JIN-146 -- Japan to Lifetime Employment System: You're Fired!!

J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the week's business and technology news

Issue No. 146
Thursday, August 29, 2001


+++ Viewpoint: Japan to Lifetime Employment System: You're Fired!!
+++ Noteworthy news
- TV Shows Encourage Audiences to Participate by Cellphone
- That Social Stability Thing
- DoCoMo Picks PacketVideo to Deliver Video on 3G Keitai

+++ Viewpoint

Japan to Lifetime Employment System: You're Fired!!

How times have changed. Over the past two weeks it's become
abundantly clear that a turning point has been reached in regards to
Japan's much-vaunted system of lifetime employment. This system, some
argue, is far superior to the fire-and-hire system in the West for
several reasons: It keeps ideas in the company -- job-hopping
employees don't hop away with company secrets. Managers are not
short-sighted, and think in terms of decades instead of their term of
office. Some argue that industrial robots are huge in Japan because,
unlike Western counterparts, Japanese workers need not fear getting
fired if a robot takes over their job. For society at large, the
benefits are to be seen in the unemployment and low crime rate.

Perhaps the system is indeed superior in some ways, but its future is
in doubt. While reports of unemployment reaching a record 5 percent
in July surfaced, this week Toshiba announced it would lose a billion
dollars this fiscal year and fire 19,000 employees, including 17,000
in Japan. (Often such cuts come mainly at the expense of foreigners
-- not this time.) This follows similar announcements by other
blue-chip companies, including Fujitsu (16,400 jobs), NEC (4,000),
Hitachi, and Matshushita. In particular, the announcement by
Matsushita (the company behind the Panasonic brand) came as a shock
to the Japanese psyche, partly because it was one of the earlier
announcements and partly because the deeply conservative,
Kansai-based electronics firm is typically associated with the
lifetime employment system.

Clearly the unemployment rate will increase in August and over the
next few months, which means it's a particularly bad time for Prime
Minister Koizumi to implement job-slashing structural reforms;
however, this awkward situation must in some ways please at least one
force in Japanese society: those vested interests who don't **want**
structural reform. Indeed, for them it seems downright convenient.
Makes you wonder ...

In any case, it should be noted that this isn't Japan adopting the
often brutal hire-and-fire, creative destruction system of the US.
Employees at Toshiba will be let go over a period of 30 months --
that's about 6,800 per year. Attrition and reduced recruiting will
account for a substantial portion; transfers to subsidiary and group
firms will cushion the shock for some more. Perhaps what we're seeing
is the emergence of a new Japan employment system, one that has both
the flexibility of the US **and** the social stability of Japan.
Still, it might not be a bad idea to invest in companies that sell
security-related products ...

In the meantime, reminders that Japan remains a stunningly wealthy
country are everywhere. This week we were shown YRP, or Yokosuka
Research Park. The facility is totally dedicated to
telecommunications research and development, and is populated by
sophisticated labs from the likes of NTT, NTT DoCoMo, NEC,
Matsushita, and Fujitsu, not to mention Ericsson, Nokia, and
Motorola. These wireless technology companies established their labs
at YRP because, well, because DoCoMo told them to. The magnificent
DoCoMo lab largely sets the pace for 3G technology research, and as a
result YRP is one of (if not the) leading center for 3G development

Despite DoCoMo's recent share price slippage, let there be no doubt
that the company is one of the world's powerhouses driving mobile
research. On the hill behind DoCoMo's 3G lab building the company is
building a new, multi-thousand-square-foot facility dedicated to --
you guessed it -- 4G. (The local joke is that there's enough space on
the hillside for two additional buildings, so wireless development
will end at 6G!)

It's been said that Japan is a nation of contradiction and contrasts.
Yes -- large technology companies are laying off staff and slashing
revenue forecasts. But at the same time, investment in future
technology runs in the billions. If Japan can remold its employment
system to adapt America's flexibility while maintaining social
stability and prosperity -- while at the same time dedicating huge
amounts of wealth to commercialize some of the world's best
technology -- the country will be a formidable competitor to the rest
of the world. Watch out Europe and America: Here comes Japan.

-- Steve Mollman, Daniel Scuka

"Workers face tough times as lifetime work ends," Mainichi,


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** TV Shows Encourage Audiences to Participate by Cellphone

Extract: Two major Japanese TV broadcasters started experimental TV
programs in which audiences are encouraged to participate via their
cellular phones. TV Tokyo and Excite Japan are cooperating to improve
part of TV Tokyo's conventional sports program, "Gekinama Sports
Today." TV audiences can use their i-mode phones to predict winners
of baseball games, and earn a chance to win prize money.

Commentary: It's spreading rapidly, this idea of the cellphone as a
tool for getting consumers to take immediate action in response to
entertainment or advertising in traditional media. We chatted
recently with Kazutomo Hori, president of cellphone content creator
Cybird. His firm is working with Dentsu, Japan's No. 1 ad agency, on
Sugu Meru, a service that lets consumers respond to traditional-media
ad campaigns -- i.e., win a trip to outer space in the year 2010! --
by sending an email over their cellphone. Sounds clunky, but it makes
sense. Compare it to sending a postcard. Your cellphone is likely
within reach no matter what you're up to. For advertisers and
entertainers, allowing for cellphone-based interactions is simply a
way to get more out of the investment they've already put into their

Source: "TV Programs Encourage Audiences to Participate by Cell
Phone," Aug. 28
Nikkei AsiaBizTech,

** That Social Stability Thing

Extract: The labour union of Japan's dominant telecom operator,
Nippon Telegraph and Telephone, will accept a proposed reform program
that includes 15-30 percent pay cuts, a newspaper said on Wednesday.
The 210,000-strong union will hold a two-day general meeting starting
Wednesday. The program calls for some 110,000 of the union members,
including those at NTT's two regional units, NTT East and NTT West,
to either quit or move to new companies at reduced salaries.

Commentary: This item perfectly contrasts the US' hire-and-fire
approach with Japan's concern for social stability (see Viewpoint
above). No captain of corporate Japan would take such drastic action
to reduce his company without first securing the compliance of the
relevant unions. Similarly, no union boss would allow the move to go
unchallenged absent a guaranteed soft landing for at least a
substantial majority of his members. We're not saying such moves are
painless. Doubtless, there will be disruption in employees' lives,
and even the odd suicide (it happens). But having a job at a smaller
subsidiary, even at a 30 percent lower salary, is for many people
preferable to no job, and this avoids the wholesale slaughter and
"get your cube cleaned out by noon" approach seen in many countries
outside Japan.

Source: "NTT labour union to accept reform plan-paper," Reuters, Aug.

** DoCoMo Picks PacketVideo to Deliver Video on 3G Keitai

Extract: NTT DoCoMo Inc unveiled a deal with multimedia software
maker PacketVideo Corp to deliver video to mobile phones for DoCoMo's
high-speed third-generation (3G) service. The deal between the two
companies will create a common platform for media and content
providers to distribute video to mobile phones and handheld

Commentary: We've been watching this venture for a while. Our
November 2000 feature story on wireless began with PacketVideo's
president Stephen Burke demonstrating streaming video on an iPaq
handheld in the company's "new Tokyo office." We describe PacketVideo
as "in the vanguard of firms helping to create an entirely new
industry around Japan's booming wireless Web." Little did we know
then that the firm would be DoCoMo's choice for 3G streaming video
partner -- but we're not surpised, either. Our hats off to


Source: DoCoMo, PacketVideo in Deal to Deliver 3G Video," Reuters,


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** FCC Marketing & Communications Symposium 2001
19 October 2001, the Tokyo American Club, Tokyo

The Forum for Corporate Communications is proud to announce the FCC
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** MCF Mobile Developers Conference 2001 (mobidec 2001)

August 29-30, Tokyo

mobidec 2001 provides you with everything you need to know about the
latest in mobile application and content technology. The three
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major industry leaders will bring you up-to-date information on
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** The US-Japan 21st Century Project
September 6-7, San Francisco, CA

"The United States and Japan: An Enduring Partnership in a Changing

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For further information please visit:


** Next Generation Mobile Content Strategies
11-13 September, London, UK

Next Generation Mobile Content Strategies goes straight to the heart
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4,255 (as of date of publication)

Written by Steve Mollman (steve@japaninc.com) and Daniel Scuka
Assistance with news compilation:
Richard Ochero (richard@japaninc.com)

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