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Hitachi

Hitachi Research Institute

Interview

Interviews with experts and opinion leaders from our research network

Megatrends in the World Economy and Japan
- Heading toward social system reforms to enhance labor productivity –

While some point out that developed countries have continued to experience low economic growth since the financial crisis following the bankruptcy of Lehman Brothers in 2008 and face what is called secular stagnation (i.e., long-term stagnation), slow improvement in labor productivity is recognized as one factor underlying the long-term stagnancy and is an issue common to those countries. We invited Ms. Yumiko Murakami, Head of the OECD*1 Tokyo Centre which conducts analyses of economic policies and labor productivity from the perspective of international comparison, to discuss Japan’s challenges toward increasing labor productivity and its response going forward.

*1
The Organisation for Economic Co-operation and Development

Ms. Yumiko Murakami

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Head of the OECD Tokyo Centre
Born in 1965. Graduated from the Faculty of Foreign Studies, Sophia University. After completing a Master’s degree at Stanford University, she went to work for the United Nations. Received an MBA from Harvard University in 1994. Worked at Goldman Sachs and Credit Suisse before assuming her current position in 2013. She is in charge of OECD activities in Japan and elsewhere in Asia as well as overseeing public disclosure of surveys and research conducted by the OECD and recommendations on economic policies made by the OECD. Author of “Bukitoshite no jinkogen shakai – Kokusai hikaku tokei de wakaru nihon no tsuyosa (Leveraging a population-declining society – Japan’s strengths reflected in international comparison analysis)” (Kobunsha, 2016).

Worldwide stagnation in labor productivity

Shirai:Recently there has been much debate in Japan over labor productivity and work-style reforms. As the economic growth rates of developed countries remain slack, some point out the stagnation of labor productivity. How do you view economic growth and labor productivity?

Murakami:While the social and economic environment differs from one country to another, not only Japan but also most other developed countries face the issue of slow improvement in labor productivity and are discussing the issue as an important theme. My sense is that labor productivity has rather been on a rise since early 2000 when IT implementation advanced. For example, the use of fax machines was replaced by emails, paper-based tasks shifted to digital-based operations, and many things have been connected by networks. Enhanced operating efficiency should no doubt lead to increased labor productivity. Meanwhile, looking at the OECD macro statistics, the labor productivity of major developed countries, including Japan, the U.S., and the EU, has been on a decline over a period of some ten years. There is a gap between my personal feeling and the macroeconomic indicators, and I feel that action to fill the gap is indeed the key to global economic growth going forward. While I cannot respond with absolute proof about what has been causing the stagnation, various studies are underway and the OECD has formed certain hypotheses.

Shirai:We have a similar feeling about the situation. Japan is said to be showing a particularly low rate of improvement in labor productivity among the OECD member countries. What is your view on the background of this?

Murakami:Using an international comparison, Japan’s labor productivity and GDP per capita have unfortunately fallen below the average levels of OECD member countries. It is not that these economic indicators decreased rapidly in recent years but rather that they have been on a decline for the last 20 years or more. Although there may be slight deviations caused by fluctuations in foreign exchange rates, Japan’s labor productivity is ranked no higher than 20th among the 35 member countries. If labor productivity does not increase as the country’s working population shrinks, the overall output will obviously fall. Yet one important phenomenon in Japan to point out is that there has been a decline in working hours per person. While there has been a surge in public opinion regarding moves to restrain long working hours, statistics in fact indicate that the average hours actually worked annually for each worker is at a level almost comparable to the OECD average. There is a trick to the statistics. The total hours worked include those of temporary workers, and the rise in the percentage of temporary workers in recent years is contributing to lower average working hours. At any rate, since labor productivity remains stagnant while working hours decline, Japan’s GDP per capita ultimately continues to be at a low level among the OECD member countries.

Challenges toward creating innovation

Shirai:What you just described with regard to working hours corresponds to the denominator in calculating labor productivity. If the creation of added value which represents the numerator increases, labor productivity will increase. From the perspective of added value creation, we hit the reality that relatively speaking, innovation is unlikely to come about easily in Japan. In China, for example, there is advancement in building a cashless society. The spread of totally new services in emerging countries is supporting their economic growth. What is needed in Japan to accelerate the creation of new added value, which serves as the numerator mentioned earlier, through innovation?

Murakami: In the OECD, we conduct research to measure environments that encourage innovation. There are certain conditions that make an environment one that encourages innovation. For example, businesses cannot be established and products cannot be commercialized without funding, even when there are wonderful ideas. Communication and social infrastructure are also important. Academic backgrounds and skills are also among the factors to consider when raising the level of human resources.

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When conducting research on these elements and indexing them for comparison, the assessment of Japan reveals that the system for creating innovation and the social environment are at relatively high levels. In terms of financing, the current interest rate is near zero and there are abundant funds for research and development and other initiatives. Although it is a separate issue to determine whether such funds are used correctly, Japan has no issue in terms of funding. We have a solid social infrastructure and the country is given a high assessment even compared to the levels of other OECD member countries. Also, in regard to human capital, the Japanese demonstrate world-class skills in quantitative reasoning and reading comprehension, among other skills.
On the other hand, an element lacking in Japan is networks. Even when you have high-grade ingredients, you need a kind of seasoning to cook them properly and tie them together, such as soy sauce to give a subtle flavor. Without such a seasoning, the dish does not taste good. In other words, even with a social environment in place, innovation does not come about easily due to the lack of networks to connect the components of the environment.
That said, under a comprehensive comparison, Japan has much room for growth. While funding and highly educated individuals are indispensable for generating innovation, a country without those elements requires an extremely long time to satisfy the conditions for creating innovation, whereas Japan already has those elements in place. The country has the potential to make a significant change if a social system to combine and link those elements can be implemented.

Shirai:I imagine that we require various networks, such as those to link corporations with corporations, and corporations with universities and people with funding, to generate innovation. Could you share with us any particularly important points on networks?

Murakami: Currently discussions are being held in Japan regarding a social system to connect the state, corporations, people and funds and other schemes to link the dots from diverse perspectives. The OECD also incorporates the topic in its policy recommendations. In my opinion, the biggest factor for Japan is human liquidity. I lived in the U.S. for many years and returned to Japan about 9 years ago. Although I have continued to participate in discussions on the liquidity of the labor market since then, I am extremely concerned that no material reform has taken place to date. It is going to be too late if we don’t pick up the pace and work on increasing the liquidity of the labor market. The world’s business environment is changing rapidly, and we need to make drastic moves. Hitachi already has in place a new personnel system in line with the global standard, but not many Japanese firms have done so. Since it takes a certain amount of time after implementing a system before liquidity is generated, reforms must be carried out quickly.

Shirai:Every country has companies with high labor productivity and those with low labor productivity. If the difference is caused by the quality of manpower, I feel that Japan has human resources behind the closed doors of corporations. For example, even when an individual at a company is a highly skilled specialist, there are probably individuals with more extensive knowledge and experience and higher labor productivity in an open labor market. However, having a closed atmosphere at companies does not contribute to attracting highly skilled individuals from outside. For better or worse, many people in Japan to date have generally worked at the same company until retirement. It is a fact that, among other factors, the system of lifetime employment, based on traditional Japanese corporate culture, has contributed to the country’s labor productivity.

Murakami: I have nothing against lifetime employment. One of the strengths of Japanese firms is their approach of investing in human resources over a long period of time. The firms’ strategies are built on the major premise that their workers will remain committed to work for the organization for 30 or even 40 years. And it is based on these strategies that employees gain a wide range of experience and attain high labor productivity as professionals. No other country has such a corporate culture of providing employees with roadmaps and career paths.
However, once seniority is incorporated into lifetime employment, a very troubling issue arises. When an element of equality of outcome becomes part of the seniority system, the advantage of long-term investment in human resources can backfire, causing the paradox of changing Japan’s strength into a weakness. Equal opportunity should essentially be in place, and equality of outcome weakens the competitiveness of Japanese firms. A potentially effective measure that comes to mind is skillfully shifting the equality of outcome under the seniority system to equal opportunity. Since people’s abilities and needs vary, continuing to take the equality-of-outcome approach based on which compensation, etc. of employees is determined in a single-line manner under the seniority system will cause a company’s growth opportunities to slip away. To prevent the loss of growth opportunities, it is important to increase liquidity in the labor market, simultaneously make good use of the performance-based or results-based system seen in European and U.S. firms, and incorporate the element of equal opportunity. That means combining the advantage of long-term investment in human resources under the lifetime employment system with the principle of competition adopted in Europe and the U.S. to implement a hybrid-type human resources strategy. While maintaining a good balance is extremely important, effective implementation would contribute to developing highly skilled individuals capable of contributing greatly to firms in Japan. I worked many years for Goldman Sachs, a company having a typical U.S. “up or out”*2 corporate culture in which one can never be caught off-guard. I experienced both the good and bad sides of such a culture. Rather than simply taking in the strict principle of competition, I would like Japanese firms to put in place a personnel system that combines the positive elements of both the Japanese and European/U.S. styles to increase labor productivity. Since Japan has grounds on which the principle of competition is less likely to make its way, it can be said that the future outcome will depend on whether the hybrid personnel system can function effectively.

*2
The policy of requiring employees to strive for promotion (up) within a certain period of time or else leave the organization (out).

Reskilling presents a new roadmap to a super-aging society

Shirai:Although Japan is already experiencing declines in both its total population and working population, the labor force has yet to shrink thanks to the government’s efforts to encourage the participation of females and senior citizens in the labor force. The so-called M-shaped curve*3 is disappearing. From 2020 onwards, we cannot expect a further rise in the labor participation rate, and the labor force will ultimately begin to decline. Although Japan faces the pressure of an aging population before any other advanced country, aging will also advance in other major countries. In 10 or 20 years, how will Japan’s relative position change? What projections can be made based on international statistics?

Murakami: The OECD’s population forecast is in a field with a comparatively high rate of accuracy. We have a very clear scenario regarding the demographics for 2050. We project that Japan’s population will fall below 100 million in 2050, give or take a few years.
While there are many negative comments regarding the population forecast, I feel that, conversely, a decline in population offers an opportunity for the country. The biggest reason is that Japan is facing an aging population combined with a decreasing number of children and a technology revolution at the same time. Given this lack of workers, Japan has the need and the means to pursue automation and implement technology. The issue of a declining population is also not a phenomenon unique to Japan; a similar demographic shift will occur around the world. When conducting research on aging, the old-age dependency ratio, or percentage of the population of persons aged 65 and over compared with the working-age population (ages 15 to 64) is used as a common index. Japan is at the 46% or 47% level which is higher than any other country. Even at the present stage, Japan is the country aging the most in the world, i.e., a super-aging society. We will remain in a super-aging state in 2050 and the percentage of persons aged 65 and above to working-age population will be over 70%.
By 2050, more and more countries will be experiencing advanced aging like Japan. Not only Japan but also Korea will see its old-age dependency ratio exceed 70%. Although Korea has yet to find aging combined with fewer children a serious societal issue, the country will be in a state similar to that of Japan in 2050. The same thing can be said about China which will experience the aging of the population at an even faster speed than that of Japan. While one may have the impression that ASEAN countries have relatively high birth rates, Thailand will experience aging combined with a decreasing birth rate at a fast pace in the next 20 to 30 years. Although the U.S. has a large percentage of immigrants and a high birth rate, the issue of aging will become more serious upon the retirement of a large number of individuals in the baby-boom generation.
Considering what we have talked about thus far, population aging combined with a declining birth rate is a global megatrend and Japan is simply experiencing this trend a step earlier than other countries. As a developed country leading the effort to resolve issues, Japan should be able to implement effective strategies and lead the rest of the world. I think that while other countries hesitate to introduce technology that can take away people’s work, Japan can pursue technology reforms in a timely manner and build a society which can serve as an effective role model for other countries that will face the issue of aging combined with a declining birth rate in the near future.

Shirai:Various discussions have already been taking place in the country and some voice the need for a system reform that assumes a 100-year lifespan. What initiatives should Japan take as the world’s frontrunner in facing population aging?

Murakami: While discussions on aging societies tend to get pessimistic, it is wonderful that people live long, healthy lives. Yet at the present, although people now have longer lives, the social and economic systems are not up to speed in supporting an era of 100-year lifespans. Japan is at the forefront of super-aging societies and it must quickly carry out system updates. Since the healthy life expectancy will also lengthen, the current lifetime employment system will cease to function well under a 100-year life expectancy. Although the lifetime employment system is not a bad system, our employment system should offer equal opportunity, and the seniority approach with its equality of outcome must be dissolved. If healthy life expectancy grows, people will spend more years participating in the social and economic spheres. Therefore our employment system must be altered to support that. According to the OECD assessment for adult competencies, the academic skills of Japanese persons aged 55 and above are at remarkably high levels.

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The quantitative reasoning skills and reading comprehension skills of Japanese people are at the world’s top levels, and this is especially so for people aged 55 and above. As we enter an era of 100-year lifespans, I feel that no other statistics can give us greater encouragement.
In the era of 100-year life expectancy, many people will have active careers until the age of 80. Technologies and business environments will go through changes, one after another, creating new types of jobs. To continue working while responding to new technology, workers are expected to attain new skills. The term “reskilling” means to acquire new skills and update the skills you have. Reskilling can become challenging for people who do not have the basic academic skills. In that respect, the middle-aged and older age groups in Japan have highly competent people compared to those of other countries. They have significant potential as the country makes adjustments in job functions and skills. While one may have the impression that as people get older, their competency to learn new things drops and thus reskilling would become more difficult, Japan is in the best condition for reskilling. In Korea, for example, the results of an assessment on adult competencies indicate that there are many persons with low basic academic skills, such as reading, writing and calculating, among those aged 55 and above. On the other hand, the academic skills of Korean people aged between 10 and 29 are at high levels due to the improvement in the country’s education level. Since Korea will face aging in the future, reskilling becomes necessary for all age groups, but it will be challenging for persons aged 55 and above. I am not sure whether Japan’s past educational system anticipated the coming of evolving technology or a 100-year lifespan, but it has turned out that Japan’s middle-aged and older adults today have the necessary skills at high levels. It would be wonderful to make effective use of the latent capabilities of Japanese people in the middle-aged and older age groups to create a society where a 100-year lifespan is the norm, where people can take active roles for many years. In this perspective, the outlook for Japan’s aging society is bright.

Shirai:Why is it that middle-aged and elderly adults in Japan have high basic academic skills? Does it relate to the large number of persons in the baby-boomer generation who went through the fiercely competitive college entrance examinations?

Murakami: Japan’s quality fundamental education system is designed to restrain drop-outs. In other words, our system develops uniformly capable individuals. The U.S. produces a number of geniuses but also has many drop-outs. Japan has a very limited number of drop-outs but does not have many geniuses. I think this is our strength, but some see this as a weakness. Comprehensively speaking, we can say that Japan’s education level is high.
Another factor I would like to point out is that many Japanese companies, on the assumption that their employees will work for the same company for 30 or 40 years, have been making solid efforts to develop people through their professions. The advantage of long-term investment in human resources is reflected in the high skills demonstrated by people aged 55 and above.

*3
An M-shaped curve in which the rate of women in the workforce by age group declines for childbirth and child care, and peaks before and afterwards.

To promote penetration of innovation in society

Shirai:To respond to the expected population shrinkage and lack of manpower going forward, it is important to utilize new technology and increase per capita labor productivity. From the current macro perspective, our labor productivity has not improved much. One hypothesis is that while the world made a big step forward through the IT revolution, more time is needed before an improvement in labor productivity becomes evident because the revolution brought about by AI and IoT has yet to peak. Ms. Murakami, what do you feel is the bottleneck that is slowing improvement in labor productivity?

Murakami: At the OECD, we also recognize labor productivity as an important topic and have in place a team to discuss the matter. Many scholars and research institutions have issued reports on the subject and we also accept the view that we are currently in a transition period which will eventually bear fruit in various ways. There is another hypothesis which the OECD recognizes as being reasonable. This is that labor productivity will slacken worldwide, showing a downward trend on a macro basis. Looking at this outlook in more detail, however, we can see that the downward trend does not apply to all companies. A limited number of firms will demonstrate an outstanding improvement in labor productivity along with an extremely high growth rate. Firms that maintain top-level labor productivity are referred to as frontier firms. There is research exclusively on these top 100 firms. The growth in labor productivity of top firms particularly in the service industry is evident, continuing an increase of 5% p.a. since 2001. However, the growth rate for the overall service industry is quite low at an average 0.3% p.a., reflecting very little growth over the past decade or so.
This may sound a bit rough, but if labor productivity = innovation, we accept the view that the number of firms generating innovation is limited and the innovation created has not been spreading into the various segments of the economy. In other words, labor productivity is stagnant because the mechanism of penetration is not functioning. This is a reasonable hypothesis. Although we do not see innovation coming about clearly according to the macro statistics, it might be that innovation is generated only with respect to a small number of companies. I feel that is where we can find hints for solutions. Building social and economic systems that enable the proliferation of innovation can open up significant possibilities. Of course, it may take time before we can bear fruit, and there is the issue of timing. Yet we feel that building an environment that encourages penetration of innovation is the biggest challenge.

Shirai:Is what you just described comparable to the situation where although the new vehicle dispatch system Uber was launched, no innovation has come about at existing taxi companies, or where, although the number of new e-commerce operators is increasing, department stores, etc. are still struggling?

Murakami: Yes. There are various sectors, but I feel there is value in giving thought to how we can help innovation proliferate throughout society.

New innovation models in major emerging countries

Shirai:When we talk about technological innovation, the Silicon Valley model has long attracted attention. Recently, however, we are becoming aware of innovation in a form different from the conventional ones in emerging countries such as China and India. Under the recent model, while technology development is conducted by advanced countries such as the U.S. and Japan, the technology is adopted in the user country and commercialized in a short period of time. The Chinese market is extremely large and once a business is established it spreads instantly and can change the world. There are an increasing number of young Chinese individuals who return to the country after having studied in the U.S. They see more business opportunities in China than in the U.S. and can succeed in a very short period of time. While emerging countries take initiatives using a new model with a sense of speediness, what issues does Japan face to demonstrate uniqueness?

Murakami: When I was attending Harvard Business School, the majority of students from abroad would continue to stay in the U.S. and strive to undertake active roles in Silicon Valley or on Wall Street. Over the last few years, however, clearly more young individuals are returning to China with the objective of getting rich quickly. The form of innovation is significantly changing, and it is evident that a new trend is in place as reflected in where students from abroad work after completing their studies. The Chinese business culture, unlike the Japanese one, allows consolidation matches, which works to an advantage. China’s business environment encourages the birth of entrepreneurship, i.e. entrepreneurs can learn beneficial lessons from past mistakes and take on challenges for the second or third time. In some ways, the situation is like that in Silicon Valley. In Japan, consolidation matches are not often found, and this is a major factor that impedes the taking of risk or making mistakes.

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There is also the issue of personal guarantee, etc. Twenty-five years ago, my mother at the age of 48 established a business and opened a drugstore. She took out a bank loan but a failure in business would mean selling her home. She was facing a major risk, and being her daughter, a part of me wanted to oppose her plan. Fortunately, my mother’s business turned out to be a big success, but if she had failed, she would have never taken on another challenge. Risk-taking tends to be difficult in Japan’s business environment even today. It would not be an overstatement to say that such factors in the environment are causes that make innovation less likely to come about in Japan.
Japan must learn from China, India, and Silicon Valley regarding the quick pace and the environment in which entrepreneurs can get another chance even after failing. Companies also learn from a failure in business and take on the next challenge. Through a repetition of this process, a totally new business model is generated, and a business can be established in a short period of time.
Since 1983, the rate of office closures continues to be no more than 5% in Japan while the rate is approximately 10% on average in other advanced countries. The rate of office closures is less than half of the average and the rate of new entries is also on a low level. Perhaps this is one major issue. Improving the social environment so that it becomes one which encourages entrepreneurship should lead to making a major improvement in labor productivity.

Personnel system that allows all kinds of people to take on active roles

Shirai:Although the labor force participation rate of females is increasing also in Japan, the rate has yet to reach the levels of Europe and the U.S. in terms of not only quantity but also quality, including the matching of positions with workers’ motivation and skills. Ms. Murakami, given your experience in having taken leadership positions in the U.S. for an extended period of time, what initiatives do you feel are important?

Murakami: Prime Minister Shinzo Abe has been actively pointing out the growth in the female employment rate. Over the last few years, the country’s employment rate of women in fact improved to a level comparable to the average among OECD member countries. However, issues remain. One example is the wage gap between males and females. The fact remains unchanged that Japan and Korea have the lowest female wage levels among developed countries. Although the number of female workers has increased, women in executive and director positions are quite limited, accounting for only about 3%. Those in managerial positions are equivalent to no more than half of those of U.S. and European corporations. It is important that discussions on heightening the quality of positions, work-style, etc. are carried out from the perspective of not only women but also diversity. There is a need to develop a personnel system in which individual character is respected and the capabilities of all kinds of people can be put to effective use.
For instance, when a worker is faced with circumstances such as childbirth and nursing care, the system must allow arrangements to be made flexibly in consideration of factors including the respective condition, timing, and skills of the respective person. Even when a woman returns to work after childbirth and child-rearing leave, if she ends up on a “mommy track” and is placed outside the promotion path, her skills would be wasted. The same can be said when a worker, regardless of gender, needs to take care of his or her parents. Also, in a number of cases, once a worker leaves a company to establish a business, he or she is taken off the core career promotion path even when the worker is reemployed. Improvements should be made to accept short working hours and working from home, and to offer equal opportunities for those changing jobs as well so that all workers can build their careers. In order to put in place a work environment in which the skills of workers are put to effective use instead of focusing on the number of years of employment, it is crucial that we implement a personnel system that allows flexibility, and expand the liquidity of employment. I feel it will take more time before diverse human resources can take active roles in different forms and positions.
Based on my experience from working many years for a U.S. firm, I truly feel the need for a role model that leads to motivating workers to continue working. Since Japan has very limited female role models, even when a personnel system which allows women to take on leadership roles is implemented, the system does not readily make its way through society. Fortunately, I was able to build up my career in the U.S. I had a female manager during my years at Goldman Sachs. She took a leave of about three months after she gave birth to her first child and again after her second child and resumed work afterwards each time, continuing to move up the ladder as she had been doing before giving birth. Just as the proverb goes – seeing is believing. When you have a manager or colleague who serves as a role model in building a career while maintaining a good balance between child-rearing and professional work, you naturally start to feel that you can also do the same. I feel female workers need to make use of role models and make efforts to lower the psychological hurdle that they can continue working after giving birth and get promoted rather than to put themselves on a bold front as females. When developing role models, it is more effective to support multiple women than having just one. For example, if a company supports 10 women, if even one of them should fall behind, the active participation taken by 9 females would penetrate through the organization, naturally enhancing their ambition to rise.
While I just happened to get lucky having a female manager, many female workers are not in such an environment. It is recommended that companies with a large percentage of male workers, e.g. in the manufacturing industry, cooperate also with other firms or other industries to put in place a female-friendly work environment and support female workers taking on active roles in their companies. I participate in a network of women who have leadership roles in various industries and corporations. In many cases, these women represent the only executive or manager in their organizations and they play active roles in different ways. Even if there is no role model in your own company, creating a network beyond the industrial boundaries can actively lead to attracting promising women. Becoming connected with enthusiastic women would help in building one’s confidence and courage.

Promoting diversity

Shirai:There are moves in the world today that go against diversity, such as anti-immigrant and anti-globalization sentiment. I imagine that despite having the understanding that diversity is the base for generating new value, many companies have yet to advance their initiatives.
European countries have their own approaches while U.S. President Trump does not hide his anti-immigration attitude. Under such circumstances, what do you think are the important points for a corporation considering diversity?

Murakami: It is unfortunately true that anti-global and anti-diversity movements are spreading in the U.S., the U.K. and the EU. However, although this may be true in terms of the relationships between countries, it is not the case at the corporate level. We do not recognize that global companies are keeping pace with governments. One can become pessimistic seeing only the aspects of countries moving toward anti-international trade and conservative protectionism, but private companies, which in fact drive the economy, are steadily moving forward with initiatives to promote diversity.

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In June 2017, the Trump administration declared its intent to withdraw from the Paris Agreement, and global companies were temporarily hit with a pessimistic mood. Today, however, those companies are ignoring the intention of President Trump and are moving in the complete opposite direction. The same trend is apparent also in terms of diversity, and an increasing number of companies are adopting initiatives to promote diversity. Also, in a number of cases, companies are promoting diversity in response to the expectations of their investors. There is a significant advantage in effectively utilizing diverse human resources in terms of gender, nationality, etc., and the business community will remain on this path.
There are always situations when discussions on policies and business are not consistent. Global companies, in particular, have a solid understanding of the current gaps between country-level discussions and international businesses. Even when discussions on withdrawal from the TPP or the Paris Agreement take place at the national level, global companies do not let go of material business opportunities. They do not simply decide to eliminate business with the U.S. because it has pulled out of the TPP. In addition, it is clear to them that if a company took an anti-diversity approach, its competitiveness would weaken. Leaders of companies are therefore making appropriate business decisions. In my opinion, what’s essential is the decision on what actions should be taken as a business to enhance corporate value in the mid-to-long term.

Shirai:Thank you for sharing your valuable insights today.

Editor's Postscript

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I interviewed Ms. Murakami, the Head of the OECD Tokyo Centre, who has a broad range of experience gained through holding leadership positions at organizations including the United Nations and Goldman Sachs. She shared her insights regarding the improvement of labor productivity from various perspectives. I was extremely impressed with her comments on the importance of pursuing innovation through making effective use of human resources, based on her professional career built in the U.S. and other overseas locations. The interview made me realize once again the role of diversity in innovation and reconfirm the need to take initiatives as a corporation.