think that you could quite easily have made a living as a literary critic. Why finance?
Instinctively I have directed my energies along lines where, first of all, I could earn an income. Economic and financial writing is something for which there is an ongoing demand, and the more experience you have, the better you are able to cover the field. After the Mishima work came out, my publishers in New York wanted to press on with a book on Yasunari Kawabata, another Japanese writer who had committed suicide. The idea of immersing myself in a further catalog of catastrophe was extremely unappealing. I didn't take it seriously, at least not for more than two seconds.

Can you give us some insights into the way top financial journalists work in Japan?
That's a very nice question. At the risk of sounding arrogant or condescending toward some of my colleagues, many simply do not know how to cover this country. Let me take a very recent example. The Financial Times carried the name of the Daiwa Bank on their front page, stating that it was heading for oblivion. They named the institution, and they have been doing this kind of thing on and off for a number of years. It is absolutely childish and regrettable that one of our leading publications should report in this way [naming the bank explicitly in a story based on second-hand analysis]. But the thing is that if you go and ask people their views, these are the sort of opinions they will voice.

You mean that the official forecasts are often the gloomiest?
Exactly. One of the conversely great and not so great things about this country is that people run around expressing their worries and innermost anxieties. The Japanese are plagued with what one scholar described many years ago as "endemic pessimism," something which is deeply rooted within this society. I can walk out of this building now, go down to the nearest securities office and, if it's staffed by Japanese, they're going to tell me the world's coming to an end. They will reel off a number of doomsday scenarios that are about to burst upon us. However, it is precisely by rehearsing all these worst-case scenarios that they avoid the final disaster from actually occurring. The very day after the FT had published its story on the Daiwa Bank, the authorities announced a whole bunch of responses, which may, ironically, have even been triggered by that very report.

Getting back to you again, may I ask who your main clients are, the recipients of your work?
The main people I am working for at the moment are The Economist. I am also working with Japanese publications like Toyo Keizai, as well as actively exploring the possibility of new book ideas on the area of small and medium-sized enterprises. [SMEs] are very difficult for conventional news operations here to cover because nobody has heard their names.

How did the book A Hundred Samurai Companies come about?
Someone at the Ginza office of Nomura had circulated the idea that there was scope for a study of small companies here, which had never been done in book form in English before. This came to the attention of a publication I was writing a column for. I just didn't have enough things to do for them, so when I heard of this idea I thought, "That's for me! This is something that will take me into completely new waters."

In the book you said that Japan must be more like California in the 1980s. What did you mean by that?
When I rethink that remark, my thought was that something similar, albeit on a smaller scale to Silicon Valley, could happen over here. There was an attempt to do so in Shibuya with the Bit Valley concept. The survivors of that experiment are there today. It proved to be a somewhat more diffuse phenomena than anticipated. One of the first companies I interviewed in Shibuya, called Living on the Edge, exemplifies what I had in mind when I said that a California of the '80s should be replicated in Japan. That company's original activity was to produce Web sites for people, which they would then design, set up, and run. The owner of that company has subsequently set up half a dozen subsidiaries, some overseas, and he's looking for more niche activities which he can pursue within the Internet field.

The book is unapologetically optimistic. Can you expand on the source of that optimism?
Yes, I can. The source of my personal optimism is the following: The Japanese economy couldn't possibly get any worse. In terms of atmospherics of, say, the willingness of banks to lend, the eagerness of entrepreneurs to risk their precious money, you get swings of the pendulum -- cycles -- in any economy. This pendulum has swung so far out in the last ten years that it is inconceivable it will remain at this level forever. The swing back is not just one of mood but is accompanied by rapid-fire investments. People are sitting on vast piles of money here, doing nothing with it.

Public finances are in a dreadful mess and require drastic action, but I observe that we have a country with the strongest currency in the world, with the largest trade surpluses in the world, and accumulating the largest foreign reserves in the world. And having, incidentally, the largest pool of private savings in the world.

In any consideration or evaluation of the Japanese economy, culture plays a major role, a far greater one than it does in the discussion of other countries. Why this more holistic approach to the economy here?
One or another model cannot possibly suffice to account for an economy, let alone a totality that includes society at large. It has become the convention among our more thoughtful writers and commentators to treat things here in terms of a culture rather than simply an economy, but maybe that should be the approach used all over the world.

There is this almost cabalistic view of Japanese society, isn't there --that you need to know the rituals, you need a code book to operate here?
Yes. It is still extraordinarily hard to know what's really happening here in areas like banking. There is very little sustained effort to explain what is going on. How many of the big banks have got people who are competent to explain what they are doing? It's in their interests to do this, especially in terms of IR (investor relations). If they want people to invest in their companies and to keep their stock prices high, they need to keep them informed in a consistent and timely manner. This shortcoming is seen in an even more extreme form in the case of politics.

You mentioned the forthcoming Economist conferences. Can you tell us a little more about that?
The Economist has a subsidiary called the Economist Conferences, with a body here entitled the Economist Conferences-Japan. My task is to prepare a report on 100 Japanese companies, newly listed on the Nasdaq Japan, Mothers, and Jasdaq, and to present this at the October 3rd conference. Other organizations run conferences here: The FT runs them, the Nikkei too. The Economist is particularly well-suited in this respect because they have this broad and somewhat relaxed world view. The event has been titled the "Transforming Japan Project." The idea is that Japan, as Yukio Mishima forecast decades ago, must either change or "disappear." The best hope for a transformation lies in Japan's new companies.

Note: The function "email this page" is currently not supported for this page.