The right target for the third arrow: Corporate managerial efficiency in Japan compared with the United States

Reuters

Japan's Prime Minister Shinzo Abe waves as he arrives to attend the Enniskillen G8 summit, at Belfast International Airport, Northern Ireland, June 16, 2013.

Article Highlights

  • Will Abe's aggressive economic reforms succeed?

    Tweet This

  • Inefficient capital allocations should be the target for Abe's economic reforms.

    Tweet This

  • If Abe makes the right moves, he could enter the ranks of great reformers.

    Tweet This

Subscribe to
The Ledger
Get AEI's weekly snapshot of economic news, views, and cues.

First Name:
Last Name:
Email:
Zip Code:

Japan has reinvented its economic model before. Following the Meiji Restoration, the Japanese rapidly industrialized by intentionally borrowing from the West. After the Second World War, Japan achieved a second economic miracle, rising from the ashes to become the world’s second largest economy in only a quarter century. During the 1980s its industrial might came to be feared around the world; indeed, many in America warned that Japan might soon overtake or even “buy up and own” America. This rapid development became known as the “Japan Model” and has since been emulated throughout East Asia as a development template.

In the past two decades, however, Japanese corporations have tended to rest on their earlier accomplishments. The Japanese economy has stagnated and leading Japanese brands have been knocked down from their once pre-eminent positions.

Now Prime Minister Shinzo Abe is attempting an aggressive reform program in order to revitalize the Japanese economy. Can he succeed? We believe he can, but only if he aims his “third arrow” of structural reform at the right target. That target should be the inefficient and unaccountable way that Japanese managers allocate capital.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Lawrence B.
Lindsey

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

Event Registration is Closed
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.