A forum for Hawaii's
business community to discuss
current events and issues
A forum for Hawaii's
business community to discuss
current events and issues
Japan's economy continues to be in the doldrums. In 2002 its economic output shrunk by a half-percent and the outlook for 2003 is only marginally better: less than 1 percent growth is expected. The non-performing loan problem in the banking sector is now larger than ever. Some speculate that the first decade of this new millennium may be Japan's second consecutive "lost decade." All this has intensified calls for Japan to change.
DAVID SWANN / DSWANN@STARBULLETIN.COMBy Jack Suyderhoud
These issues were the focus of a recent conference at the East- West Center sponsored by the Japan-United States Friendship Commission and organized by professors Sumner La Croix of the University of Hawaii and Magnus Blomstrom of the European Institute of Japanese Studies. The conference brought together experts from a variety of fields -- economics, sociology, history, political science and law -- to discuss what stood in the way of substantive institutional changes in Japan.
The impetus for making change in Japan is the economy, which has underperformed relative to its potential for the last 10-plus years. This lack of adequate growth will result in lower standards of living in the future if, as forecast, Japan continues to age while the population begins to shrink and the number of workers per retiree falls.
The conference participants noted Japan has undertaken many broad and significant institutional changes in commercial law, in banking and finance, and in opening to competition and foreign investment. Goldman Sachs' recent purchase of a stake in the Sumitomo Mitsui Financial Group (Japan's number two bank) is indicative of some of the progress made. These changes have received support both inside and outside Japan.
Yet, for many, Japan has not changed far enough or fast enough. For example, while Japanese stockholders have been given expanded rights to sue corporate managers for failures of fiduciary duties, they have not been provided with the right to uncover financial records that may point to such failures. Likewise, Japanese labor institutions such as life-time employment practices and amakudari (the practice of placing retire bureaucrats in the businesses they once regulated), have changed very little. Japanese labor markets are not yet well-suited for allowing redundant "salary men" to find new work.
The question raised by the conference is "Will Japan make the additional changes that are needed?" Some think it is only a matter or time, but others are less certain for two reasons. First Japan may not want to change, and second Japan may not be capable of change.
As noted by some conference participants, the post-WW II Japanese system has served them well and was considered a model for many developing nations. A more "Anglo-American" system may not suit the Japanese. The old ways have produced a society that is more egalitarian, has longer life expectancies and fewer social ills than the touted alternatives. Thus, many perceive there is no need to change.
Even if the evidence for the need to change is strong, the incentives and ability to change may not exist. Japan's political structure gives relatively large political power to special interest groups, such as farmers who receive protection from foreign competition. These special interest groups resist change even if the greater good exceeds their loss. So far, Japanese politicians have not been able to solve this problem. There are also aspects of Japanese economic relations that create disincentives to change. For example, life-time employment and seniority-based compensation pays workers more when they are older (and frequently less productive) than when they are younger. Thus, if the rewards are in the future, people will be less inclined to "rock the boat" and risk losing those rewards. The fact that Japan has used these institutions for more than 50 years means they are more entrenched and harder to change.
Still, the need to change remains. Perhaps a younger generation of Japanese will have both the urgency and the ability to seek those changes. When they do, it is likely that they will seek solutions that are consistent with their needs and culture. They will be Japanese solutions to Japanese problems.
Jack P. Suyderhoud ia a professor of business economics with the University of Hawaii College of Business Administration. Reach him at www.cba.hawaii.edu/suyder.
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We all know how important it is to choose the right gift for someone. We know that the thought we put into the gift is as important as its worth. Each of us can think back to a birthday, anniversary or holiday when someone close to us gave us something that was truly meaningful to us because of the thoughtfulness behind it. Maybe they put together a photo album of treasured moments. Maybe they gave us a trip which opened our eyes and broadened our minds. Choosing just
the right giftBy Judith Sterling and Michelle Tucker
While gifts can reflect thoughtfulness, they can also reflect carelessness or insensitivity. Each of us can probably remember thoughtless or inappropriate gifts we have received over the years. Maybe we were given woolen gloves when we never stray from warm climes.
Gifts and bequests also can be made either thoughtfully or carelessly. Here are some examples of bequests which are thoughtful or careless:
>> You fail to plan at all and die without a will. This is careless because it leaves your loved ones with numerous loose ends to tie up and subjects your assets to probate, lessening the amount they will receive. Further, probate subjects you and your heirs to the prying eyes of the public.As with other gifts, bequests can be thoughtful or thoughtless. A qualified estate planning attorney can help you plan your estate so that you can give your children or other beneficiaries a thoughtful gift they will remember long after you are gone.>> You fail do tax planning. Again, this could cost your loved ones much of what you had intended them to have. Poor income, estate and other tax planning could levy an unnecessary tax equal to the majority of your assets.
>> You leave assets in trust when appropriate. Often the most thoughtful way for you to leave assets to loved ones is to leave those assets in trust. By leaving the assets in trust, you can help your beneficiary shield those assets from estate taxes and from their own creditors. Leaving the assets in trust can also help the beneficiary protect those assets from division in the event of divorce.
>> You can leave assets for your beneficiaries in a way that encourages them to continue to grow. Sometimes, when beneficiaries inherit a significant sum of money, they cease to have the ambition they once had. Inheritances destroy the lives of some beneficiaries, depriving them of self esteem and sending them into a downward spiral of substance abuse and self-loathing. For beneficiaries like these, a family incentive trust (FIT) would provide them the benefit of the assets, without the downside. A FIT is very flexible and can make distributions to a beneficiary based on criteria you set. A FIT can be used to match the beneficiary's earned salary. The match rate could be higher for low paying occupations that serve society, such as teaching.
>> If one of your beneficiaries has medical needs requiring governmental assistance, now or in the future, you can leave assets in a special needs trust. By leaving him or her the assets in such a trust, the beneficiary will not be disqualified from receiving governmental assistance such as Medicaid. The assets in the trust may still be used for the beneficiary's "special needs," essentially expenses beyond the essentials. On the other hand, if the assets are left to the beneficiary outright, they might cause a disruption of governmental benefits.
Judith Sterling and Michelle Tucker are certified public accountants and partners in the Honolulu law firm of Sterling & Tucker. Reach them via www.sterlingandtucker.com or by calling 531-5391.
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