Walking home last Monday afternoon through the picturesque and normally gore-free seaside city of Maizuru, a primary school student discovered a human fingertip lying on the road.
This was a traumatising horror for a small child, but arguably a bigger jolt for Japan as a whole and for corporate Japan in particular. The incident not only highlights an old and debilitating strain of fear, but also the urgent need to swap it for new and possibly useful ones.
The problem presented by the severed finger was that its former owner, a delivery lorry driver in his sixties, had knowingly left it on the street after the two were separated by the vehicle’s sliding door. Rather than picking it up and seeking immediate medical attention, the retirement-age driver pressed on with his delivery rounds.
Though the man’s decision was shocking by any standards, it drew widespread recognition. Media commentators, academics and social media users could see broader, familiar problems expressed in this roadside spasm of duty and demographic pressure. The sense of obligation and endurance instilled in much of the Japanese workforce has served the economy superbly in many ways. But, as many pointed out, it often exacts a high societal and personal price — usually less newsworthy than an abandoned fingertip, but not necessarily less injurious.
And the obligations themselves are getting heavier. The logistics industry is notoriously troubled by Japan’s chronic labour shortages, with scant prospect of relief. A government report last Wednesday laid out the severity of the nation’s demographic challenge, forecasting a 30 per cent shrinkage in Japan’s population by 2070. Even now, drivers are burdened with routes that can easily require well in excess of 100 deliveries a day. As many wondered out loud: if the amputee had diverted to a hospital, who would have taken on the rest of his round? How would customers have reacted to the delay in delivery? And so on.
These issues are not going to go away. A more immediately pernicious problem, however, is that a version of that driver’s thinking exists at the senior levels of corporate Japan: the idea that it is generally better to press on than to divert, whatever the circumstances. Behind that, often, lies a vague but potent fear of the alternative — instability, confrontation with customers and the dread of being wherever the buck stops when a mistake has been made.
In the corporate context, this fear finds expression in various forms: cash hoarding, risk-aversion, cross-held shares in other listed companies, the tendency to set forecasts low and hope for outperformance and chief executives whose grandest strategic ambition is to survive their time at the top without incident.
The striking thing about this framework of fear is how suddenly vulnerable it all looks, and on multiple fronts. The first of these, in a shift that has not yet been recognised for its truly tectonic nature, is a new edict from the Tokyo Stock Exchange that will in effect force companies to explain why their share-price-to-book-value ratio is consistently low.
The embarrassment factor should, in theory, shake a lot of companies hard. And while the price-to-book metric may not be the best or most consistent gauge of a company’s commitment to better governance and better capital efficiency, it works well as a catch-all identifier of the larger problem.
Japanese chief executives have lived until now without an explicit, sustained pressure (or stock-ownership-related incentive) to raise their share price, or even a clear doctrine that it lies within their powers to do so. Suddenly, the TSE has granted investors permission to hard-boil CEOs on their literacy levels when it comes to cost of capital, and to make inaction the greater fear than a sudden course correction.
Closely linked to that is the need for companies to be more scared than they currently seem to be by the pace of irresistible, and in some cases existential, change. The transformations that will be forced on corporate Japan by artificial intelligence, deteriorating US-China relations and the fact that the country’s most important company, Toyota, appears to have misjudged global demand for electric vehicles are all examples of concerns that should far outweigh the more conventional fear of sudden strategic change. They have yet to do so — at least outwardly — in the C-suites of many companies.
A missing fingertip, however gruesome, may be survivable. The question the incident raises is how bad the injury would have to have been to give up on that day’s deliveries.