A Subtle Shift In Japan

Despite repeated assertions that Japan is about to bounce back, the world's second-largest economy continues to scrape bottom. According to the International Monetary Fund, Japan is expected to grow at only a lackluster 1.5% rate in 2000, and the country is dependent on exports to keep it from sinking even further.

Nevertheless, there may be real changes occurring beneath the surface. The biggest difference: a cultural shift that is transforming the country's communal way of doing business. Some aspects of this transformation are painful, such as the end of lifetime employment. But the net result is the slow emergence of a more open and entrepreneurial outlook.

Signs of this evolution are showing up everywhere. For one thing, Japan Inc. is no longer so hostile to the outside world. Foreign investment is running at an annualized pace of $125 billion, triple the rate of a year ago. More and more Japanese are embracing the Internet. And the old mores that kept educated women out of the workforce finally are crumbling.

But it's far too early to celebrate the emergence of a new Japan. The government needs to sustain its commitment to reform. Especially important is the need to further open up the Japanese home market to foreign competition, which will force Japanese companies to modernize. The eventual result will be a re-energized Japan, which can only be beneficial for the global economy.