Building from the ashes of defeat (with a little help from certain parties interested in a bulwark against Communism), Japan started with all new equipment and factories, and was able to adopt new structures learned mostly from Americans. Combining this with traditional strengths, the country found a "magic formula" that worked wonders under particular economic conditions.

At it's peak, this "magic formula" resulted in great wealth and a scramble for very limited resources within Japan. Prices fed on themselves and rose to unrealistic heights. Acustomed to absurd pricing going ever higher, Japanese business invested very unwisely in overseas real estate and other questionable ventures.

Now the world has changed, that shiny new manufacturing infrastructure is aging and obsolete, the "work till you drop, then go home and die" work ethic is changing. Prosperity has set in and sacrifice is no longer popular. Other countries can easily beat the price or match the quality, or both. Jobs are moving overseas.

Most important, the social structure that made the "magic formula" work so well now holds back all attempts to adapt to new conditions. The U.S and other competitors have replace their manufacturing infrastructure in normal turnover and are now often more modern than Japan.

Innovation is sorely needed because technology moves so fast today copying is becoming increasingly less viable, and foreign companies have learned to be suspicious. Unfortunately, a tradition of innovation and colaboration is lacking. The "Fifth Generation Computer Project", designed to show that Japan really could innovate, was a total failure. The moment a participating company found a possibly marketable idea, they hid it from the others.

When money became tight at home, and new loans became hard to get, cash strapped Japanese enterprises had no choice but to sell off their foreign real estate holdings for cash, often at horrifying discounts. Many Japanese now believe this real estate fiasco was all a deliberate American scam they got sucked into, and books have been written about it.**

Realizing the U.S. has already gone through all this and survived, books on American management theory have been recently popular in Japan (though the current scandals may tarnish that - or, maybe they won't).

As I used to say, "Watch Tokyo real estate prices. When you see them drop, the game is over, and it's not coming back".


**Asians love to blame things on complex conspiracies. Many years ago, after Radio Moscow became too worldly wise to be fun any more, I started listening to Radio Peking. Almost every broadcast had a story of how watchful Communist pesants foiled, at the very last moment, an American plot to subvert the productivity of their vilage. The plots were always so clever, so labarinthine, so diabolically complex and convoluted, and always came so close to improbable success, it made me really proud to be an American just listening to it all.