Abstract
Japan's prolonged economic stagnation has left many observers questioning the wisdom of Japanese economic organization and institutions. The current system is often viewed as so cozy and inflexible that reformers have been and will be unable to muster sufficient political power to force change until the system is confronted with a major crisis. Conventional wisdom, in both media analysis and academic research, is that a coalition of powerful political interest groups is blocking critically needed reforms, because these groups would lose wealth and power. This view provides, we argue below, a far too simplistic picture of institutions and institutional change in Japan. This book analyzes recent changes in important Japanese institutions. It addresses the origin, development, and recent adaptation of core institutions , including financial institutions, corporate governance, lifetime employment, and the amakudari system. To place current institutional changes in perspective, it also includes discussion of both historical and international comparisons. Emphasis is placed on comparisons with Meiji Japan, a period in which Japan borrowed and adapted foreign institutions to its unique circumstances. Comparisons with recent economic and financial reforms in Korea, Switzerland, and New Zealand are also included to provide a broader perspective on the current reform process in Japan. The conventional wisdom is that Japanese institutions have remained relatively rigid since the collapse of the 1980s bubble, while our findings indicate that there has been significant institutional change over the last decade.