RECLAIMING JAPAN’S GLOBAL EDGE:
HARNESSING STRENGTHS AND OVERCOMING
CHALLENGES IN THE 21ST CENTURY
Ryosuke NAKAJIMA
Member of SGB, Management Consultant at PwC Consulting LLC,Adjunct Professor at Global/Digital Business Dept at Tokyo Business and Language College,
Doctor of Business Administration at Swiss School of Business and Management(1-2-1 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan)
E-mail: ryosuke.nakajima777@gmail.com

In the 21st century, Japan's role in the global business landscape has experienced significant shifts. Thispaper examines Japan's strengths, such as technological prowess, high-quality standards, and robust
educational systems, which have historically bolstered its competitive edge. However, Japan faces pressing
challenges, including a declining workforce due to an aging population, excessive regulation, a shortage ofglobal talent, and lagging digitalization.
Technological innovation remains a cornerstone of Japan’s global business strategy. Companies like
Toyota and Sony exemplify Japan’s commitment to maintaining technological leadership. However, tosustain this edge, increased investment in research and development and fostering open innovation throughcollaboration with domestic and international entities are essential.
Labor market reforms are critical to addressing Japan’s demographic challenges. Enhancing theparticipation of women, seniors, and foreign workers, coupled with education system reforms, can mitigate
the adverse effects of a shrinking workforce. Promoting flexible working arrangements and improving labormarket flexibility are necessary steps.
Deregulation and improvements in the business environment are vital for fostering innovation and new
business ventures. Simplifying administrative procedures and creating supportive startup legal frameworks
can enhance Japan’s entrepreneurial landscape. Encouraging a corporate culture that embraces change andflexibility is also crucial.
Nurturing global talent through enhanced language education, study abroad programs, and better
integration of foreign workers can improve Japan's international competitiveness. Equally important isadvancing digital transformation within companies by strengthening IT infrastructure and digital skills.
The paper concludes that addressing these challenges while leveraging Japan's inherent strengths canrevitalize its presence in the global business context. Strategic investments in technology, labor market
reforms, deregulation, global talent development, and digital transformation are imperative for Japan toreclaim its influential role worldwide.
Key Words: Technological Innovation, Digital Transformation, and Labor Market Reforms

Japan's strengths and challenges and considers
strategies for revitalizing its presence in the global
business context.

1. INTRODUCTION(1) Background
Japan's role on the global business stage has
undergone significant changes in the 21st century.
Having experienced rapid economic growth, Japannow faces new challenges. This paper analyzes(2) Research Objectives & SignificanceThis research investigates Japan's capacity toregain its competitive edge in global business byleveraging its technological strengths and addressing
1

developed infrastructure. The country’s
transportation infrastructure, including
bullet trains, subways, and buses, operates
punctually and efficiently, providing a solid
foundation for business activities.

its demographic and regulatory challenges based on
the Management Survey. This research is significant
because it is beneficial to understand the latest
management views and perspectives regarding therevitalization of Japan’s economy. These dynamics are
crucial for policymakers and business leaders aiming torevitalize Japan's economy.

As for Japan’s global business challenges, fourpotential challenges are below.
(a) Lag in Digitalization(b) Declining Workforce and Aging Population(c) Excessive Regulation & Lack of Flexibility(d) Shortage of Global Talent(3) Research Hypothesis – Japan’s Strengths &Challenges
Regarding Japan’s strengths in global business,there are four main potential strengths, as shown
below.
(a) Technological Prowess and Innovation(b) High-Quality Standards(c) High Educational Standards(d) Safety and Infrastructure Development••••(a) Technological Prowess and Innovation
Japan is globally recognized for its
technological prowess and innovation.
Particularly in manufacturing, Japan'sadvanced technology underpins its
competitive edge. Companies like Toyota,
Sony, and Panasonic consistently develop
new technologies that lead the market. For
example, Toyota's hybrid technology andSony's digital camera technology arenotable examples of this innovation.
(b) High Quality Standards
Japanese products are renowned for theirquality, both domestically andinternationally. The precision in machinery,electronics, and the automotive industry’s
quality control is unparalleled. Thiscommitment to quality strengthens thebrand power of Japanese companies.
Products such as Sharp’s LCD televisions
and Canon’s cameras are globally acclaimed
for their high standards.

(c) High Educational Standards
Japan boasts high educational standards,
resulting in a skilled workforce. Educationin engineering, science, and technology
fields supports corporate innovation.
Additionally, the high level of essential
academic ability sustains Japan'scompetitiveness. A recent study shows thatJapanese students’ performance in PISA
tests ranks among the best in the world.
(Mathias Cormann, 2022)(d) Safety and Infrastructure Development
Japan is known for its safety and well2•(a) Declining Workforce and Aging
Population
Japan faces a significant challenge with its
declining workforce and aging population. A
recent study shows that as of 2021, 28.7% ofJapan's population is 65 or older (CabinetOffice, 2021). This demographic shift poses
difficulties for companies securing labor andraises concerns about declining productivity—
additionally, the increase in social security
costs due to aging burdens the overall
economy.

•(b) Excessive Regulation & Lack ofFlexibility
Japan’s business environment is often
criticized for its stringent regulations andbureaucratic processes. These factors hinder
the establishment of new businesses and thepromotion of innovation. For instance,
launching a new product requires numerous
approvals and procedures, slowing
companies' ability to respond swiftly.
Moreover, corporate culture tends to beconservative, showing low flexibility tochange.

•(c) Shortage of Global Talent
Enhancing international competitivenessrequires globally-minded talent. However,Japanese companies often need more foreign
workers and culturally diverse personnel,
indicating slow progress ininternationalization. For instance, more
English communication skills are required toimprove international expansion efforts.

•(d) Lag in Digitalization
Digital advancement is crucial in global
business, yet Japan lags. Particularly amongsmall and medium-sized enterprises (SMEs),
inadequate IT infrastructure and a shortage ofdigital talent pose challenges. Consequently,
efficient business operations and adopting
new business models take time.

(1) Technological Innovation
A recent study shows Japan's historical leadershipin manufacturing and technological advancementsemphasizes the need for sustained Research &Development (R&D) investment (Ministry ofEconomy, Trade and Industry, 2023).

2. PROBLEM STATEMENT
Japan’s global business presence has waned due toa declining workforce, stringent regulations, a lack ofinternational talent, and slow digital transformation.
Despite its strengths in technology and quality
standards, these challenges hinder Japan's ability tocompete internationally. Addressing these issues isessential for Japan to reclaim its influential role on
the global stage. This research clarifies the answers
to the question, “ What would be the potential
strategies for Japan ’ s revitalization of GlobalBusiness?” based on the Management Survey.

(2) Demographic Challenges
A recent study indicates that Japan ’ s aging
population critically impacts labor supply andproductivity (Yoshio, 2022).
(3) Regulatory Environment
A recent study suggests Japan’s regulatory
framework inhibits rapid business innovation andflexibility (Cosmas, 2023).
(4) Global Talent
A recent study points to a significant gap in Japan’sability to attract and retain global talent, which
impacts its international competitiveness (Aileen etal., 2021).

3. RESEARCH METHODOLOGY(1) Approach
The research adopts a qualitative methodology,
focusing on comprehensive Literature Reviews and aManagement Survey.

(5) Digital Transformation
A recent study shows that Japan lags behind otheradvanced economies in digitalization, affecting
operational efficiency (Cosmas, 2023).

(2) Data Sources
Data is sourced from government publications,industry reports, academic journals, and theManagement Survey results.

5. MANAGEMENT SURVEY RESULTS(1) Management Survey Questions
Below are five Management Survey questions toclarify the potential strategies for Japan’s
revitalization of global business from fiveperspectives:
TechnologicalInnovation,
Demographic Challenges, Regulatory Environment,Global Talent, and Digital Transformation.

(3) Analysis
Based on the Management Survey Results,
thematic analysis is conducted to identify patterns
and insights related to technological innovation,
demographic changes, regulatory impacts, globaltalent acquisition, and digital transformation.
(4) Evaluation
Strategies are evaluated based on their potential toaddress identified challenges and leverage Japan’s
strengths.

[Q1] Technological Innovation
To what extent does your company prioritize
research and development (R&D) investment
to foster innovation and maintain acompetitive edge in the global market?

4. LITERATURE REVIEW

1 - Not at all prioritize
2 - Slightly prioritized3 - Moderately prioritized
4 - Highly prioritized
5 - Extremely prioritized

Several works of literature / past studies discuss
potential strategies for Japan’s revitalization ofglobal
businessfromfiveperspectives:
Technological Innovation, Demographic Challenges,
Regulatory Environment, Global Talent, and Digital
Transformation.

[Q2] Demographic Challenges
How effective do you believe your company's
current policies are in addressing laborshortages by encouraging the participation ofwomen, seniors, and foreign workers?
3IT & Telecommunications: 17 respondents (20%)
Financial Services: 12 respondents (15%)
Retail & Consumer Goods: 8 respondents (10%)
Healthcare: 8 respondents (10%)
Energy & Utilities: 4 respondents (5%)
Transportation & Logistics: 4 respondents (5%)
Other Industries: 5 respondents (5%)

1 - Not effective at all
2 - Slightly effective
3 - Moderately effective
4 - Very effective
5 - Extremely effective[Q3] Regulatory Environment
How significant do you consider the impact
of government regulations on yourcompany’s ability to innovate and quickly
respond to market changes?

[By Division]
Executive (C-suite): 21 respondents (25%)
Operations: 17 respondents (20%)
Human Resources: 12 respondents (15%)
R&D: 12 respondents (15%)
Finance & Accounting: 8 respondents (10%)
Marketing & Sales: 7 respondents (8%)
IT & Digital Transformation: 4 respondents (5%)
Other Divisions: 2 respondents (2%)

1 - Not significant at all
2 - Slightly significant
3 - Moderately significant
4 - Very significant
5 - Extremely significant[By Position]
C-Level Executives: 21 respondents (25%)
Senior Management: 25 respondents (30%)
Middle Management: 29 respondents (35%)
Other Management: 8 respondents (10%)[Q4] Global Talent
How well does your company’s talentacquisition strategy support recruiting andretaining globally-minded and culturally
diverse employees?

In summary, Manufacturing and IT&Telecom are
the sectors most represented, reflecting Japan's strong
focus on technology and production. Many
respondents are from the Executive (C-suite) andOperations, indicating a strategic focus in thesurvey's design. The survey mainly targets Senior andMiddle Management, providing insights from thosewith direct decision-making authority.

1 - Not supportive at all
2 - Slightly supportive
3 - Moderately supportive
4 - Very supportive
5 - Extremely supportive[Q5] Digital Transformation
How advanced is your company's digitaltransformation strategy in adopting newtechnologies like AI, IoT, and digitalplatforms to enhance operational efficiency?

(3) Results of the Management Survey (Q1)
[Question]
To what extent does your company prioritize
research and development (R&D) investment tofoster innovation and maintain a competitive edge in
the global market?

1 - Not advanced at all
2 - Slightly advanced
3 - Moderately advanced
4 - Very advanced
5 - Extremely advanced[Answer]
1 - Not at all prioritized: 5%
2 - Slightly prioritized: 15%
3 - Moderately prioritized: 30%
4 - Highly prioritized: 35%
5 - Extremely prioritized: 15%

These survey questions are provided to thepotential survey respondents, including executives
and management in Japanese companies, via
Amazon Mechanical Turk and CloudResearch from
July 29th to August 18th, 2024.

Most Management (65%) moderately to highly
prioritize R&D investment, indicating a recognitionof its importance but with room for greater emphasis.

(2) Management Survey Respondents
In total, 83 respondents answered to thisManagement Survey. The following are the survey
respondents’ demographic data.

(4) Results of the Management Survey (Q2)
[Question]
How effective do you believe your company's[By Industry]
Manufacturing: 25 respondents (30%)
4current policies are in addressing labor shortages byencouraging the participation of women, seniors, andforeign workers?

[Answer]
1 - Not advanced at all: 10%
2 - Slightly advanced: 25%
3 - Moderately advanced: 30%
4 - Very advanced: 20%
5 - Extremely advanced: 15%[Answer]
1 - Not effective at all: 10%
2 - Slightly effective: 20%
3 - Moderately effective: 35%
4 - Very effective: 25%
5 - Extremely effective: 10%

While 35% are advanced in digital transformation,a considerable number (35%) need to catch up,
indicating a need for more robust strategies.

There is a mixed response. Most (60%) feel theirpolicies are moderate to very effective, but asignificant minority (30%) need improvement.

These survey results suggest areas wherecompanies may be doing well, such as R&D
investment, but also highlight significant areas forimprovement, particularly in labor market reforms,global talent acquisition, and digital transformation.

(5) Results of the Management Survey (Q3)
[Question]
How significant do you consider the impact ofgovernment regulations on your company’s ability toinnovate and quickly respond to market changes?

6. CONCLUSION / INSIGHT
The Literature Reviews and the Management
Survey results demonstrate the initial research
hypothesis. The following five strategies areidentified as potential solutions for Japan’s
revitalization of global business.

[Answer]
1 - Not significant at all: 5%
2 - Slightly significant: 15%
3 - Moderately significant: 25%
4 - Very significant: 30%
5 - Extremely significant: 25%(1) Promoting Technology and Innovation
Increased research and development (R&D)
investment is essential to further enhance Japan's
technologicalandinnovation
capabilities.
Additionally, promoting open innovation andstrengthening collaboration with domestic andinternational companies and universities are crucial.
For example, bolstering in-house R&D departments
and encouraging startup cooperation can drive
innovation.

Many (55%) view government regulations as asignificant barrier to innovation.
(6) Results of the Management Survey (Q4)
[Question]
How well does your company’s talent acquisition
strategy support recruiting and retaining globallyminded and culturally diverse employees?
[Answer]
1 - Not supportive at all: 15%
2 - Slightly supportive: 20%
3 - Moderately supportive: 35%
4 - Very supportive: 20%
5 - Extremely supportive: 10%(2) Labor Market Reforms
Addressing labor shortages requires the utilizationof women and seniors and the promotion of foreign
worker acceptance. Specifically, advancing workstyle reforms to promote flexible working
arrangements is necessary to enhance labor market
flexibility. Furthermore, reforming the education
system to elevate young people's and foreign
workers’ skills is also essential.

The results show that while some companies aresupportive (30%), many still see significant gaps
(35% moderately supportive and 35% lesssupportive).

(3) Deregulation and Business Environment
Improvement
Improving the business environment necessitates
deregulation and the simplification of administrative
procedures. For instance, legal frameworks that
support establishing new businesses and enhanced
support programs for startups are essential.
Moreover, fostering a corporate culture thatembraces change and developing flexible(7) Results of the Management Survey (Q5)
[Question]
How advanced is your company's digitaltransformation strategy in adopting new technologies
like AI, IoT, and digital platforms to enhance
operational efficiency?
5

organizational structures is critical.

2022-results-volume-i_53f23881-en/full-report.html[2] Cabinet Office, 2021. Annual Report on the Ageing Society[Summary] FY2021. Cabinet Office. Available at:https://www8.cao.go.jp/kourei/english/annualreport/2021/p
df/2021.pdf[3] Trade Policy Bureau, 2023.White Paper on International
Economy and Trade 2023. Ministry of Economy, Trade andIndustry. Available at:https://www.meti.go.jp/english/press/2023/pdf/0627_001a.pdf[4] Yoshio Higuchi, 2022. Japan Labor Issues. Japan Institutefor Policy and Training. Available at:https://www.jil.go.jp/english/jli/documents/2022/40-00.pdf[5] Aileen Huang, Cheryl Ng & Gwenaelle Hennequin, 2021.
Global Talent Competitiveness Index 2021). INSEAD.
Available at: https://www.insead.edu/news/2021-globaltalent-competitiveness-index-fostering-green-and-digitaljobs-and-skills-crucial-talent[6] Cosmas Luckyson Zavazava, 2023. Measuring digitaldevelopment The ICT Development Index 2023).
International Telecommunication Union, Development
Sector. Available at: https://www.itu.int/hub/publication/DIND-ICT_MDD-2023-2/(4) Nurturing Global Talent
Enhancing international competitiveness requires
the development of globally-minded talent.
Strengthening language education, promoting study
abroad programs, and improving systems foraccepting
foreigntalentcanadvanceinternationalization. For example, implementing
English training programs within companies andencouraging overseas assignments are effectivestrategies.
(5) Advancing Digital Transformation
Promoting digital transformation in companies iscritical to improving operational efficiency andcreating new business models. Specifically,collaboration between the government andbusinesses to formulate digital support programs andstrengthen support for SMEs is vital. Additionally,
enriching digital technology education in educational
institutions is necessary.

(Received August XX, 2024)(Accepted September XX, 2024)

REFERENCES[1] Mathias Cormann, 2022. PISA 2022 Results (Volume I).
Organization for Economic Co-operation and Development.
Available at: https://www.oecd.org/en/publications/pisa-6