Members of the Faculty &

Students of Waseda University

I thank you and Waseda University for the honour of bestowing on me this honorary doctorate. Waseda in today’s business idiom is a brand name among universities world-wide. Singapore will welcome a stronger Waseda presence to join INSEAD, MIT, Johns Hopkins already in Singapore.

I have watched with respect and admiration Japanese people in defeat in Aug 1945 and the manner in which they have climbed back to economic strength from the devastation of war. Through their unity, their determination and their ability, your parents and grandparents learned and mastered new knowledge and honed new skills. Your companies reorganised themselves. Together, Japanese managers and workers caught up with America’s standards of competence and excellence, especially in manufacturing. Indeed you went on to improve on American products.

Unfortunately because of the bubble economy in the 1990s, Japan’s economy has been sluggish for over ten years since 1991. It has been in a deflationary trend. Volumes have been written extensively on the causes of this decline and the possible solutions by Japanese, American and European economists and political scientists. So far no solution has worked to get Japan back to the high growth that it enjoyed up till 1990. In part it is because Japan’s economy has matured and it is now difficult to make the kind of high growth Japan achieved during the catch-up period. Next, Japan’s population is ageing and there are not enough young Japanese to work and spend and so drive the economy.

Moreover the world has changed dramatically. The Cold War has gone. Communism championed by the Soviet Union is no longer the common enemy. For Americans today, terrorism by religious extremists like al Qaeda is the number one enemy. Terrorism is probably the nearest to a common enemy for US and EU, but it has not brought the same unity of purpose and objectives between America, France and Germany. Both France and Germany opposed US in the UNSC when the US wanted a second resolution to force Iraq to disarm immediately or face the consequences. As a result NATO and the Atlantic Alliance was splintered. America invaded Iraq in March, without a second UN resolution. Japan on the other hand supported the US. So did South Korea, Singapore and the Philippines.

Although the world has changed, Japan’s basic interest is best served in a strong US-Japan alliance which ensures security and stability in East Asia. Like Japan, Singapore wants a US military presence in East Asia to maintain a balance that enables trade, investments and economic growth to bring a better life for all.

The Japanese are well-educated and capable. You have a superior industrial technology and capabilities. You have wide experience in trade and investments in many parts of the world. The world economy has globalised. In order to be successful a product must compete globally. The Japanese have shown their capabilities especially in electronics where they are world leaders, with Sony, Nintendo, Matsushita, Toshiba, names known world-wide. So also in the car industry, with Toyota, Honda and Nissan as household names.

However Japan now faces a different future in Asia. China has gone for the free market and joined the WTO. It wants to catch up with Japan and America. The low wages of its workers and low costs of land, power and other factors have lead many industries to move their low end production to China causing unemployment in Japan and many countries in Southeast Asia. But this will change over time. China’s wages and other costs will increase in the next 10-20 years to approximately the wages and costs of the Koreans and the Taiwanese. They plan to match this increase in wages with higher standards of education and skills. They will also want to catch up in technology. The challenge for your generation is different from that for your elders. You have been brought up in comfortable homes in an affluent Japan. To surmount this formidable competition, you have to demonstrate that you have the same high dedication, energy and determination to succeed and to stay ahead of the pack, as was shown by your elders when they fought to bring Japan from the depths of despair and a shattered economy in 1945 to the security and comfort since the 1970s. They have given you the highest savings per capita of all peoples of the world and a standard of living and earnings per capita amongst the top five nations of the world.

Your challenge is more demanding. Whatever you do the Chinese will try very hard to catch up and do likewise. However you enjoy a considerable lead over all others in Asia at the moment. Your technology in many fields is superior. To stay ahead, you must invest in research and development so that as your competitors catch up, you move on to new technology and new products.

You also need to shift your emphasis in education from learning facts to fostering creativity, innovation and entrepreneurship. We have all seen how the Americans were able to remake themselves when they were overtaken by Germany and Japan in the 1970s and ‘80s. If there is one important lesson from America’s recovery after Japan and Germany caught up with them in industrial production, it is their ability to start new enterprises and innovate. They created the PC and the internet that is at the heart of the IT industry. They are still the leaders in software. Their R&D in defence has been turned to civilian and commercial use. That was how the internet became the world-wide web that has resulted in a world of unprecedented connectivity.

Americans have fostered and encouraged entrepreneurship. They teach it from primary school to university. Young American people do not simply follow the beaten path, the usual careers in Business Administration, Medicine, the Law or Engineering. They produced Bill Gates, Michael Dell, Steve Case and the financial wizard investors in the world of banking and finance. Of course they also produced corporate criminals like those who cheated public investors in Enron and World.Com. Japanese have higher standards of integrity. You must now encourage and produce that diversity of thinking and willingness to try and carve out new paths to the future, to think outside the box. One example of how the Americans trumped you was the billions of dollars you spent on improving and perfecting analogue high definition TV (HDTV). Americans could not compete with you in this. But they broke new ground with research in digital HDTV. In one simple move digital HDTV is so much more effective and simpler and rendered your analogue HDTV obsolete. Japanese people have been excellent in perfecting technologies. The standard example was the way they improved on the Chinese abacus which has seven beads, two above, five below, rounded and noisy. The Japanese reduced the seven beads to five, one above, four below, with sharp edges, silent and fast. So too Japanese chopsticks. The pointed ends make it easier to manage small rounded morsels like peanuts that are difficult to handle with the Chinese chopsticks. This ability to improve on present technology is worth preserving and maintaining. But improving on what others have invented is not enough. You have to be like the Americans and invent products that others have not thought of that will be desired and bought by billions across the world. That is the way for Japan to maintain its pre-eminence.

The Japanese manufacturing industry has produced many innovative products from the Sony walkman, Nintendo’s gameboy and NTT DoCoMo’s third-generation cell phones. However in the service sector, there has not been the same high level of innovation and inventiveness to increase productivity. Unless Japan becomes as innovative in the service industries as Americans are, the Japanese economy will not be as competitive in every sector. This is so for example in banking and finance. Japanese banks and financial houses have been operating for decades in a protected domestic market. Therefore when big Japanese banks and finance institutions set up branches in New York and London, they did not succeed. In fact some made huge losses. All these can change in your generation.

In this globalised world, Japanese executives need better English language skills than their parents. Then you can work and co-operate with peoples of different races and cultures in all countries where successful Japanese industries have invested in trade and manufacture. That well-educated Japanese can all read and write English is well-known. But most are not comfortable speaking English. This prevents direct interaction at a pace that will enable them to interact and learn quickly from other people. To develop fluency, you will have to concentrate on spoken English language lessons when young. The younger you start to listen and speak the easier to gain fluency. The emphasis must be not on reading but on listening and speaking. Of course you will need to ensure that English fluency is not at the expense of your Japanese language and culture. But in this globalised world, to speak only Japanese is to be at a disadvantage when competing against executives from other countries.

The Japanese people have the unity, the energy, the ability and the determination to succeed and excel in whatever they set themselves to. I am sure you can and will succeed in this next stage of your history.

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