CENTER ON JAPANESE ECONOMY AND BUSINESS AND ECONOMY JAPANESE ON CENTER

Center on ANNUAL REPORT 2018–2019 REPORT ANNUAL Japanese Economy and

475 Riverside Drive Room 312F New York, NY 10115 Email: [email protected] Business Phone: 646-745-8569 Web: www.gsb.columbia.edu/cjeb ANNUAL REPORT 2018–2019 (JULY 2018–JUNE 2019) CJEB Representative Office in c/o Terumi Ota 1-19-18-1003 Shibuya Shibuya-ku, 150-0002 Phone/Fax: 03-5467-6012 Table of Contents

Letter from the Directors 2 Closing the Gender Gap in Japan: Achievements, Challenges, and Prospects 39 CJEB Team 4 Have We Seen This Movie Before? , Japan, Leadership and Staff 4 Industrial Policy, and Trade Conflict 39 Core Faculty 7 Breaking Generational Curses in Corporations 40

Research and Faculty Engagement 10 Sustainability and Promotion of Long-Term Investing: The Role of Investors and the Stock Exchange 40 “Japan’s Economy: Stable in a Turbulent World” Design/Production: The Puzzle of Japan’s Low-for-Long 41 by Hugh Patrick 10 Columbia Creative Workshops 41 Current Research Highlights 22 Office of Communications and Public Affairs Faculty Engagement 24 A Target of Opportunity: Empowering Japanese Women in Leadership Initiative 41 Research Paper Series 26 Editor: Cross-Cultural Negotiation 42 CJEB Programs 28 Rethinking the Asian Leadership Gap: Breaking the Ryoko Ogino Program on Public Pension and Sovereign Funds 28 Bamboo Ceiling 42

Corporate Governance and Stewardship Program 28 Demystifying Machine Learning and Artificial Intelligence 42 Assistant Editors:

The New Global Financial Architecture 29 Resources 43 Taylor Cook

Events 30 Faculty Advisory Committee 43 Emiko Mizumura Conferences 30 2018–2019 Visiting Fellows 44 Shoko Nakamoto Conference on Public Pension and Sovereign Funds 30 2019 Visiting Fellow Reunion Reception 45 Julio “JP” Perez U.S.-Japan Relations in a New Era: Trade, 2019 Annual Visiting Fellow Business Field Trips 45 Governance, and the Global Economy 31 Research Associates 46 Photography: The Japan Project Meeting with Joint ESRI Professional Fellows 47 Eileen Barroso International Conference 32 International Advisory Board 48 ESRI International Conference: Michael DiVito “AI, Robotics, and the Labor Market” 33 Promoting Exchange of Ideas 49 Yuki Kato Symposia 34 CJEB in the News 49 Shoko Nakamoto Japan’s Politics and Economy: What Next? 34 Enhancing the MBA Experience 50 Practical Applications of ESG in Japan: How Investors Enhancing the Columbia Experience 51 Make Companies Better Global Citizens 34 Visits from Japan to Columbia 53 Lectures 35 Fellowship and Scholarship Programs 53 The Future of Japan’s Social Security and Library and Data Resources 54 Work Style Reform 35 Discussion Groups 55 Agenda for 2020: Can Japan Win Gold for Its Economic Performance? 36 Japan Economic Seminar 55 Leading after a Nuclear Disaster 36 U.S.-Japan Discussion Group 55 Lunchtime Seminars 37 Financial Support 56 The Rise of Japanese Cross-Border M&A in a Sponsorship Program 56 New Era of Shareholder Scrutiny 37

Shareholder Activists Take on Corporate Japan 37 Rakuten: How to Promote Global Innovation 38 Private Equity Coming of Age in Japan 38 Aggressive Use of Tax Shelters by the Wealthy and General Anti-Avoidance Rules 38 Center on Japanese Economy and Business The preeminent academic center in the on Japanese business and economics

Established at Columbia Business School in 1986 under the direction of its chairman, Professor Hugh Patrick, and led currently by its director, Professor David Weinstein, the Center on Japanese Economy and Business (CJEB) promotes knowledge and understanding of Japanese business and economics in an international context. CJEB is a research organization widely recognized for its vigorous research activities, international symposia, conferences, and lectures, held in New York City and Tokyo, which provide prominent speakers from the public and private sectors a forum for collaboration and reflection on Japan, the United States, and the global economy.

Under the leadership of Professors David Weinstein and Takatoshi Ito, CJEB’s associate director of research, CJEB supports research projects and library and computer-based resource initiatives. Other core faculty members are Japan specialists drawn from Columbia’s Business School, School of International and Public Affairs, Economics Department, and Department of Political Science. While CJEB is an independent and nonpartisan research center that takes an objective stance on political or economic policies, we encourage our researchers and scholars to hold their own individual perspectives. Funding and resources are provided by corporate sponsors, foundations, individuals, Columbia Business School, and the University.

For more than 33 years, CJEB has developed, grown, and evolved in order to carry out its mission effectively in a changing Japan and a changing world. In this way, CJEB has been able to build and maintain its status as the preeminent academic center on Japanese business and economics anywhere outside Japan.

Further information about CJEB can be found on the Center’s website: http://www.gsb.columbia.edu/cjeb

CJEB Annual Report 2018–2019 | 1 LETTER FROM THE DIRECTORS

Letter from the Directors

Dear Friends, David Weinstein wrote an influential paper, “The Impact of the 2018 Trade War on U.S. Prices and Welfare,” Since its founding in 1986, the Center on Japanese which was released on March 1, 2019. Its exploration Economy and Business (CJEB) has made its mission of the impact of the Trump administration’s trade policy the promotion of knowledge and understanding of the on prices and welfare was highlighted in many global Japanese economy and business systems in domestic, media outlets, such as The New York Times, The Wall U.S., Asian, and global contexts. Street Journal, Veritas, and many others in David Weinstein, the United States, Europe, and Japan. The paper’s full Director Considering the importance of the Japanese economy media coverage can be found on p. 49. He appeared in in global affairs, this mission continue to be crucial many interviews in the following months, culminating into the future. With this in mind, effective July 1, 2019, with an opportunity in May to present on the paper to His founding director Hugh Patrick has passed the torch to Excellency Shinzo Abe, . David Weinstein, and assumed the newly-created role of chairman. We are confident that the Center will main- CJEB held its highly successful annual conference in Tokyo tain its reputation as a distinguished academic and on May 28, 2019. The conference, “U.S.-Japan Relations research center under David Weinstein’s leadership. in a New Era: Trade, Governance, and the Global Economy,” featured keynote addresses from His Excellency Taro Aso, Hugh Patrick, Chairman Looking back over this past year, CJEB has continued deputy prime minister of the , and to accomplish its mission through a wide range of public from Glenn Hubbard, dean and Russell L. Carson Professor symposia, conferences, research projects, paper series, of Finance and Economics at Columbia Business School and visitor programs. Japan’s economy has continued its (CBS). Dean Hubbard’s speech addressed the economics trajectory of modest, sustained recovery and growth, and of U.S. President Trump and the G20 summit that was is predicted to keep doing so for some time. scheduled to take place in Japan in late June of 2019. Minister Aso’s speech mainly discussed the U.S.-Japan alli- Over the past academic year, CJEB continued to address ance, while also touching on the rapid changes happening and examine several key challenges and prospects for in Japan and its economic progress. More details about the Japan’s economy and business systems through a series Tokyo conference can be found on p. 31. of public programs. On September 27, 2018, former Minister of Health, Labour, and Welfare Katsunobu Kato CJEB continues to successfully host a zadankai lunchtime gave a special lecture discussing the Abe administration’s lecture series for students and others. Yaz Iida, president achievements and goals (p. 35). Professor Takatoshi Ito of Rakuten USA, Inc., gave a talk about his company and delivered his annual lecture on the Japanese economy, its trajectory for growth in North America on October 30, titled “Agenda for 2020: Can Japan Win Gold for Its 2018 (p. 38). Robert Dohner, former deputy assistant Economic Performance?” on October 4, 2018 (p. 36). On secretary of the U.S. Department of the Treasury, deliv- October 31, 2018, Gerald L. Curtis, Burgess Professor ered a sold-out lunchtime talk titled “Have We Seen This Emeritus of Political Science at , Movie Before? China, Japan, Industrial Policy, and Trade and Hugh Patrick held a joint symposium on the future of Conflict” on February 19, 2019 (p. 39). On April 16, Japan’s politics and economy (p. 34). On April 18, 2019, 2019, Hiroshi Nakaso, immediate past deputy Naomi Hirose, executive vice chairman of Fukushima at the Bank of Japan (BOJ), spoke about the continuing Affairs at Tokyo Electric Power Company Holdings puzzle of Japan’s “Low-for-Long” (p. 41). To learn about our (TEPCO), gave a presentation about his experience leading other zadankai seminars, please see pp. 37–41. TEPCO after the Fukushima nuclear disaster in March of 2011. He described the accident, the steps TEPCO took CJEB also organized several events as part of its two to mitigate it in the immediate aftermath, and the ongo- research programs, the Program on Public Pension and ing reconstruction efforts the company is making in the Sovereign Funds (PPPSF), directed by Professor Takatoshi Fukushima region (p. 36). Ito, and the Corporate Governance and Stewardship

2 | CJEB Annual Report 2018–2019 Program, directed by Adjunct Associate Professor and constructive evaluation designed to advance one’s Alicia Ogawa. On December 6, 2018, the third annual career and personal development (p. 41). The second dealt Conference on Public Pension and Sovereign Funds was with cross-cultural negotiation, while the third considered held, featuring keynote speakers Nobuchika Mori, former the “bamboo ceiling,” or leadership barriers that exist for commissioner of the Financial Services Agency of Japan, Asians in the United States (p. 42). and Roger . Ferguson Jr., president and CEO of TIAA. The conference had three sessions. The first was on the Every year, we consider how to enhance and expand our macroenvironment and the potential macrorisk for asset Visiting Fellows Program (p. 44). CJEB Visiting Fellows management; the second covered the benefits and risks of are selected from Japanese companies, academia, and public funds investment in long-term investment; and the the government and come to Columbia, normally for a third investigated whether or not public pension funds will year, to pursue independent study and research. CJEB make an impact on environmental sustainability (p. 30). A Visiting Fellows have access to Columbia’s rich resources, symposium was held on February 27, 2019, in conjunc- including the University’s libraries and public events; the tion with CJEB’s Corporate Governance and Stewardship opportunity to engage with students and faculty of the Program: “Practical Applications of ESG in Japan: How Columbia community; and the ability to audit a wealth Investors Make Companies Better Global Citizens.” This of courses at Columbia. It is important that our Visiting event featured an all-female panel: Fabiana Fedeli, man- Fellows acquire necessary cross-cultural substantive and aging director and global head of Fundamental Equities communicative skills in an increasingly global landscape at Robeco; Laura Nishikawa, managing director of ESG and changing world economy. CJEB hosted several com- Research at MSCI Inc.; and Fiona Stewart, lead financial munication workshops and provided individual coaching sector specialist at the World Bank (p. 34). sessions for our Visiting Fellows to improve their presen- tation skills. Our Visiting Fellows had the opportunity to CJEB invests in developing the next generation of aca- put all of this knowledge into practice by presenting their demic leaders on the Japanese economy and its business research to CJEB directors and their peers in monthly systems by offering a variety of fellowship and scholar- seminars. CJEB has happily hosted more than 260 ship opportunities for students interested in studying Visiting Fellows since the Center’s establishment in 1986. and specializing in Japan. Last year, CJEB’s first PhD fellow, Jackson Lu of CBS, completed his PhD program We are extremely proud of our administrative team of five in 2018 and was appointed to the MIT Sloan School of talented members, led by Ryoko Ogino, who became CJEB Management faculty. In spring 2019, he was named one managing director on July 1, 2019. The Center’s success of the 2019 Best 40 Under 40 Professors by Poets & largely depends on their dedication, energy, and hard work. Quants, a leading online resource for information about We are certain that CJEB’s best years are still yet to come. business schools. You can read more about our initiatives, fellowships, and scholarships offered over the past aca- The Center’s accomplishments are also made possible demic year on p. 53. through the resources provided by the Business School and the University, and, notably, the generous funding CJEB was also proud to launch a new initiative called provided by our corporate sponsors, foundations, and indi- “Empowering Japanese Women in Leadership.” This viduals. We thank all our supporters deeply. program was co-created by Yumiko Shimabukuro of the School of International and Public Affairs at Columbia With warm regards, University and Ryoko Ogino, CJEB managing director, with the intention of tackling the major female leadership gap that exists in Japan, and the various issues that Asian David Weinstein Hugh Patrick women face in the workplace in the United States. In its Director Chairman inaugural year, this initiative held three events. The first July 15, 2019 was a two-day workshop that offered hands-on instruction

CJEB Annual Report 2018–2019 | 3 CJEB TEAM

Leadership and Staff

Hugh Patrick is the awarded an honorary doctorate of Social Takatoshi Ito is founder and director* Sciences by Hong Kong’s Lingnan University the director of of the Center on in 2000 and the Eagle on the World award the Program on Japanese Economy by the Japanese Chamber of Commerce and Public Pension and and Business Industry of New York in 2010. Sovereign Funds (CJEB) and R. D. and associate Calkins Professor director of research of International David Weinstein is at CJEB. He is also Business Emeritus the Carl S. Shoup a professor at the at Columbia Business School, as well as Professor of the School of International and Public Affairs codirector of Columbia’s APEC Study Center. Japanese Economy (SIPA) at Columbia University. He has He joined the Columbia faculty in 1984 after at Columbia taught extensively both in the United some years as professor of economics and University. He is States and Japan since finishing his PhD in director of the Economic Growth Center at also the director economics at in 1979. Yale University. He completed his BA at Yale of research* at He was an assistant and tenured associate University (1951), obtained MA degrees in CJEB, director of professor (1979–1988) at the University of Japanese studies (1955) and economics the Japan Project at the Bureau Minnesota, an associate and full professor (1957), and earned a PhD in economics at of Economic Research (NBER), and a at Hitotsubashi University (1988–2002), the University of Michigan (1960). He has member of the Federal Economic Statistics a professor at the Graduate School of been a visiting professor at Hitotsubashi Advisory Committee. Previously, Professor Economics at the University of Tokyo University, The University of Tokyo, and Weinstein was chair of the Department of (2004–2014), and dean of the Graduate the University of Bombay. Professor Economics and a senior economist as well School of Public Policy at the University of Patrick has been awarded Guggenheim and as a consultant at the Federal Reserve Bank Tokyo (2012–2014) before assuming his Fulbright fellowships and the Ohira Prize. of New York, the Federal Reserve Bank of current position in 2015. In spring 2016, His professional writings include 18 books San Francisco, and the Federal Reserve he received a courtesy appointment in the and some 60 articles and essays. His most Board of Governors. Prior to joining the Finance and Economics Department at recent books are How Finance Is Shaping Columbia faculty, Professor Weinstein Columbia Business School. He held visiting the Economies of China, Japan, and Korea held professorships at the University of professor positions at Harvard University, (Columbia University Press, 2013), coedited Michigan and Harvard University. He also , and Columbia Business with Yung Chul Park; and Reviving Japan’s served on the Council of Economic Advisors School and was Tun Ismail Ali Chair Economy: Problems and Prescriptions (MIT from 1989 to 1990. His teaching and Professor at the University of Malaya. Press, 2005), coauthored and coedited research interests include international He has held distinguished academic and with Takatoshi Ito and David Weinstein. economics, corporate finance, and the research appointments such as president Professor Patrick served as one of four Japanese economy. Professor Weinstein of the Japanese Economic Association in American members of the binational Japan– earned his PhD and MA in economics from 2004–2005, fellow of the Econometric United States Economic Relations Group the University of Michigan and his BA at Society since 1992, research associate at appointed by President Carter and Prime Yale University. He is the recipient of many the National Bureau of Economic Research Minister Ohira from 1979 to 1981. He has grants and awards, including five National since 1985, faculty fellow at the Centre been a member of the Council on Foreign Science Foundation grants, an Institute for Economic Policy Research in London Relations since 1974. He was a member of for New Economic Thinking grant, a Bank since 2006, research associate of the the Board of Directors of the Japan Society of International Settlements Fellowship, Tokyo Center for Economic Research since for seven three-year terms. In November and a Google Research Award. Professor 1990, and faculty fellow of the Research 1994, the Japanese Government awarded Weinstein is the author of numerous Institute of Economy, Trade and Industry him the Order of the Sacred Treasure, Gold publications and articles. since 2004. He was editor-in-chief of the and Silver Star (Kunnitō Zuihōshō). He was Journal of the Japanese and International

4 | CJEB Annual Report 2018–2019 *All titles and positions indicated were held from July 2018 through June 2019. Economies and is coeditor of the Asian U.S.-based macro hedge funds in the United Officers Economic Policy Review. In an unusual move States and an adjunct associate professor Taylor Grace Cook for a Japanese academic, Professor Ito was at SIPA. Until 2006, she was managing appointed senior advisor in the Research director at Lehman Brothers, where she was Program Manager Department at the International Monetary responsible for managing the firm’s global BA, English Fund (1994–1997) and deputy vice minister equity research. Prior to joining Lehman University of Pennsylvania for International Affairs at the Ministry of Brothers, she spent 15 years in Tokyo, where MA, Higher and Postsecondary Education Finance of Japan (1999–2001). He also she was a top-rated bank analyst and director Teachers College, Columbia University served as a member of the Prime Minister’s of research for Nikko Salomon Smith Barney, Emiko Mizumura Council on Economic and Fiscal Policy having managed the original Salomon Brothers (2006–2008). Research Department through three mergers. Assistant Director for Programs She is a member of the board of directors of BA, American and English Literature In 2010, Professor Ito was a coauthor the Maureen and Mike Mansfield Foundation, Otsuma University of a commissioned study of the Bank of a member of the investment committee of the MS, Information and Knowledge Strategy ’s 10th-year review of its inflation Association for Asian Studies, and a member Columbia University targeting regime. He frequently contributes of the President’s Circle of the All Stars op-ed columns and articles to the Financial Shoko Nakamoto Project, a development program for inner city Times and Nihon Keizai Shinbun. He is young people, which was recently launched in Senior Administrative Manager* the author of many books, including The Tokyo. She graduated from Barnard College BA, Law Japanese Economy (MIT Press, 1992), The and earned a master’s degree in international Okayama University Political Economy of Japanese Monetary affairs at SIPA. She is a member of the MA, Diplomacy and International Relations Policy (1997), and Financial Policy and International Corporate Governance Network. Seton Hall University Central Banking in Japan (both with T.

Cargill and M. Hutchison, MIT Press, 2000); Julio “JP” Perez An Independent and Accountable IMF Ryoko Ogino is Program Manager (with J. De Gregorio, B. Eichengreen, and the director for BA, East Asian Languages and Cultures C. Wyplosz, 1999); and more than 130 administration* at Columbia University academic (refereed) journal articles and CJEB. She officially chapters in books on international finance, joined the Center as monetary policy, and the Japanese economy. Japan Representative, associate director His research interests include capital flows for administration Tokyo and currency crises, microstructures of in September 2010 Terumi Ota the foreign exchange rates, and inflation after successfully BA, Tsukuba University targeting. He was awarded the National managing the Center’s Tokyo conference in Medal with Purple Ribbon in June 2011 for spring 2010. Prior to that, she held positions his excellent academic achievement. at Americas Corporation and Student Casuals

Corporation of America, bringing a wealth Yotam Deree of experience in product development, Alicia Ogawa is BA Candidate, Political Science PR, international marketing, and staff the director of Columbia University management. She graduated magna cum the Project on laude from the State University of New York, Japanese Corporate Sara Hirade Buffalo, with a major in human relations Governance and BA, Mathematics and Statistics in multinational organizational settings Stewardship at Columbia University sponsored by the Department of Psychology CJEB. She is also and Management. She co-created the Center’s a consultant to Empowering Japanese Women in Leadership one of the largest Initiative with Professor Yumiko Shimabukuro.

CJEB Annual Report 2018–2019 | 5 Hao-Yun Hsu Xochitl Honoria Romo Nana Uehara MS Candidate, Management Science and JD MA, Social-Organizational Psychology Engineering, and Medical Physics Columbia Law School Teachers College, Columbia University Columbia University Riku Tabata Jade Ke Wang Grace Lin BA Candidate, Economics and Computer MPA, International Finance and Economic BA Candidate, Political Science and Science Policy Economics Columbia University School of International and Public Affairs Columbia University Columbia University

CJEB welcoming the Reiwa era with Columbia University colleagues

Back row: JP Perez, Xochitl Honoria Romo, Jade Ke Wang, Sara Hirade, Nana Uehara, Ryoko Ogino, Shoko Nakamoto Front row: Taylor Grace Cook, Emiko Mizumura

6 | CJEB Annual Report 2018–2019 Core Faculty

CJEB’s seven core faculty members provide Parliamentary Exchange Program, special finance, Dean Hubbard is the author of three the Center’s intellectual foundation and advisor to Newsweek for Newsweek Japan, popular textbooks, as well as coauthor of are drawn from Columbia University’s columnist for the Tokyo/Chunichi Shimbun and The Aid Trap: Hard Truths about Ending Business School, Department of Economics, member of the International Advisory Board of Poverty, Balance: The Economics of Great Department of Political Science, and School and the Advisory Council Powers from Ancient Rome to Modern of International and Public Affairs. In addition for the Japan Foundation Center for Global America, and Healthy, Wealthy, and Wise: Five to Hugh Patrick, David Weinstein, and Partnership. His articles and commentaries Steps to a Better Health Care System. His Takatoshi Ito, CJEB’s core faculty members appear frequently in newspapers and commentaries appear in Business Week, The are as follows: magazines in Europe, Japan, and the United Wall Street Journal, The New York Times, the States. Professor Curtis is a member of the Financial Times, the Washington Post, Nikkei, Board of Directors of the Japan Society, the and the Daily Yomiuri, as well as on Gerald L. Curtis is Japan Center for International Exchange, and radio. From 2001 until 2003, he was Burgess Professor and the Mansfield Foundation and serves as chairman of the U.S. Council of Economic Emeritus of Political councilor to the U.S.-Japan Council. He has Advisors. In the corporate sector, he is on the Science at Columbia served as consultant and advisor to numerous boards of ADP, BlackRock Closed-End Funds, University and public and private organizations in the United and MetLife. Dean Hubbard is cochair of the former director of the States and Japan. Committee on Capital Markets Regulation; he Weatherhead East is a past chair of the Economic Club of New Professor Curtis is a recipient of numerous Asian Institute. He York and a past cochair of the Study Group on prizes and honors, including the Masayoshi received his PhD from Corporate Boards. Ohira Memorial Prize, the Chunichi Shimbun Columbia University in 1969 and was on the Special Achievement Award, the Japan Columbia University faculty from 1969 until Foundation Award, the Marshal Green Award December 2015. He is a professor emeritus, Merit E. Janow is of the Japan-America Society of Washington, a senior research scholar at the Weatherhead dean of Columbia and the Eagle on the World award from the East Asian Institute, and director of University’s School Japanese Chamber of Commerce in New York. Columbia’s Research Program. He is of International He is a recipient of the , the author of numerous books and articles and Public Affairs. Gold and Silver Star, one of the highest honors published in both English and Japanese Dean Janow is awarded by the Japanese government. on Japanese politics, government, foreign an internationally policy, and United States–Japan relations. He recognized expert in divides his time between Columbia University international trade Glenn Hubbard is and Tokyo, where he is active as a columnist, and investment, with extensive experience dean* and Russell speaker, and writer. in academia, government, international L. Carson Professor organizations, and business. In addition, she Professor Curtis has held appointments at of Finance and has had a lifelong involvement with Asia and the Royal Institute of International Affairs, Economics at is an expert on that region. Dean Janow has Chatham House, London; the College de Columbia Business been a professor of practice at Columbia France, Paris; the Lee Kwan Yew School of School. He recently University’s School of International and Public Policy, Singapore; and in Tokyo at Keio, stepped down as Public Affairs (SIPA) and affiliated faculty Tokyo, and Waseda Universities, the Research Dean of the Business at Columbia Law School since 1995. She Institute for Economy, Trade and Industry, School after a storied 15-year tenure. Dean teaches graduate courses in international the Graduate Research Institute for Policy Hubbard received his BA and BS degrees trade/WTO law, comparative antitrust law, Studies, and the International Institute for summa cum laude from the University of China in the global economy, and international Economic Studies. Central Florida and also holds AM and trade and investment policy, among others. PhD degrees in economics from Harvard In addition to his academic work, he has She has held a number of leadership positions University. In addition to writing more than served as director of the U.S.-Japan at the University. Currently, she is codirector 100 scholarly articles on economics and

*All titles and positions indicated were held from July 2018 through June 2019. CJEB Annual Report 2018–2019 | 7 of the APEC Study Center. Previously, she corporations, financial services, technology Climate Change, which shared the 2007 Nobel was director of the Master’s Program in companies, and not-for-profit organizations. Peace Prize. In 2011, Time named Stiglitz one International Affairs and chair of Columbia In 2009, she became a charter member of of the 100 most influential people in the world. University’s Advisory Committee on Socially the International Advisory Council of China’s Professor Stiglitz was a member of the Responsible Investing. Her research interests sovereign wealth fund, China Investment Council of Economic Advisors from 1993 focus on international trade and investment, Corporation. Early in her career, Dean to 1995, during the Clinton administration, Asia, competition law, economic globalization, Janow was a corporate lawyer specializing and served as CEA chairman from 1995 digital trade, internet governance, and in cross-border mergers and acquisitions to 1997. He then became chief economist cybersecurity. She has written several with Skadden, Arps, Slate, Meagher & Flom and senior vice president of the World Bank, books and numerous articles and frequently in New York. Before becoming a lawyer, she from 1997 to 2000. In 2008, he was asked speaks before business, policy, and academic worked at a think tank, where she focused by the French president Nicolas Sarkozy to audiences around the world. on U.S.-Japan trade and economic relations. chair the Commission on the Measurement of She grew up in Tokyo, Japan, and is fluent in While at Columbia University, Dean Janow Economic Performance and Social Progress, Japanese. She has a JD from Columbia Law was elected in December 2003 for a four- which released its final report in September School, where she was a Stone Scholar, and year term as one of the seven members of the 2009 (published as Mismeasuring Our Lives). received a BA in Asian studies with honors World Trade Organization’s (WTO) Appellate He now chairs a High Level Expert Group at from the University of Michigan. She is a Body, which is the court of final appeal for the OECD that is attempting to advance these member of the Council on Foreign Relations adjudicating trade disputes between the ideas further. In 2009, he was appointed by and the Trilateral Commission. 161 members of the WTO. She was the the president of the United Nations General first woman to serve on the Appellate Body. Assembly as chair of the Commission of She was involved in more than 30 appeals. Experts on Reform of the International Financial Joseph E. Stiglitz While on the Appellate Body, she organized and Monetary System, which also released its was born in Gary, a series of global conferences with leading report in September 2009 (published as The Indiana, in 1943. A experts and senior government officials Stiglitz Report). Since the crisis, he has played graduate of Amherst that focused on the Appellate Body, the an important role in the creation of the Institute College, he received international trading system, and economic for New Economic Thinking (INET), which seeks his PhD from MIT in globalization. From 1997 to 2000, Dean to reform the discipline so it is better equipped 1967, became a full Janow served as the executive director of to find solutions for the great challenges of the professor at Yale in the first international antitrust advisory . 1970, and in 1979 committee of the U.S. Department of Justice was awarded the John Bates Clark Award, Professor Stiglitz serves on numerous boards, that reported to the attorney general and the given biennially by the American Economic including the Acumen Fund and Resources for assistant attorney general for antitrust. Her Association to the economist under 40 who the Future. report recommended the creation of a global has made the most significant contribution to network of enforcers and experts, which is He helped create a new branch of economics, the field. He has taught at Princeton, Stanford, now the International Competition Network. “The Economics of Information,” exploring the and MIT and was the Drummond Professor consequences of information asymmetries and Prior to joining Columbia’s faculty, Dean and a fellow of All Souls College, Oxford. pioneering such pivotal concepts as adverse Janow was deputy assistant U.S. trade He is now University Professor at Columbia selection and moral hazard, which have now representative for Japan and China (1989– University in New York, where he is also the become standard tools not only of theorists, 1993). She was responsible for developing, founder and copresident of the University’s but also of policy analysts. He has made major coordinating, and implementing U.S. trade Initiative for Policy Dialogue. He is also the chief contributions to macroeconomics and monetary policies with Japan and China. She negotiated economist of the Roosevelt Institute. In 2001, theory, to development economics and trade more than a dozen trade agreements with he was awarded the Nobel Prize in economics theory, to public and corporate finance, to Japan and China during a period of intense for his analyses of markets with asymmetric the theories of industrial organization and economic and political tension. Dean Janow information, and he was a lead author of the rural organization, and to the theories of serves on the Board of Directors for several 1995 Report of the Intergovernmental Panel on welfare economics and of income and wealth

8 | CJEB Annual Report 2018–2019 distribution. In the 1980s, he helped revive with Bruce Greenwald, published by Columbia interest in the economics of R&D. University Press in 2014; The Great Divide: Unequal Societies and What We Can Do about His work has helped explain the circumstances Them, published by W. W. Norton and Penguin/ in which markets do not work well, and how Allen Lane in 2015; Rewriting the Rules of the selective government intervention can improve American Economy: An Agenda for Growth and their performance. Shared Prosperity, published by W. W. Norton In the last decade and a half, he has written a in 2015; The Euro: How a Common Currency series of highly popular books that have had an Threatens the Future of Europe, published by enormous influence in shaping global debates. W. W. Norton and Penguin/Allen Lane in 2016; His book Globalization and Its Discontents and Globalization and Its Discontents Revisited: (2002) has been translated into 35 languages, Anti-Globalization in the Era of Trump, besides at least two pirated editions, and in the published by W. W. Norton and Penguin/Allen nonpirated editions have sold more than one Lane in 2018. million copies worldwide. In that book he laid Professor Stiglitz’s work has been widely bare the way globalization had been managed, recognized. Among his awards are more especially by the international financial than 40 honorary doctorates, including from institutions. In two later sequels, he presented Cambridge and Oxford Universities. In 2010, alternatives: Fair Trade for All (2005, with he was awarded the prestigious Loeb Prize Andrew Charlton) and Making Globalization for this contributions to journalism. Among Work (2006). In The Roaring Nineties (2003), the prizes awarded to his books have been the he explained how financial market deregulation European Literary Prize, the Bruno Kreisky and other actions of the 1990s were sowing Prize for Political Books, and the Robert F. the seeds of the next crisis. Concurrently, Kennedy Book Award. He is a fellow of the Towards a New Paradigm in Monetary National Academy of Sciences, the American Economics (2003, with Bruce Greenwald) Academy of Arts and Sciences, the American explained the fallacies of current monetary Philosophical Society, and the Econometric policies, identified the risk of excessive financial Society, and a corresponding fellow of the Royal interdependence, and highlighted the central Society and the British Academy. role of credit availability. Freefall: America, Free Markets, and the Sinking of the World He has been decorated by several Economy (2010) traced in more detail the governments, including Colombia, Ecuador, and origins of the Great Recession, outlined a set Korea, and most recently became a member of of policies that would lead to robust recovery, France’s Legion of Honor (rank of Officer). and correctly predicted that if these policies were not pursued, it was likely that we would enter an extended period of malaise. The Three Trillion Dollar War: The True Cost of the Iraq Conflict (2008, with Linda Bilmes of Harvard University) helped reshape the debate on those wars by highlighting the enormous costs of those conflicts. His most recent books are The Price of Inequality: How Today’s Divided Society Endangers Our Future, published by W. W. Norton and Penguin/Allen Lane in 2012; Creating a Learning Society: A New Approach to Growth, Development, and Social Progress,

CJEB Annual Report 2018–2019 | 9 RESEARCH AND FACULTY ENGAGEMENT

Japan’s Economy: Stable in a Turbulent World*

By Hugh Patrick

Japan is a comfortable, safe, relatively high in imports, even though exports decreased. A U.S.-Japan partial trade agreement income, advanced democratic nation with an Consumption and capital spending were focusing on priority items was agreed to by educated, skilled, well-motivated labor force, stable. The revised estimate of 2019 sec- President Trump and Prime Minister Abe on private sector high savings rate, the rule of ond quarter growth was 1.3 percent; while September 25. Eventually, Japan and the law, and well-developed markets. The unem- exports continued to decrease as China and United States will reach agreement on a com- ployment rate is very low, modest GDP growth the world economy slowed, domestic con- prehensive bilateral economic agreement, but per capita continues, and prices are flat with sumption continued its rise, and core machin- that will not happen soon. CPI increases still significantly below the 2 ery orders jumped in June. Japan’s most important long-run fundamental percent target. Japan is fundamentally stable Nonetheless, it is unlikely this growth spurt challenge is its ongoing, inevitable demo- socially, politically, and economically, with an will be sustained. Corporate profits have graphic transition to a smaller and older pop- ethnically homogeneous population of 126 declined for three quarters, and business ulation. Japan’s fertility rate, now 1.44, has million. If this sounds familiar, it is because polls indicate firms are not optimistic about been significantly below the stable popula- my last two annual essays have begun simi- the near term. World economic growth and tion maintenance rate of 2.08 for more than larly, and future ones are likely to as well. This trade are slowing, as is the Chinese econ- four decades. In 2011, the population began speaks well of the steadiness and persistence omy. How comprehensive U.S.-Japan trade to decline. While Japan welcomes a small of contemporary Japan. negotiations work out is not yet determined. number of foreign workers, the government The LDP party won the Upper House elec- The Japan– diplomatic brouhaha maintains a restrictive policy for permanent tions in July as expected. Its leader, Shinzo is being driven by retaliatory trade and other immigration. I expect these trends to con- Abe, on November 20 will become modern economic restrictions and is escalating. At tinue for the next two or three decades, since Japan’s longest-serving prime minister. least the Japanese, and indeed we all, can fertility will not increase to parity and Japan He will presumably continue in office until look forward to the Tokyo Olympics in August will not adopt a positive immigration policy. It September 2021, completing his third suc- 2020, hot though the weather almost cer- is projected that by 2040, the population will cessive, three-year term. A fourth term is a tainly will be. be 107 million, the level of 1972. Those over possibility. 65 will reach one third of the population. Japan faces a number of domestic chal- Japan is the world’s third-largest economy, lenges, many similar to other advanced coun- An ongoing concern is the high level of gov- after the United States and China. The per tries, including gender disparity, work-life ernment gross debt of 237 percent of GDP. capita GDP in 2018, $42,823, places Japan balance, older and retired workers, income However, much is held by the government in about the middle of OECD economies, just inequality, and rural decline, as well as per- sector, including the Bank of Japan, and most behind France and just ahead of Italy. Its per sistent poverty for a small segment of the of the rest is held by the Japanese private capita income in purchasing power parity is population. The good news is that the gov- sector. This is not a major international con- 69.2 percent of that of the United States, ernment is addressing all of these issues; the cern; Japan is considered a safe haven, and and 79.8 percent of Germany’s. Japan’s net bad news is that it is not doing so quickly and foreign demand for safe yen assets is strong. foreign assets are $3.2 trillion, the highest of strongly enough. any country. The Global Context The projected effects of the increase in the Japan’s economy did better than forecasted VAT (consumption tax) on October 1 from 8 This essay focuses on economics, not poli- in the first half of 2019. The 2019 first quar- percent to 10 percent present an immedi- tics, national security, or diplomacy. However, ter GDP real growth of an annualized 2.8 per- ate challenge. the world order is in turmoil. Ongoing cent was quirky; it was due to a sharp drop geopolitical stresses and uncertainties

*There are excellent statistics, data, and analysis on the Japanese economy, including those provided by the government's ; Ministry of Economy, Trade, and Industry (METI); Ministry of Finance (MOF); and the Bank of Japan (BOJ). The World Bank, the International Monetary Fund (IMF), and the Organisation for Economic Co-operation and Development (OECD) produce excellent comparative data and analysis. They provide the basics for a great deal of good academic and private market research. See, for example, the OECD Economic Surveys of Japan, April 2019. I deeply thank Larry Meissner for his thorough, dedicated editing and research support.

10 | CJEB Annual Report 2018–2019 are significantly dampening economic per- those he is negotiating with off balance. He It is difficult to make precise estimates formances. Among other issues, Japan is pursues a go-it-alone approach in foreign because of the lack of information in China’s affected by the Brexit process and its conse- policy. This hard-nosed style has generated Communist Party–led, state-dominated econ- quences; the Middle East mess; China’s eco- some modest additional concessions for omy. An April 2019 NBER study states that nomic and political rise and assertiveness; U.S. trade, but at the much higher cost of China’s official national accounts overesti- and North Korea and nuclear weapons. By weakened U.S. participation in the alliance mated the GDP growth rate by 1.8 percent- and large, this turmoil has been external, with arrangements on which the liberal, trade-ori- age points annually from 2010 to 2016. Japan affected but not directly involved. ented system is based. China’s financial system has major problems. However, Japan is directly involved in an esca- Trump’s threats against U.S. allies and their Because the economy is so large, bumps in lating rift with South Korea dating from 2015. leaders have created political uncertainty its future economic performance will have The underlying issue, Japan’s treatment of that undermines business investment even at major impacts on Japan and the rest of the Korean women during World War II, has fes- current very low interest rates. Uncertainty world. For the most part, China is supportive tered for decades, but has erupted with direct will persist as long as Trump is in office, since of, and working within, the international eco- adverse economic and political ramifications. he cannot be expected to change. However, nomic system, although continuing its protec- probably too much of the emphasis is on tionist system. Sustained global economic growth is per- Trump himself. Trump’s election reflected sisting. GDP grew at 3.1 percent in 2017 China and the United States are the two widespread frustration with, and opposition and 3.6 percent in 2018. It is forecast by hegemons in East Asia. Their relationship is to, the established political leadership, and the IMF to slow to 3.2 percent in 2019, but key in all major dimensions—security, politics, the direction American culture has taken. It is to rebound to 3.5 percent in 2020. Global and economics. It ensures a complex mixture not clear how such rifts can be healed. trade growth has slowed from 3.0 percent in of benefits and costs, both from competition 2018, to 2.6 percent in 2019, but is fore- Japan has well -managed the Trump phenom- and cooperation. The economic challenge for cast to regain 3.0 percent in 2020 (World enon. Abe and Trump have become friends, each nation is how to deal with the other’s Trade Organization data). a process implemented by Japanese diplo- system—the open market-oriented American macy. Their relationship did not result in spe- and the state-controlled, authoritarian, pro- Many expect a global growth slowdown, given cial treatment for Japan in the U.S. admin- tected Chinese. unbalanced European performance and a istration’s impositions of tariffs. However, it slowing United States and Japan. Still, I do not Most Americans support a tougher economic has helped propel the successful efforts of expect a global recession in the near future. stance against China. Its protected markets the two governments to reach an immediate are one concern. Another is how Chinese Commodity prices have basically continued to narrow bilateral trade agreement, providing firms and others have obtained technology be flat. A certain degree of volatility is to be U.S. exporter access to selected Japanese in the United States, ranging from outright expected as markets quickly respond to “news.” agricultural markets, presumably in exchange theft to requirements that U.S. companies for U.S. agreement not to impose high tariffs doing business in China share technology, to Central bankers in the late August 2019 on Japanese automobiles. annual meeting at Jackson Hole privately Chinese citizens studying and doing research stated that the greatest threat to the The rise of China to being a major global, in the United States. However, Americans global economic system is the uncertainty gen- and the dominant Asian, power economically, are divided on what the United States should erated by President Trump’s inconsistent, mer- politically, and militarily has created major do: most economists oppose Trump’s trade curial trade policy; his rhetoric, style, and sub- opportunities and challenges for Japan. policies because of their substance and their stance; and his personal attacks on leaders. China is the world’s largest economy because ham-handed, erratic style. of its economic growth and population of The U.S.-China trade war, rekindled when Aside from his tweets and statements, Trump 1.4 billion, but its per capita income in 2018 Trump imposed tariffs on imports from China has made clear his negotiating style is to was $9,470, which is $18,210 in purchas- in March 2018, has ratcheted up as China promote disorder, on occasion by deliberately ing-power-parity terms (World Bank data). sending mixed messages. It aims to leave has retaliated with its own increases in tariffs

CJEB Annual Report 2018–2019 | 11 and purchasing restrictions on U.S. agricul- markets with negative interest banks are now Comprehensive and Progressive Agreement tural and other exports to China. As of early ordinary and common, no longer an oddity. for Trans-Pacific Partnership), which came September 2019, China’s average tariffs on into force on December 30, 2018. In January Denmark is an extreme case of negative imports from the U.S. are 21.8 percent. 2019, the considerably larger Economic interest rates. Except for four months in Partnership Agreement between Japan Trump has met with China’s president Xi 2014, its central bank has maintained nega- and the took effect. Japan Jinping several times, most recently on tive rates since 2012, longer than any other has pushed for high-standard rules in the June 29, 2019, when they attended the country. Since August, Denmark has had less demanding Regional Comprehensive G20 summit in Osaka. Apparently, the main negative yields on all its government bonds. Economic Partnership, initiated by the 10 consequence is that they agreed to engage In August, a Danish bank, the country’s third ASEAN members plus China, , South in high-level trade negotiations in October. largest, began offering 10-year mortgages at Korea, Australia, and New Zealand, as well They need at least to halt the trade war esca- a rate of negative 0.5 percent. as Japan. The goal is to finalize RCEP by the lation, and make some mutual concessions. Two weeks later the same bank announced end of 2019, particularly in light of the U.S.- However, the fundamental economic issues— it would charge large depositors a fee. China trade war. intellectual property rights, technology trans- Effective December 1, the fee is being fer, state-owned enterprise subsidies, and increased from 0.6 to 0.75 percent and the Foreign Trade and market access—will not be resolved soon, balance threshold reduced from 7.5 million if ever, and clashes will persist in what will Investment krone to 750,000 krone ($111,100). probably be a long, drawn-out U.S.-China Japan’s foreign economic relations are trade war. Well-performing, highly creditworthy multidimensional, based fundamentally on Germany is another example. Once the The effects, and especially the uncertainties, its trade, foreign direct investment, and its ECB pushed its benchmark policy rate into of this contribute to the potential slowing foreign aid program in international and Asian negative territory in 2014, the German of world economic growth. Indeed, the IMF contexts. Japan’s foreign trade negotiations government began issuing shorter-maturity estimates that trade war costs to the global and agreements are an important element. debt with negative yield. In August 2019, the economy in 2020 could reach $700 billion, And there are many fascinating but broadly German government issued 30-year bonds which is the size of Switzerland’s economy. trivial stories, such as whaling. with a zero coupon. The issue was not fully Directly important for Japan is China’s slow- subscribed but sold at a 3.65 percent pre- Japan is a major exporter and importer of ing demand for imports of Japanese machin- mium, representing a 0.11 percent negative goods and services, including dividends and ery and equipment. yield. royalties from its foreign investments. It has A world of negative official and even market run a current account surplus on its balance Why would investors accept negative rates? interest rates is something I never expected, of payments for decades. Its goods exports One reason is that it is costly to store huge but here we are and have been for some time. of 80.3 trillion yen in fiscal 2018 peaked in amounts of cash in a vault. And some inves- It is reported that there are some $16 tril- the final quarter of 2018 and have dropped tors expect interest rates to become even lion of negative-yielding bonds outstanding substantially in the first half of 2019. The more negative, so bond prices will rise and worldwide. The financial systems of all major import of goods in fiscal 2018 was 79.6 capital gains realized. Japan’s negative inter- countries are deeply intertwined, given the trillion yen, also peaking in the fourth quarter est rate structure, though less extensive than ready flow of funds across countries, in a of 2018 and declining even more sharply Germany’s, is discussed later. world of floating exchange rates. through the first half of 2019. Japan has responded to Trump’s withdrawal Americans may perceive of the interest rate Japanese companies actively continue to from the Trans-Pacific Partnership (TPP) on U.S. government Treasury bills and bonds invest in the United States and Europe, as negotiations and his go-it-alone approach as low, but it is an advanced country outlier. well as developing countries. In fiscal 2018, by taking a leadership role in regional and This is the world of central bankers, pension the amount increased by 42 percent from global trade negotiations, including free funds, and other large institutional holders of 2017, with a big surge in the first quarter of trade agreements. Japan led the negotia- investible funds, but not of ordinary house- 2019. Much is in complex infrastructure proj- tions for TPP-11 (CPTPP, the 11-member holds, which can simply hold cash. Banks and ects where Japanese advanced technology

12 | CJEB Annual Report 2018–2019 is productive and welcomed. Japan is quietly measures or against Trump’s protectionist reducing Japanese barriers to imports of investing abroad about 50 percent more than trade policies. Without the United States beef, pork, cheese, and other U.S. agricul- China, despite China’s highly publicized “belt playing a leadership role in the G20 or in the tural products, and reducing U.S. tariffs on and road” FDI program. Japan is participating Paris agreement, widespread support of the Japanese machine tools, turbines, and other in 240 projects in the 10 Southeast Asian open international economic order is under- products. The parts of the agreement on agri- countries, China 210; and most Japanese mined. cultural and digital trade are clear—almost projects are larger. This is not either-or. So the same access to Japan for the United far 52 projects involve both Japanese and U.S.-Japan Trade States that TPP members and European Chinese participants. Japan’s projects are in Negotiations countries have, though not covering rice, fish, the six largest Southeast Asian nations and or forestry products. rated at $367 billion, compared to China’s Trump wants to reduce the U.S. trade deficit For Japan, a crucial issue is vehicles and $255 billion. More than half of Japan’s total with Japan significantly, which was $67.2 bil- vehicle parts, which are one-third of its is in Vietnam. lion in 2018 and $42.4 billion in the first half exports to the United States. Japan sought of 2019. Trump’s emphasis on bilateral bal- While foreign financial institutions are actively a clear, written U.S. commitment not to ance is a mistake and certainly will not hap- engaged in Japanese financial markets, for- impose high tariffs or restrictions on autos. pen despite his fulminations. His policy, now eign debt invested in Japan continues to be However, what Japan obtained was a strong achieved, was to reach a trade partial agree- modest, at ¥30.7 billion ($292.4 million at oral commitment. Lighthizer stated that it ment with Japan by fall 2019, well before 105 yen/dollar), only one-sixth of Japanese was not Trump’s intention at this point to the U.S. presidential election in November FDI of $1.724 billion in calendar year 2018. do anything on autos. Abe announced that 2020. The longer-run goal for both countries Notable foreign purchases of Japanese he and Trump had agreed no further tariffs is to reach a comprehensive bilateral trade companies included ’s ¥2 trillion would be imposed on Japan. The Japanese and economic agreement. Negotiations are acquisition of Memory (Toshiba’s semi- chief negotiator Atsuyuki Oike also stressed underway but will probably take several years conductor unit) in June 2018, KKR’s purchase this understanding. to complete, regardless of who is president of auto parts manufacturer Calsonic and who is prime minister. Of course, a major concern for Japan, and in May 2017 for ¥498 billion, and Ningbo indeed everyone, is Trump’s tendency to sud- Joyson Electronic Corporation’s purchase of Japan’s tariffs and other restrictions on den, unilateral actions, and of course tweets, bankrupt Takata in April 2018 for ¥175 billion. manufactured goods are low but are high which undermine the reliability of any agree- on agricultural imports. Trump’s withdrawal Japan’s foreign trade and investment policies ments. Nonetheless, this new agreement, from the TPP negotiations meant that Asian are in principle open, market-oriented, and limited though it may be, is beneficial for and EU economies faced lower tariffs than relatively free, based on the rule of law. This both American and Japanese consumers. The their American exporters on Japanese beef, is reflected in its active support of trade lib- politics are another matter—domestically grains, and other agricultural products. In eralizing agreements—TPP (CFTPP), Japan- considerably more of a win for Trump than for April 2019, U.S. trade representative Robert European Trade Agreement, RCEP, and the Abe. Lighthizer and Japanese minister Toshimitsu U.S.-Japan trade agreement negotiations. Motegi met to initiate formal negotiations, Like other nations, Japan is paying close the first of a series of meetings, the most The Economy attention to U.S.-China trade negotiations. recent of which were August 23–25, on the Japan’s GDP for fiscal 2018, ending in March In June 2019, Japan hosted the G20’s sidelines of the G7 meeting attended by Abe 2019, was ¥550.5 trillion ($5.24 trillion at annual Summit on Financial Markets and the and Trump. On August 25, Trump and Abe 105 yen/dollar). In real terms, it increased World Economy. On the whole, the meeting announced that a trade agreement had been by 0.7 percent, following the unexpectedly made only very modest achievements. Its reached in principle. rapid increase in fiscal 2017 of 1.9 percent. bland communiqué did not even denounce On September 25, Trump and Abe met in Consumption, 55 percent of GDP, grew protectionism. One critique has been that, in New York, at the sidelines of the UN General 0.8 percent. Investment continues to be order to maintain good relations with Trump, Assembly meeting, and announced they had important: the gross capital formation share Japan did not push hard for climate change signed a limited trade agreement statement increased to 24.4 percent of GDP, from 24.1

CJEB Annual Report 2018–2019 | 13 percent in fiscal 2017. Government con- abandoned, mostly in rural areas, because burial costs of about $2,500, with the munic- sumption continued its stable, one-fifth share they have no value. Young people have been ipal government covering the rest. both of GDP and of gross capital formation. leaving small villages for decades, but their Japan’s current account surplus, always pos- parents and grandparents stayed. Now Noteworthy Events itive reflecting Japan’s high savings rate rela- elderly, they are dying. One estimate is that Japan has had a number of noteworthy tive to domestic demand, was ¥19.2 trillion, there are at least 250 hamlets where all events in 2019. The most important has 3.5 percent of GDP. Since imports surged, of the residents are 75 or older. In urban been the imperial succession. The ongoing the current account surplus decreased by areas, cheaply constructed houses whose Ghosn-Renault- saga and negotiations ¥19.3 trillion from 2017. ownership cannot be determined are simply are fascinating and juicy. Probably more abandoned and left to deteriorate. Municipal GDP is a measure of a country’s economic important has been the JIC scandal. And, a governments are in the slow process of tak- power, and GDP per capita is a measure of tiny industry, whaling, has been subject to ing them over and demolishing them. economic well-being (the standard of living). criticism by environmental activists, initiated Given Japan’s population decrease, real GDP Like other property, cemetery spaces are by Australians. per capita increased 2.1 percent in fiscal expensive. Almost all (99.9 percent) of The Emperor has scant economic or political 2017 and 1.0 percent in fiscal 2018. Japanese are cremated when they die, and power, but significant symbolic power, much the ashes are put in urns. There usually is The Bank of Japan (BOJ) forecasts that real of which is thanks to Emperor , who some type of funeral service. For many urban GDP will grow 0.7 percent in fiscal 2019, began his effective reign as Emperor residents, family graves are far away, so fam- 0.9 percent in fiscal 2020, and 1.1 in fiscal in 1989. Popularly regarded as the people’s ily visits are expensive. 2021. The Cabinet Office estimates 0.9 emperor, Emperor Akihito consoled Japanese percent for 2019 and 1.2 percent for 2020. Developers in cities are now building high in difficulty and expressed remorse to coun- The IMF forecasts 0.9 percent in calendar rise buildings (called “columbariums”) to tries having suffered at Japan’s hand during year 2019, but just 0.4 percent in calendar house large numbers of urns. This makes its colonial period and World War II. He year 2020. Private sector forecasts are a bit family visits easier. The columbariums have decided to abdicate due to age (he was born more cautious. This is a particularly uncertain special facilities to enable a family to pay its in 1933) and health reasons. He was finally period, since it is difficult to estimate the respects to its own urns in a private booth, able to do so at the end of April 2019. effects of the October 2019 consumption as well as shrines, meditation centers, and He was succeeded by his son , and tax increase, the slowing world economy, other family facilities. Small funerals for just the Reiwa Era has begun. Naruhito, born in Trump’s protectionist policies, and the conse- families and friends are increasingly common February 1960, was educated in Oxford and quences of the U.S.-China trade war, among in urban areas. The development of small has promised to follow his father’s approach, other factors. funeral parlors is a growing niche business. commitments, and style. The ongoing increase in the urban-rural The national census for 2015 estimated that The abdication and the new Emperor’s divide is reflected in land prices. For Japan about 5.9 million people 65 or older lived installation was a smooth, good process, as a whole, land prices rose 1.3 percent in alone, one of six such seniors. In a small num- generating some optimism about Japan’s 2018, driven by strong demand for offices ber of cases, the ashes of such people are future. In contrast, when the Showa Emperor and hotels in major cities and tourist spots, not claimed, either because any known family (reigned 1926–1989) lay ill and finally died for both Japanese and foreign tourists. Land members are estranged, unwilling to take on in 1989, at the age of 87, everything slowed, prices increased in only 19 of Japan’s 47 the responsibilities of a funeral and urn stor- including the economy, as people mourned prefectures, they dropped in 27 rural prefec- age, or there simply are no known relatives. and refrained from parties and other forms tures, and were flat in Hyogo (where Kobe is Some cities maintain ossuaries where urns of conspicuous consumption. The lesson the major city). are identified by name and stored. learned: a smooth abdication is the best way Japan has a record-breaking 8.46 million Some cities have centers that offer programs to carry out Imperial succession. unoccupied houses. The majority (about 5 for elderly low-income residents with no The ongoing Ghosn-Nissan-Renault story million) are in the process of being renovated immediate family members. Individuals sign embodies a complex mixture of individual and for rental or sale, but 3.47 million have been up to pay at least a fifth of the cremation and

14 | CJEB Annual Report 2018–2019 management strengths and weaknesses, the whether current negotiations can resolve JIC hired a Silicon Valley firm corporate culture of two major automakers: the ownership imbalances, lack of trust, and to help it invest. In November 2018, METI Nissan, based in Japan, and Renault, based in other difficulties, despite the very strong eco- withdrew its salary offer to Tanaka and the France; the economies of scale and special- nomic incentives to work together. other board members, saying it had made a ization making their alliance so economically mistake. Yoshihide The arrests and treatment of Ghosn made me attractive; the evolving fitful nature of the Suga, once he learned of the lucrative JIC more aware of those aspects of the Japanese alliance itself; and the respective roles of salary terms, indicated it was not acceptable. legal system that are different from American the French and Japanese governments. Not METI minister Hiroshige Seko stated that practices, which themselves are probably surprisingly, the media has focused on Carlos “compensation at an institution that manages not globally typical. Not surprisingly, Ghosn Ghosn’s accumulation of power and money, and public money needs to be in line with what proclaimed his innocence. There was noth- his downfall. Information on his manipulative people find acceptable.” Tanaka and the other ing special about being held in a small cell. funding arrangements continues to seep out. JIC nongovernment board members then However, I was shocked that, according to resigned, and JIC was in limbo. The issue The Renault-Nissan relationship has evolved regular practice in Japan, he was held without was not only salary, but also the degree of significantly from 1999, when Ghosn pulled bail for three months, repeatedly questioned JIC independence that Tanaka steadfastly Nissan back from bankruptcy and established without his lawyer present, and that one of assumed, which was more than the govern- the Renault-Nissan alliance. He had a strong the conditions of his eventual bail was that ment realistically should be expected to give. desire to merge the companies but was effec- he have absolutely no contact or communi- tively thwarted by a group of Nissan manag- cations with his wife or his son, who are his On October 4, METI filled the post of presi- ers. Matters came to a head in 2018. business partners. dent and CEO of JIC with Keisuke Yokoo, for- mer president of Mizuho Securities Company. The economics of technology is a major driver The Japan Investment Corporation (JIC) Presumably, JIC will resume operations soon. of this tale. Nissan and Renault each has its scandal provides important insights into the own proprietary technologies. How much to tensions between the Japanese government Economic policy making is fundamentally share, and how to share, has been key. So, bureaucracy, the political leadership, and political; it benefits specific industries and too, has been the sharing of research and market-based senior executive compensation. workers and hurts others. There are the big development costs. On September 20, 2018, METI established stories of Trump, of China, of the international the JIC as the successor to the Innovation economic system. And there are smaller A range of different models can be built on Network Corporation of Japan (INCJ), with ¥2 stories, which on occasion receive special the same platform. Originally, platform sim- trillion ($18 billion) in government funds. Its attention. Such is the case of the Japanese ply meant the chassis, but it has expanded purpose was to be a globally competitive sov- government’s decision to officially restart in concept to include other components. ereign wealth fund to finance emerging tech- commercial hunting of whales, after having Platform sharing reduces the number of nology companies, engineer M&A, and invest agreed in 1988 to ban whaling except for unique parts across a company’s product line, in major foreign technology companies. research purposes. Antiwhaling social activ- as well as the time and money that would be ists in Australia and elsewhere have needed if every new vehicle had to be made METI recruited Masaaki Tanaka to be JIC strongly objected. using its own platform. president and CEO and appointed a board of eight other well-known outside specialists The whaling story is a complex mixture of For several years, Nissan has done poorly in and two METI officials. Tanaka had extensive culture, politics, scientific research, interna- the United States and other foreign markets, experience in global financial markets in his tional relations, economics, and consumer and profits have dropped significantly. Nissan career with UFJ Financial Group preferences. In 1951, Japan joined the management continues to strongly resist (MUFG), and as an advisor to the Financial International Whaling Commission (IWC), Renault merger efforts, as Renault has a far Services Agency (FSA), other governmental founded in 1946. In 1986, the IWC declared larger share of Nissan’s stock than Nissan agencies, and private sector business groups. a moratorium on whaling except for scientific has of Renault’s, and the French government METI offered him a significantly higher wage research purposes. Japan actively engaged in owns 19.7 percent of Renault SA, a fur- package than any Japanese official or the whale research, caught whales, and then sold ther complication. The mutual lack of trust Bank of Japan governor. the whale meat in Japan. is a major challenge. It remains to be seen

CJEB Annual Report 2018–2019 | 15 Japan had sought to replace the moratorium It is not entirely clear why the government The OECD has identified 45 broadly defined with “sustainable quotas,” most recently in decided to withdraw from the IWC and key technologies that are expected to have 2018. Rebuffed, the government decided restart commercial whaling. NHK and other significant economic (and other) impacts, to quit the IWC effective July 1, 2019, and, opinion polls show broad Japanese support some disruptive, classified into four major like Norway and Iceland, among a few oth- for whaling, presumably as a part of Japan’s categories. Of these, 14 are digital technolo- ers, engage in commercial whaling. The now historic culture, even though relatively few gies (the internet of things, big data analysis, 88-member IWC is the first major interna- Japanese now eat whale meat. However, robotics, blockchain, etc.); 10 are biotechnol- tional organization from which postwar Japan Japanese whalers have been able to enlist ogy (regenerative medicine, biochips and sen- has withdrawn. top political support: Prime Minister Abe sors, genomics, etc.); 7 are in advanced mate- is from Shimonoseki, a whaling port, and rials (nanomaterials, nano-devices, graphene, It is difficult to think of a more miniscule the LDP secretary general, Toshihiro Nikai, etc.); and 14 are in energy and environment Japanese industry. Japanese whaling con- represents Taiji, a whaling port in Wakayama (electric vehicles, wind turbines, carbon cap- sists of the large whale factory ship Nisshin prefecture. The Fisheries Agency provides an ture and storage, smart grids, etc.). Maru and its three catcher boats, and five annual subsidy to whalers of $46 million. medium whaling boats. There are around Japan ranks ninth in the Bloomberg 2019 300 people working in the industry, including Whether this minuscule industry finally dis- innovation index, just behind the U.S. (South some 200 crew members. appears probably depends fundamentally Korea has led the list for six years; Germany on the continuation of the government sub- is a close second.) Japan places high in R&D Withdrawing from the IWC is not going to sidy. It has been suggested that after three expenditures and value added, result in a frenzy of Japanese whale hunting. years it should be sharply reduced. With low but low in productivity in services sector The Japanese authorities allowed the hunt demand, and the availability of higher-quality, efficiency. of 630 whales in 2018. The government less expensive whale meat imports, as the has moved cautiously, limiting the number The August 2, 2019, Economic and Fiscal whaling ships become outmoded, they are of whales caught to 227 for the second Policy Committee report states that firms not likely to be replaced. Yet future policy half of 2019, and limiting hunting to the actively pursuing artificial intelligence and will continue to be shaped by this interesting 200-mile maritime economic zone around training workers in tasks that cannot be mixture of Japanese economics, politics, and Japan, a much closer and less costly location. readily automated are achieving significant culture, and foreign environmental activist Previously, Japanese whalers operated in productivity gains. The government actively media coverage. Antarctic waters. promotes innovative startups and (to use the government’s term) “hidden gem” small Japanese consumer demand is very low. In Productivity and Innovation and medium enterprises (SMEs). There is the early postwar years, American occupa- Productivity increases, the key to growth, are a government website specifically devoted tion authorities urged Japanese to eat whale founded on investment, improving labor skills, to the role of technology. The overall policy as a cheap source of protein. It cost only new technologies, and innovation. A common emphasis has been on the internet of things, about a quarter of the price of beef. For the metric is GDP per hour worked. For Japan, this artificial intelligence, industrial robots, regen- next decade or so, half of all protein in the rose 0.9 percent in 2017, but only 0.4 per- erative medicine, and plant-based biode- Japanese diet was whale meat and was used cent in 2018, according to OECD data. Such gradable plastics, along with a wide range of for school lunches. About 200,000 tons a measure only partially reflects the produc- more-narrowly focused projects. were consumed annually. Today, whale meat tivity of labor. On the labor-input side, this is is only 0.1 percent of total meat consump- Much analysis tends to focus on innovation because of differences in the personal capac- tion, and it is comparable in price to beef. For and new technologies, and that is appropri- ities of workers, the intensity of their effort, several years, annual consumption has been ate. Nonetheless, some products, and their and what they have to work with. Furthermore, about 3,000 tons, of which 1,000 tons is production machinery, continue in use for wages are used to measure output, which is imported. This is about 40 grams a year per decades. Maintenance of such production a problematic proxy of value in the service capita, about the size of a slice of ham. Japan systems requires procedures to produce sector, since it employs low-wage part-time or has a few restaurants specializing in whale replacement parts as they wear out; 3-D foreign workers, underestimating output and meat; it is a small niche market. production addresses this. Another issue is productivity.

16 | CJEB Annual Report 2018–2019 training engineers and other skilled workers Exchange. They have to make public a great annual meetings. Virtually all public pension to understand and maintain older technolo- deal of information. funds have signed the stewardship code, gies, not just apply the new. Some compa- though corporate pension funds have been One enduring, key feature is the stereotypi- nies, such as , have developed slow to do so. cal employment system, which is still pretty training centers for that purpose. much the case. Large firms seek to hire the Since passive investment funds select com- For some decades, I have spent upwards of best graduates of the major universities, panies based in stock indices, they do not two months a year in Japan. In more recent and in due course promote them based engage with individual companies to improve trips, I have visited companies in various on seniority and merit, winnowing down their long-term performance. Some activist parts of Japan, usually in the company of those who become top management, ulti- investors focus on long-term performance, a senior staff member of the Development mately president and CEO, and internal mem- though others push for changes that have Bank of Japan, with an interpreter. One bers of the company’s board of directors. quick results. thing that has impressed me is the entre- The result is a deeply and stronglyentrenched M&A in Japan is still modest but is increas- preneurship and innovativeness I encounter. management, often involving several compet- ing. Most are in practice acquisitions, since (Summaries of these visits are available on ing cliques. one company and its management dominates the CJEB website: https://www8.gsb.columbia. Japanese companies have accumulated the other. Most transactions are friendly, or edu/cjeb/research/companyreports.) immense financial resources from retained at least not overtly hostile. Much activity is The Corporate Sector earnings: ¥463.13 trillion (March 2019), by major conglomerates such as , a record for the seventh consecutive year. , and Toshiba, disposing of units and As in other market economies, Japan’s indus- Listed companies hold even more than that subsidiaries that are not part of the core trial organization is based on corporate enter- in cash: ¥506.4 trillion ($4.82 trillion at 105 of the company. Well-known foreign expert prises. They provide four-fifths of the jobs yen/dollar) as of their latest filings. This is investors such as KKR and Bain are actively and most of the output. The main exception is the highest level on record, according to data seeking such opportunities, as are Japanese agriculture, with its 5.9 million individual pro- compiled by Bloomberg, and is more than private equity and venture capital firms such prietorships, and some professional services. three times the March 2013 level. as Japan Industrial Partners.

Japan has some 988,000 incorporated busi- This risk-averse behavior protects manage- Hostile takeover bids remain uncommon, but ness enterprises. Almost all are small, typi- ment from periods of potential adversity, but there are some interesting new cases. They cally family-owned, with a paid-in capital of it is wasteful, particularly given Japan’s zero often invoke complicated interactions among 10 to 100 million yen. While some are barely interest rate policy. Companies are using majority shareholders, minority shareholders, profitable or even close to bankruptcy, most these surplus funds to buy back shares, and company management. The months-long are a fundamental strength of the Japanese increase diversity, and to engage in M&A, Trading Company quest for sporting economy. Virtually every Japanese city has though not in sufficient amounts to diminish goods company Descente received consid- locally well-known, small, but strong local the cash surpluses. erable media coverage, even outside Japan. companies. Some provide local banking or Itochu, already the largest shareholder with Implementation of corporate governance and financial, retail, and other services; yet others about 30 percent, wanted to regain con- stewardship codes is a continuing process. produce a highly specialized, specific compo- trol of Descente. From 1994, Itochu had While some companies are actively pursuing nent that has global reach and market share. appointed Descente’s president. Then, in reforms, management in most companies is It is difficult to assess the contributions of 2013, a founding family member became moving slowly. Almost all companies listed these enterprises. They understate profits, president and sought greater independence. on the , particularly and of course companies in difficulty do their A January 2019 tender offer at a 50 percent the JPX Nikkei 400 companies, have two best to prevent adverse information leakage. premium to the pre-bid share price allowed outside directors. An FSA October 2018 Itochu to increase its ownership share to 40 Much more information is available on listed survey found that more than 100 institutional percent, sufficient to veto major management companies, particularly the 2,155 trad- investors, a major increase, disclose their decisions. In March, Itochu took control and ing on the first section of the Tokyo Stock voting on individual agenda items at company

CJEB Annual Report 2018–2019 | 17 appointed its own staff member as Descente are part-time, compared to 43.7 percent women. This reflects the fact that regular president. Several other hostile bids are in of female employees. Small firms (less than workers receive higher wages and fringe the works in early fall 2019. 30 employees) employ 24.6 percent of benefits than nonregular workers, especially male employees and 27.3 percent of female part-time ones. Labor employees. Some 31.8 percent of male Women have family responsibilities to care employees and 27.9 percent of female ones As of July 2019, Japan’s labor force was 68.9 for their parents and, since most are married, comprise the 18.1 million (30 percent) who million, of whom 67.3 million members were care for their children and their husband’s work at large firms (500 employees or more). working, primarily as business or government parents. This constrains working hours, which employees. The unemployment rate was an In January 2019, a government wage data makes part-time work attractive, but it con- unprecedentedly low 2.3 percent. Males in the scandal erupted. The Ministry of Health, signs women to low-paying jobs. labor force numbered 38.3 million, with 97.6 Labour, and Welfare is required to survey The Abe administration has passed policies percent employed; females in the labor force virtually all companies with more than 500 to encourage more women to enter the labor were 30 million, with 97.9 percent employed. employees to obtain wage data, which are force, including investment in nurseries and The vast majority (80 percent) were employ- used for estimating government benefit other child care facilities. However, it has ees working for companies; 8.0 percent were programs. However, the Ministry had only focused less on encouraging promotion of in the government sector; and 9.7 percent surveyed about a third of Tokyo-area large women to managerial positions, a signifi- were self-employed or family workers. businesses between 2004 and 2017. Since cant problem in the private sector as well as large companies have higher wages than The number of job openings has been greater the public sector. For example, only about smaller ones, this undercounting reduced than job seekers since 2014, and the gap 10 percent of Diet members are women, a national wage estimates. One consequence is has widened. Increases in the supply of smaller share than in Iraq. that the government has failed to pay tens of workers, despite the demographic transition, billions of yen (several hundred million dollars) Importantly, the fundamentals of the work- has come from three main sources: married in unemployment insurance and similar bene- life balance environment are gradually women reentering the labor force, elderly fits, according to an internal investigation. changing, generationally and institutionally. people continuing to work, and the accep- Men working long hours into late evening, tance of a modest number of foreign workers. One major long-run change in Japan is the and overtime, have been decreasing. Many At one time Japan had a relatively low partici- role of women in the economy and in society. young married men return to home for dinner, pation rate for married women, but the rate is Japan has long been male-dominated eco- and many married working women go home now higher than in the United States. Also, a nomically, politically, behaviorally, and institu- to prepare for dinner and take care of their higher percentage of Japanese over 65 con- tionally. The increase in female participation children. The Abe administration on female tinue to work than in the United States. in the wage-earning labor force has helped employment—womenomics—is promoting change this. So, too, have improvements in Ongoing labor shortages in almost all fields these work-life recalibrations. educational opportunities, the 2018 scandal are bringing about all kinds of adjustments, over major medical schools discriminating Another work-life issue is the reality that including an explicit policy to provide work against women taking the entrance exam not- most Japanese will live 20 to 30 years after visas for some 340,000 foreign workers over withstanding. In 2016, women accounted for retirement. The government is encouraging the next five years. just 21.1 percent of all doctors in Japan, the larger companies to postpone retirement to An important distinction is between regular lowest level among OECD nations. 70, significantly higher than current retire- employees, who in principle have long-term ment ages, which are in the mid-50s, and As in most advanced economies, the wage jobs, and nonregular employees, who have to 65 or so for smaller companies. Ending differences between Japanese males and limited-term contracts or part-time jobs. formal retirement ages is probably desirable, females doing the same work are relatively Some 76.8 percent of male employees (30.5 but institutionally and financially difficult for small. However, because 76.8 percent of million) are regular employees, but only 44.6 employers. men have full-time regular positions, but only percent of female employees (26.5 million). 46.1 percent of women do, men as a group Only 15.4 percent of the male employees on average earn about 25 percent more than

18 | CJEB Annual Report 2018–2019 One of the biggest challenges from Japan’s They must have basic target. This will not be achieved anytime soon. demographic transition is how to finance the skills, and cannot bring family members. The With the Japanese economic performance costs of maintaining the existing standard of government expected to attract about 4,000 slowing, the BOJ policy remained on hold in living for Japan’s future elderly. The national workers. As of late June 2019, only 43 its September 2019 meeting, and Governor pension is ¥788,000 a year ($7,430) for applicants had been accepted. One problem Kuroda has indicated further easing steps may those who contribute the required monthly is that not many fourth-generation Japanese be taken in the coming months if needed. contribution (currently ¥16,430) for 40 descendants in foreign countries know However, the easy money, zero interest rate working years. The FSA has estimated that enough Japanese to pass the language test. policy has not been, is not, and will not be couples will need to have assets of an addi- sufficient to achieve full-employment domes- tional ¥20 million, and that they should be Macroeconomic Policy tic demand growth. The government is deal- invested, some in stocks and other more high- The fundamental rule of monetary policy and ing with the increase in the consumption tax risk assets. In the longer run, the government fiscal policy is to maintain price stability and to 10 percent by implementing a somewhat will have to find a compromise package of full-employment levels of aggregate demand. complex mixture of expectations, guaran- higher taxes and lower welfare payments. It In Japan, as in other advanced countries, for tees, and incentives to offset the immediate will take extraordinary political leadership to some years monetary policy has been very effect on consumption and on expectations. achieve this. easy, with low interest rates, and the gov- The longer-run effects of the tax increase The government has pursued a strict policy ernment has run a budget deficit, providing are unclear. While the government has long limiting the acceptance of foreigners as demand stimulus. Japanese fiscal and mon- touted fiscal reform and eventually eliminat- workers in Japan, except for a few thousand etary policies generally work in tandem, with ing the budget primary deficit, the realistic highly-skilled foreigners recruited for special good communication between both sets of need to stimulate demand has trumped such positions. Foreign workers come in a variety policymakers, but certainly not as a coordi- MOF goals. Japan has run budget primary of ways: as trainees, as students allowed nated unit, as evidenced by the consumption deficits for more than 20 years without sig- to work 28 hours per week, and as tourists tax increase in October 2019 to 10 percent, nificant deleterious effects. I expect this to and former students who overstay visas. A and the inability so far of the BOJ to achieve continue indefinitely. separate category is designed to attract the its 2 percent CPI increase target, first set in So long as interest rates are below the GDP descendants of Japanese emigrants, in part January 2013. growth rate, a primary deficit is not a major to nurture relations of foreign Japanese- Modern monetary theory (MMT) has been economic or fiscal problem. Olivier Blanchard descendant communities in other countries actively discussed by policymakers, as well and Takeshi Tashiro, in a May 2019 PIIE pol- with Japan. as academics. The basic proposition of MMT icy brief, argue that Japan should continue to In 1990, Japan revised its immigration laws is that the government can spend unlim- run a modest budget primary deficit in order to grant second and third generations of ited local currency amounts, financed by to sustain sufficient aggregate demand. Their foreign citizens of Japanese ancestry special purchases of its bond issues by the central analysis does not hold if Japanese interest access to the Japanese labor market. As a bank, with no limit on domestic money supply rates rise significantly, but such interest rate consequence, Japanese-Brazilian workers in because there is no risk of default, until the increases would be in response to changes particular were attracted to Japan, reaching inflation target is reached. in positive economic fundamentals such as a peak of 310,358 in 2007. When the 2008 a surge in Japanese private investment or a This way of thinking has correctly been strongly financial crisis hit Japan, the government major decrease in private saving. rejected both by BOJ governor Haruhiko Kuroda provided foreign workers incentives to leave. and senior MOF officials. BOJ continues its pol- What the government spends on is a differ- By the end of 2017, Japanese-Brazilians in icy of extraordinarily low interest rates and yield ent, important issue. The challenge is how Japan had decreased to about 190,000. curve control, with its official short-term rate to sustain the standard of living of Japan’s In late March 2018, the government of minus 0.1 percent, and a 10-year Japanese elderly poor through welfare expenditures, as announced a program to attract fourth-gen- Government Bond (JGB) yield of zero. The pol- the proportion of elderly retirees increases eration emigrants to work in Japan for up to icy has been managed well but still is far from and the proportion of younger taxpayers five years under a preferential visa program. achieving the 2 percent CPI annual increase decreases.

CJEB Annual Report 2018–2019 | 19 The Financial Sector deposit rates had fallen to 1.1 percent point volatile. As of 2016, 35 percent of Japan’s by 2017, and even less subsequently. In their energy consumption was for cooling, heating, Japan has a well-developed, market-oriented March 2019 -end reports, profits and lighting buildings and houses, 28 percent financial system that continues to be bank decreased in about 70 percent of 78 regional for industry, and 24 percent for cars, trucks, based, but with increasingly active, import- banks and their holding groups, and three railroads, and other forms of transport. Some ant financial markets. Financial technology suffered losses. For some banks, reported 42 percent of primary energy consumption continues to change profoundly, from ATMs profits were increased by capital gains from was oil, 27 percent coal, and 24 percent nat- to FinTech to cyber currency. The financial sales of JGBs, purchased earlier with a posi- ural gas. The other sources were small: bio- system has had to adjust to two profound tive interest rate. The BOJ has estimated that mass 3.2 percent, hydro 1.6 percent, solar changes: the demographic transition to fewer 60 percent of regional banks will be having and wind 1.2 percent, nuclear 1.1 percent, and older people, and directly to the BoJ’s losses within the coming 10 years. and geothermal 0.5 percent. extraordinarily low interest rate policy and its Regional banks also are shifting their busi- Technology is changing rapidly, and so are huge purchases of JGBs. ness models from traditional lending-oriented costs. The government encourages solar and The seven major banks, including the three to a broader range of financial services, but wind sources, and the development not only megabanks, have shifted their business it is a slow, difficult process. The FSA is of rechargeable lithium-ion batteries, but also model from loans and deposits to focusing on encouraging regional financial institutions alternative energy storage systems such as asset wealth management and other financial to merge and is supporting the Regional Molten Salt TET and ice thermal storage. services, and actively entering foreign mar- Bank Association request that the current 5 Electricity generation, mainly by electric kets by investing in foreign bonds and lending percent limit on ownership of the stock of a power utilities, is key. Given the long life of abroad, particularly to the foreign branches corporate client be significantly liberalized, existing facilities and the flattening of elec- or subdivisions of their large Japanese cor- so banks can earn capital gains on successful tricity consumption, the sources of electricity porate clients. Even so, the banks are in the local companies they know well. generation change slowly. In 2019, LNG process of substantially reducing employees, The future does not look good for many produced 40 percent of electric power gen- and their profits are down significantly. regional banks. Their economic environments eration, coal 28 percent, and oil 2 percent. Many regional banks have serious problems. suffer from an aging and declining population, Solar, air, and biomass generate 10 percent With only a few exceptions, they are not big loss of young people, and local SMEs clos- of electricity, hydro 9 percent, and nuclear 6 enough, and do not know enough, to oper- ing. Interest rates will not rise significantly percent. ate well in foreign markets. However, they in the foreseeable future. First-tier banks Government energy policy is broad based and are important in Japan. Three-fourths of will survive, but many second-tier banks will focuses on helping develop new technologies, Japanese companies rely on a local financial be absorbed by other financial institutions. thereby reducing costs, in renewables, as well institution as their main transactions bank. Regional financial institution group alliances as efficiency. are one way to keep regional banks alive and While the sustained low interest rate policy well. A hopeful harbinger is the SBI Holdings An unresolved issue is what to do about has benefited business borrowers and resi- announcement in late September 2019 that nuclear power. Nine of Japan’s nuclear power dential home owners having mortgages, it has it will invest in Shimane Bank in the wake plants have been reopened in 2019, but one been costly for financial institutions. of Shimane’s losses on its securities port- then closed because its counter-terrorism Although some regional banks, usually the folio, but it will take time to determine if its facilities were deemed inadequate. Another larger ones in larger cities, are in reasonably approach succeeds. five or so are scheduled to be reopened good shape, most have severe problems, par- in 2020. However, Shinjiro Koizumi, the ticularly in regions with significant declining Energy politically popular new minister of the envi- populations. Regional bank difficulties are ronment, in September 2019 announced he Energy has long been Japan’s greatest eco- well known and are reflected in the market wants to close all the nuclear power plants, nomic vulnerability. It has to import all its oil price of their shares: 83 of 87 listed banks and presumably not build any new ones. and natural gas, and most of its coal; these have a price-to-book ratio (PBR) of 0.4 or This is in contrast to the 2018 report of the comprise about 90 percent of Japan’s total lower. The spread between lending and Japan Institute of Energy Economics that in energy sources. Their world market prices are

20 | CJEB Annual Report 2018–2019 2050 nuclear power will provide 16 percent measured productivity growth has continued its economy. I am optimistic that Japan will of Japan’s primary energy consumption and to slow. I expect productivity growth to rise deal reasonably well with the challenges it generate 20 percent of its electricity. as new technologies are more widely used. faces at home, and in a turbulent world.

I am always fascinated by tidbits. For exam- While in many respects ours is a turbulent October 4, 2019 ple, electricity, called regenerative power, is world, Japan has a stable, strong, well-per- generated by vehicles motors, notably railway forming economy in a politically stable, prag- and subway trains, when the vehicle hits its matically flexible, culturally homogeneous brakes. This is a clean, inexpensive source society. Japanese are well-educated, skilled, of electricity, but it requires an inverter to hardworking, and diligent. The country has convert the regenerative power from DC to achieved a high level of civilian technology. AC electricity to use on the grid. It has a large capital stock: housing, office Corporation has developed and uses an elec- buildings, factories, roads and other infra- trochemical double-layer capacitor (EDLC) structure. And it has strong economic, social, to store electricity better than an ion-lithium and other institutions. In these respects battery in that it can recharge rapidly and Japan is similar to the advanced Western repeatedly and has a long operating life. European nations. It has both its own specific problems and challenges, and those that Japan has at least two energy dilemmas. One other developed countries also have to is that coal is cheap but “dirty” (CO2, meth- deal with. ane, and other pollutants). Japanese compa- nies have developed ways to increase coal Japan is an outlier, and a leader, in the pro- efficiency and in storing CO2. BloombergNEF cess of adaption to a decreasing and aging reports that Japan will add 10 gigawatts of population. At some point, Japan eventually coal-fired electricity over the next five years, will have to decide how to halt population making coal’s share of energy 36 percent by decrease, but the decision will not be made 2024. Natural gas now and renewables in soon. the eventual future will replace coal, but it We need to change our way of thinking about will probably be a long, slow process. a country’s economic performance from total The equally important dilemma is what to do GDP to GDP per capita. In terms of economic about nuclear power. The immediate issue is welfare, maintaining and increasing the stan- how many closed plants to reopen. The long- dard of living is key. The simplest, though not run issue is whether to continue to develop adequate, measure is GDP per capita. That and use new, efficient, presumably very safe depends on output per worker per hour. So nuclear power plants to generate electricity. Japan’s future total GDP may be flat, or even slightly declining, but the standard of living Conclusion can be stable or continue to increase. Of course well-being is generated by many social The world, is in the midst of its fourth and personal factors as well as economic, industrial revolution, as digital and other and GDP per capita only approximately mea- new technologies drive the global economy. sures economic well-being. Opportunities and challenges are arising. Importantly, although essentially everyone Japanese will live longer and better lives, par- is benefiting in some way, the gulf between ticularly because of ongoing major improve- those at the top and bottom has widened. ments in medical technology and health care, This necessitates ameliorative government as well as all of the new technologies and and sound policies. One surprise is that other innovations that will continue to drive

CJEB Annual Report 2018–2019 | 21 Current Research Highlights

From left to right: David Weinstein, Gerald L. Curtis, Merit E. Janow, and Takatoshi Ito

One of CJEB’s highest priorities is promoting of Japanese e-retailers has affected con- Takatoshi Ito contributes to the Center’s research related to the Japanese economy, sumer prices and welfare in Japan. Finally, he research activities and has several individual businesses, management systems, and has continued to do work related to under- ongoing research projects. Professor Ito’s financial markets. Typically, the Center’s core standing the determinants of trade patterns. research and teaching focus on international faculty members obtain funding individually finance, foreign exchange market micro- Professor Weinstein’s research is often cited through competitive outside grants, as well structure, Asian financial markets, inflation and discussed in the media, and he is a fre- as additional financial and administrative targeting, and the Japanese economy. quent commentator on Japan. support from the Center in order to facilitate Professor Ito also maintains a teaching and their research. Gerald L. Curtis divided his time this past research position during the summer at the year, as he has for many years now, between National Graduate Institute for Policy Studies David Weinstein leads the Center’s research living in New York and Tokyo. He conducted in Tokyo. His research focuses on three broad activities and has several projects under way. research on Japanese politics, U.S.-Japan themes: international finance, the Japanese Professor Weinstein’s research and teaching relations, and the changing political order in economy, and the Asian financial markets. He focus on international economics, macro- the Asia-Pacific region, spoke at many public has carried out a series of research projects economics, corporate finance, the Japanese events in both countries, and consulted with on the dynamics of the exchange rates in economy, and industrial policy. In addition to his policymakers, business leaders, and oth- various time spans and frequencies. He has role as CJEB’s director of research, he is the ers. He participated in a number of track II done macroeconomic analysis of the yen/ director of the NBER Japan Project, and the meetings to discuss policy issues with other dollar exchange rates after the rate floated in executive director of the Program for Economic experts from the United States, Japan, China, 1973. Currently, he is examining the micro- Research in the Department of Economics at and Korea. His views on issues relating to structure of the foreign exchange markets Columbia. Professor Weinstein was also the Japanese politics and to U.S.-Japan and U.S.- using a tick-by-tick dataset, which contains chair of Columbia University’s Department of East Asian relations were quoted in numerous all firm quotes and deals in a computerized Economics. publications on both sides of the Pacific. order-matching engine. He is researching In 2018–2019, Professor Weinstein released how particular institutions and rules in the In May 2019, just as Japan ushered in its a paper examining the costs of the trade war, market influence pricing and deal activities. new Reiwa era, he published a major work in estimating them to be 1.4 billion dollars per Japanese about the political history he has His work on the Japanese economy includes month. This paper was widely cited in media observed close-up over the past half century. both macro- and microeconomic aspects of in the United States, Europe, and Japan. In The title of the book, rendered into English, is the economy. On monetary policy, he was a addition, he also published a paper in the IMF A Personal Chronicle of Politics in Showa and proponent of inflation targeting in Japan, long Economic Review on international bank flows the Heisei Era. The book draws heavily on the before the Bank of Japan finally adopted it in and the global financial sector documenting extensive interactions he has had with Japan’s 2013. He is investigating transmission chan- how problems in one banking system are prime ministers and other political leaders nels and the effects of quantitative easing transmitted globally. His work on e-commerce since the late 1960s and has drawn enthusi- adopted by the four major central banks. On resulted in a paper examining how the entry astic reviews. fiscal policy, he has been analyzing the debt

22 | CJEB Annual Report 2018–2019 sustainability of Japanese government debts. East Asian economies dates from the time on central banking and financial policy; and He has been conducting a simulation analysis of the Asian currency crisis in 1997–1998. global urban policy. of a menu of fiscal consolidation with varying He has done research on, as well as given Alicia Ogawa continues her private consult- degrees and speeds. On growth strategy, he policy advice related to, economic and finan- ing work for an activist fund on the Japanese investigates various reform plans in regulated cial issues in Southeast Asia, in particular equities market. She has been a featured industries from agriculture and education to Thailand, Indonesia, Korea, and Myanmar. He speaker on corporate governance at sev- medical and health care. He combines theory continues to visit these countries to engage in eral NPOs this year, including the American and empirical research and derives policy academic and policy discussions. He has been Chamber of Commerce in Japan, the Council implications. doing research, as well as teaching, on infla- of Institutional Investors, and the International tion targeting and exchange rate regime and He belongs to a research group at the Corporate Governance Network. The project financial and capital markets development in Research Institute of Economy, Trade, on Japanese Corporate Governance and the Asian emerging market economies. and Industry, which examines Japanese Stewardship organized several events at exporters’ decisions to pass through the Merit E. Janow, appointed dean of the Columbia this year, including a seminar enti- exchange rate changes on export and des- School of International and Public Affairs tled “Practical Applications of ESG in Japan: tination prices. He is also a special member (SIPA) in 2013, undertakes research on inter- How Investors Make Companies Better Global of the Council on Customs, Tariff, Foreign national trade, finance and investment, the Citizens.” She also led a group of SIPA gradu- Exchange, and other Transactions at the digital economy, and the intersection of those ate students in a project for Citibank on ESG Ministry of Finance, Japan. Professor Ito areas in Japan and China. Over the past four ratings and stock performance. organizes internationally acclaimed seminars, years, she has spoken to international cor- Hugh Patrick continues his study of Japan’s such as the NBER East Asian Seminar on porate, academic, and policy audiences on current economic performance, monetary Economics in June 2016. topics including financial regulatory reform in policy, and institutional changes. His most the United States, developments in interna- He served as chair of the study group on recent paper is his annual essay on the tional trade and investment, and comparing reforming public pension funds in Japan. A current Japanese economy, included in this Chinese and Japanese industrial policies and report from his group, recommending portfolio annual report, starting on p. 10. He is an policies around high tech and digital, and rebalancing away from Japanese government active participant in a range of conferences corporate governance issues. As dean, she bonds and toward more risk assets, has been about Japan and Asia. He made trips to also has initiated a number of new initiatives very influential in the subsequent change of Japan in fall 2018 and spring 2019, and to around the intersection of technology and the Government Public Investment Fund. Korea in spring 2019, and had meetings with policy, notably focusing on cybersecurity, senior policy advisors and business leaders. Professor Ito’s involvement in Southeast and internet governance, and digital economy; a major China/Asia initiative; new initiatives

Hugh Patrick

CJEB Annual Report 2018–2019 | 23 Faculty Engagement

From left to right: Glenn Hubbard and Hugh Patrick

CJEB actively supports Columbia University September 27, 2018, CJEB sponsored a On December 6, 2018, CJEB hosted its faculty members who are not formally asso- lecture featuring Katsunobu Kato, minister third annual Conference on Public Pension ciated with the Center by promoting dialogue of Health, Labour, and Welfare of Japan (p. and Sovereign Funds (p. 30). Nobuchika between the business, professional, academic, 35). The lecture, titled “Special Lecture with Mori, former commissioner of the Financial and cultural communities in the United States Minister Katsunobu Kato,” was moderated Services Agency of Japan and senior and Japan. CJEB funds Japan-related research by Takatoshi Ito, professor at the School of research scholar and adjunct professor at and explores ways to incorporate the study of International and Public Affairs and Director the School of International and Public Affairs, the Japanese economy and business systems of CJEB’s Program on Public Pension and gave one of two keynote speeches. Jacob J. into faculty research and teaching. We foster Sovereign Funds. Minister Kato discussed Lew, former secretary of the U.S. Treasury collaboration and use our extensive network the current state of Japan’s economy and the and visiting professor of International and of Japanese professional contacts to arrange impact has had. On November Public Affairs at Columbia’s School of for speakers from the private, academic, 13, 2018, CJEB cohosted a lecture with International and Public Affairs, moderated and government sectors to give lectures the Weatherhead East Asian Institute (WEAI) the first panel, “Macro Environment: Is There to the Columbia community. CJEB faculty of Columbia University featuring Gerald Any Macro Risk for Asset Management?” have access through CJEB to various Japan- L. Curtis, Burgess Professor Emeritus of Sanjay Peters, adjunct associate professor related databases for use in their research. Political Science at Columbia University, and of International and Public Affairs at SIPA, Additionally, where appropriate, CJEB can fund Hugh Patrick, titled “Japan’s Politics and served as a panelist in the second session, and arrange faculty trips to Japan. Economy: What’s Next?” (p. 34). Professors titled “Public Funds Investment in Long- Curtis and Patrick shared their perspectives Term Investment: Benefits and Risks.” On This past year, CJEB invited several faculty on Japan’s current political and economic February 14, 2019, CJEB held a lunchtime members to participate as speakers or landscapes and their predictions for the seminar titled “Closing the Gender Gap panelists in its various public programs. On country’s next few years. in Japan: Achievements, Challenges, and

24 | CJEB Annual Report 2018–2019 Prospects,” that was moderated by Yumiko Adam Sacarny, professor at Columbia its annual Tokyo conference, “U.S.-Japan Shimabukuro, Director of the Urban and University’s Mailman School of Public Health, Relations in a New Era: Trade, Governance, Social Policy Program at the School of also served as a discussant for the paper and the Global Economy” (p. 31). Several noted International and Public Affairs and faculty “Free for Children? Patient Cost-Sharing Columbia faculty members participated in this advisor of the Empowering Asian Women and Health Care Utilization,” written and conference, including Glenn Hubbard, dean program at Columbia. presented by Toshiaki Iizuka, professor at the of Columbia Business School, and Merit E. University of Tokyo. Janow, dean of SIPA. CJEB also held its annual Japan Economic Seminar (p. 55) on March 8, 2019, On May 30, 2019, CJEB hosted a special CJEB continues to work with the Jerome A. highlighting several papers on the Japanese educational summit for its corporate sponsors Chazen Institute for Global Business and CBS’s economy. CBS postdoctoral research scholar and guests, titled “Demystifying Machine student-run Japan Business Association (JBA) Cynthia Mei Balloch was a discussant for Learning and Artificial Intelligence” (p. 42). to support the annual travel of a CBS faculty the paper “Forgiveness versus Financing: The summit was taught and designed by leader on the Chazen International Study Tour The determinants and impact of SME debt R. A. Farrokhnia, adjunct associate professor to Japan. In spring 2019, Mattan Griffel, Forbearance in Japan,” written and presented at Columbia Business and Engineering adjunct assistant professor of business at CBS, by Chuo University professor Arito Ono. Schools. Two days prior, CJEB organized led the study tour.

David Weinstein

CJEB Annual Report 2018–2019 | 25 Research Paper Series

CJEB fosters dissemination of research WP 364 Under bank-dominated systems, main banks on Japan’s economy and business within are expected to be effective monitors. In our The Neo-Fisher Effect: Econometric Columbia and in the broader academic, model, main banks play the role of reducing the Evidence from Empirical and business, professional, and public policy lenders’ demand for accounting conservatism Optimizing Models communities. While much of the research pro- by reducing information asymmetry. We find duced by scholars affiliated with the Center Martin Uribe that main banks can reduce the demand for ultimately appears in scholarly books and accounting conservatism. Our findings help September 2018 professional journals, early drafts of the work understand accounting conservatism vis-à- and research results can be found in CJEB’s In this paper, I investigate whether the vis agency problems. We provide empirical Working Paper (WP) Series. We also accept neo-Fisher effect, according to which a evidence to contribute to the literature interesting, topical papers not slated for permanent monetary tightening leads to on banking, specifically to fields such as eventual publication in our Occasional Paper an increase in inflation in the short run, is relationship banking. (OP) Series. Papers in both series are avail- present in U.S. data. I estimate an empirical able for free download through our website at and a New-Keynesian model driven by www.gsb.columbia.edu/cjeb/research, which transitory and permanent monetary and WP 366 links to the Columbia University Libraries’ real shocks. I find that both models produce Earnings Management and Internal Academic Commons website. similar dynamics. Temporary increases in the Control in Bank-Dominated Corporate nominal interest-rate lead, in accordance Governance: Evidence from Japan with conventional wisdom, to a temporary 2018–2019 increase in real rates that is contractionary Hideaki Sakawa and Naoki Watanabel and deflationary. The main result of the September 2018 Working Papers paper is that, in response to a permanent WP 363 increase in the nominal interest rate, inflation We examine the relationship between internal increases immediately, reaching its higher governance and earnings management in The Samurai Bond: Credit Supply and long-run level within a year. Furthermore, Japanese listed firms. Following the recent Economic Growth in Pre-War Japan the adjustment entails no output loss and is accounting frauds in large companies such as characterized by low real interest rates. In Sergi Basco and John P. Tang Olympus Corp. and Toshiba Corp., Japanese both models, permanent monetary shocks internal governance systems have also been July 2018 are an important driver of nominal variables, widely criticized. Unlike the United States and explaining more than 40 percent of the United Kingdom, Japan is known as a bank- While credit supply growth is associated with variance of changes in inflation. dominated corporate governance system. exacerbating financial crises, its impact on We predict that the bank-client relationship long-run development is unclear. Using bond is expected to mitigate opportunistic payments to samurai in nineteenth-century WP 365 earnings management by mitigating the Japan as a quasi-natural experiment and degree of information asymmetry, which is exploiting regional variation, we find that bond Main Bank Relationship and Accounting a main cause of agency problems arising payments are associated with persistent Conservatism: Evidence from Japan from debt contracts. Our results show redistributive effects between regions and Hideaki Sakawa and Naoki Watanabel that bank-appointed audit board members sectors. Areas with early railway access and mitigate managerial earnings management. higher bond value per capita experienced September 2018 Furthermore, neither outside directors faster income growth in the tertiary sector nor audit committees (ACs) are helpful to and slower growth in the primary, with In a market-oriented economy like the United decrease opportunistic managerial earnings analogous effects for sectoral labor shares. States, the process of monitoring through management. Our findings imply that a Our interpretation is that the interaction lending mitigates lenders’ demand for lender-monitoring system, through audit board between credit supply and productivity- accounting conservatism. Japanese corporate members, could contribute by substituting the enhancing technologies facilitated economic governance is characterized as a bank- monitoring role of outside directors and ACs. development and structural transformation. dominated or relationship-oriented system.

26 | CJEB Annual Report 2018–2019 WP 367 methods, we find that the full incidence of the tariff falls on domestic consumers, with Japanese Newspapers a reduction in U.S. real income of $1.4 billion David Flath per month by the end of 2018. We also see similar patterns for foreign countries who March 2019 have retaliated against the United States, In 2017, Japanese newspaper advertising which indicates that the trade war also revenue, adjusted for inflation, was only half reduced real income for other countries. as great as at its 1997 mini-peak. Japanese newspaper circulation also peaked in 1997, and in the two decades since then has fallen 2018–2019 by about one-fourth (counting a morning-and- evening subscription as two, by one-fifth if Occasional Papers counting it as one). Based on the inferences OP 79 in this paper, underlying these recent changes in Japanese newspaper revenue and Japan’s Economy—Stable, with Sustained circulation is an 83 percent decrease in the Modest Change demand for newspaper ads from 1997 to Hugh Patrick, R. D. Calkins Professor of 2017, and a 26 percent decrease in demand International Business Emeritus; Director, CJEB for newspaper subscriptions, measured at the 1997 inflation-adjusted prices of ads June 2019 and subscriptions. The fall in demand for Professor Hugh Patrick’s 2017–2018 annual newspaper ads can be directly linked to the essay on the Japanese economy is pub- rise of the internet using an autoregressive lished here as a CJEB Occasional Paper. The distributed lag model. essay considers the full breadth and scope of issues facing the Japanese economy. He describes Japan’s economy as continuing WP 368 to do well, despite a blip in the first quar- The Impact of the 2018 Trade War on U.S. ter of 2018. There were no big domestic Prices and Welfare surprises, and he did not anticipate any. In 2017, GDP increased 1.7 percent, greater Mary Amiti, Stephen J. Redding, and David than estimated potential growth. GNP per Weinstein capita, in some ways a better measure than GDP growth since Japan’s population is April 9, 2019 declining, increased by almost 1.9 percent. This paper explores the impact of the Trump Unemployment continued to decline to 2.5 administration’s trade policy on prices and percent in July. Deflation ended, but the welfare. Over the course of 2018, the United major macroeconomic shortfall was that the States experienced substantial increases 2 percent consumer price index (CPI) annual in the prices of intermediates and final increase target was not achieved, and he goods, dramatic changes to its supply-chain did not believe it would be achieved anytime network, reductions in availability of imported soon. At the macro level, improvement was varieties, and complete pass-through of incremental and gradual. He observed that the tariffs into domestic prices of imported this essay reads very much like his essay goods. Overall, using standard economic from the previous year.

CJEB Annual Report 2018–2019 | 27 CJEB PROGRAMS

Program on Public Pension and Sovereign Funds

With imposed stress on public pension systems across advanced economies because of the growth in aging populations, many countries have created or reformed public pension funds to finance future shortfalls in pension con- tributions. Under the guidance of Professor Takatoshi Ito, CJEB established this program in order to examine and conduct extensive research on how public pension funds and sovereign wealth funds should be structured, both in portfolio and governance. The program evaluates public pension fund reforms across Japan and other global economies, with an aim toward deriving lessons for Japan to enhance its Government Pension and Investment Fund (GPIF). Similarly, the GPIF can serve as a model for structuring other public and quasi-public From left to right: Roger W. Ferguson Jr., William Kinlaw, Sanjay Peters, and Geoffrey Rubin pension funds in Japan and other emerging market economies, with the intention of setting up or reforming its own funds. 30). The conference was composed of three Funds Make an Impact on Environmental sessions: “Macro Environment: Is There Any Sustainability?” The two keynote speakers were This year, the Program on Public Pension and Macro Risk for Asset Management?”; “Public Nobuchika Mori, former commissioner of the Sovereign Funds (PPPSF) held its third annual Funds Investment in Long-Term Investment: Financial Services Agency of Japan, and Roger conference on December 6, 2018 (see p. Benefits and Risks”; and “Will Public Pension W. Ferguson Jr., president and CEO of TIAA.

Corporate Governance and Stewardship Program

As a major policy to promote structural reforms, companies and how it has contributed to their Prime Minister Abe introduced the Corporate status as leading competitors in the global Governance Code and the Stewardship Code market. The program’s mission is to inspire best in order to encourage Japanese firms to practices among other firms in Japan as they innovate and invest, and for shareholders to consider new approaches to governance. actively monitor and promote those efforts. In 2018–2019, CJEB held an evening sym- The Corporate Governance Code is designed posium for its Corporate Governance and to increase transparency and accountability Stewardship Program: “Practical Applications in Japanese corporate management, and the of ESG in Japan: How Investors Make Stewardship Code is designed to encourage Companies Better Global Citizens” (p. 34). investors to engage in active discussion with Three lunchtime seminars were also held as their invested companies, in order to guide and part of the program: “The Rise of Japanese accelerate the evolution of Japan’s corporate Cross-Border M&A in a New Era of Shareholder culture. Through a series of public programs and Scrutiny” (p. 37), “Shareholder Activists Take papers led by Alicia Ogawa, this program ini- on Corporate Japan” (p. 37), and “Sustainability tially focuses on an analysis of the governance and Promotion of Long-Term Investing: The Role Sustainability and Promotion of Long-Term Investing: structure of the most innovative Japanese The Role of Investors and the Stock Exchange of Investors and the Stock Exchange” (p. 40).

28 | CJEB Annual Report 2018–2019 The New Global Financial Architecture

CJEB Annual Tokyo Conference 2019

Building on CJEB’s “Program on Alternative the broader context of the global financial This year, CJEB held a number of NGFA Investments,” which ran successfully from system and all of its major players. Topics events, including four at Columbia University: 2002 to 2009, the Center established a include, but are not limited to, financial sys- in October 2018, “Agenda for 2020: program in July 2009 titled “The New Global tem restructuring; development of national Can Japan Win Gold for Its Economic Financial Architecture” (NGFA). The purpose and international regulatory systems; effec- Performance? ” (p. 36); in November 2018, of the NGFA program is to engage in analyt- tive governance, supervision, and monitoring; “Private Equity Coming of Age in Japan” ical and policy-oriented evaluations of major the operations of and interactions among (p. 38); in February 2019, “Have We Seen global financial and economic issues and reg- specific financial markets; the relationships This Movie Before? China, Japan, Industrial Corporate Governance and Stewardship Program ulatory changes, through conferences, brain- between finance and the performance of the Policy, and Trade Conflict” (p. 39); in April storming sessions, and research activities, economy; and the nature and role of govern- 2019, “The Puzzle of Japan’s Low-for-Long,” with a major emphasis on Japan. ment and monetary policies. (p. 41). Finally, “U.S.-Japan Relations in a New Era: Trade, Governance, and the Global The program brings together distinguished The NGFA program began with CJEB’s seed Economy” (p. 31) was held as part of the finance and economics professors at funding, and in 2011, Aflac Life Insurance NGFA program in Tokyo in May 2019. Columbia Business School (CBS) and other Japan Ltd. (formerly known as Aflac Japan) parts of the University with scholars and became the first sponsor. The Center con- financial market participants in the United tinues to seek a small number of appropriate States, Japan, Europe, and China. While sponsors inclined to make significant annual emphasis is placed on Japan and the United commitments for three years. States, the program also concentrates on

CJEB Annual Report 2018–2019 | 29 Each year, CJEB organizes and hosts numerous major conferences, symposia, lectures, seminars, and workshops EVENTS that feature distinguished speakers. These programs provide an important educational platform for students, academics, members of the private sector, and policymakers from Japan and the United States. The 2018–2019 events are listed below and split into the following sections: Conferences, Symposia, Lectures, Lunchtime Seminars, and Workshops. All professional titles listed for participants are accurate for the time of the event. In addition to the descriptions below, videos and reports can be found on CJEB’s website: www.gsb.columbia.edu/cjeb. Conferences

Back row: Lukasz Pomorski, Ayako Yasuda, Norihiro Takahashi, Kee Chong Lim, Athanasios Orphanides, William Kinlaw, Sanjay Peters, Ekaterina Gratcheva, and Jacob Lew. Front row: Takatoshi Ito, Hugh Patrick, Catherine Mann, and Nobuchika Mori

Conference on CEO of TIAA, delivered the second keynote, School of International and Public Affairs, which was followed by the next panel, “Public Columbia University Public Pension and Funds Investment in Long-Term Investment: Keynote: Roger W. Ferguson Jr., President Sovereign Funds Benefits and Risks.” This panel focused on and Chief Executive Officer, TIAA issues related to the interim risks of long- December 6, 2018, The Italian Academy, term strategies, the opportunity cost of illiq- Session 1: Macro Environment: Is There Columbia University uid portfolios, and the difficulties of making Any Macro Risk for Asset Management? This was the third annual conference of realistic long-term commitments that will Moderator: Jacob J. Lew, Former Secretary CJEB’s Program on Public Pension and not be swayed by near-term market fluctua- of the U.S. Treasury; Visiting Professor of Sovereign Funds (PPPSF). CJEB director tions and board pressures. In the final panel International and Public Affairs, SIPA Hugh Patrick gave opening remarks and session, “Will Public Pension Funds Make an briefly introduced the program. PPPSF direc- Impact on Environmental Sustainability?,” the Panelists: tor Takatoshi Ito, a professor at the School panelists considered the potential of public of International and Public Affairs (SIPA) at pension funds and other large institutional Kee Chong Lim, Deputy Group Chief Columbia University, followed with more investors to positively impact environmental Investment Officer and President, Americas, details about the program and its success in sustainability. GIC the past year, and then went on to introduce Welcoming Remarks Catherine Mann, Global Chief Economist, the three panels. Nobuchika Mori, former Citigroup commissioner of the Financial Services Hugh Patrick, Director, CJEB, Agency, delivered the first keynote speech, Columbia Business School Athanasios Orphanides, Professor of which was followed by the first panel, “Macro the Practice of Global Economics and Takatoshi Ito, Professor, SIPA, Columbia Environment: Is There Any Macro Risk for Management, MIT Sloan School of University, and Director, PPPSF, CJEB Asset Management?” In this session, the pan- Management elists discussed their respective forecasts Keynote: Nobuchika Mori, Former Session 2: Public Funds Investment in for the global economy in the coming 12–24 Commissioner, Financial Services Agency, Long-Term Investment: Benefits and Risks months. Roger W. Ferguson Jr., president and Japan; Senior Research Scholar,

30 | CJEB Annual Report 2018–2019 Nobuchika Mori Back row: Drew Edwards, Hiroki Sampei, Alicia Ogawa, Mireya Solís, Lorenzo Caliendo, Shotaro Oshima. Front row: Glenn Hubbard, Takatoshi Ito, Hugh Patrick, David Weinstein, Merit Janow

Moderator: Roger W. Ferguson Jr., President U.S.-Japan Relations rise to the global stage as an architect and and CEO, TIAA defender of free trade. Dean Hubbard was in a New Era: Trade, optimistic that the upcoming G20 summit Panelists: Governance, and the meeting would offer an opportunity for global William Kinlaw, CFA, Senior Managing Global Economy reflection on growth prospects, financial Director, State Street Global Exchange stability, international trade relations, and May 28, 2019; Otemachi Financial City sources and consequences of populism. Sanjay Peters, Adjunct Associate Professor Conference Center, Tokyo, Japan of International and Public Affairs, SIPA His Excellency Taro Aso, deputy prime minister CJEB presented its annual Tokyo conference of the Government of Japan, also delivered a Geoffrey Rubin, Senior Managing Director featuring business, government, and academic keynote speech on the U.S.-Japan alliance, and Chief Investment Strategist, Canada leaders from Japan and the United States. the changes happening in Japan, and Japan’s Pension Plan Investment Board economic progress. Minister Aso began his Glenn Hubbard, dean and Russell L. Carson address by reminding the audience that, Session 3: Will Public Pension Funds Professor of Finance and Economics at despite recent turmoil, America still holds a Make an Impact on Environmental Columbia Business School, delivered a place of global prominence and that many in Sustainability? keynote speech on President Trump’s the world still look to America for leadership. economic policies and the G20 summit Moderator: Takatoshi Ito He also noted that a strong America is key to that was scheduled to take place in Japan a strong Japan, just as a strong Japan is in Panelists: in late June 2019. He outlined what he the best interest of America. He expressed saw as the recent successes of President Ekaterina Gratcheva, Lead Financial Officer confidence that the United States and Japan Trump’s policies, including a resetting of in Finance, Competitiveness, and Innovation can work out any common challenges, including growth expectations in the United States Global Practice, World Bank Group ongoing trade negotiations. He also encouraged and the enactment of tax and regulatory CJEB to continue facilitating research on the Lukasz Pomorski, Managing Director, AQR changes aimed at growth. He noted that economic and political ties between the two Capital President Trump’s actions on trade were more countries. Finally, Minister Aso illustrated controversial, particularly when his policies Norihiro Takahashi, President, Government several key changes now taking place in Japan, could be construed as harmful to relationships Pension Investment Fund ranging from better corporate governance, with key allies like Japan. In comparison, Dean to the fostering of young entrepreneurs, to Ayako Yasuda, Professor of Finance, UC Hubbard described Japan’s recent and current rewriting social contracts to include more Davis Graduate School of Management trade policies and actions as helping Japan

CJEB Annual Report 2018–2019 | 31 Deputy Prime Minister Taro Aso From left to right: Taro Aso and Takatoshi Ito Glenn Hubbard

spending on families with children. He urged the David Weinstein, Director of Research, Tsuyoshi Maruki, President and CEO, audience to pay attention to the changes going CJEB, Columbia Business School; Carl S. Strategic Capital, Inc. on in Japan. Shoup Professor of the Japanese Economy, Hiroki Sampei, Head of Engagement, Fidelity Columbia University Welcoming Remarks International Moderator: Merit E. Janow, Dean, Hugh Patrick, Director, CJEB, Moderator: Alicia Ogawa, Director, Project School of International and Public Affairs, Columbia Business School on Japanese Corporate Governance and Columbia University Stewardship, CJEB Keynote Speech: The Economics of Trump Keynote Speech by Minister Taro Aso and the G20 Summit Closing Remarks Speaker: His Excellency Taro Aso, Deputy Speaker: Glenn Hubbard, Dean and Russell L. David Weinstein Prime Minister; Minister of Finance; Minister Carson Professor of Finance and Economics of State for Financial Services, Cabinet Toast at the Reception Columbia Business School Office, Government of Japan Satoru Komiya, Senior Managing Director, Moderator: Hugh Patrick Moderator: Takatoshi Ito, Director, Program Holdings; Tokio Marine Nichido Panel I: America and the New on Public Pension and Sovereign Funds, Fire Insurance Protectionism CJEB; Professor, School of International and Public Affairs, Columbia University Panelists: Panel II: Shareholder Engagement: How The Japan Project Lorenzo Caliendo, Professor of Economics, Investors Talk to Companies Yale University Meeting with Joint ESRI Panelists: International Conference Shotaro Oshima, Chairman, Institute for International Economic Studies Drew Edwards, CEO and CIO, Usonian July 29–30, 2019; Asian Development Bank Investments Institute, Tokyo, Japan Mireya Solís, Director, Center for East Asia Policy Studies; Philip Knight Chair in Japan Akitsugu Era, Director, Head of Investment The Japan Project meeting is held annually by Studies, The Brookings Institute Stewardship Team, BlackRock Japan Co., Ltd. CJEB in partnership with the National Bureau of Economic Research (NBER), the Center for

32 | CJEB Annual Report 2018–2019 Advanced Research in Finance (CARF) at the Authors: Naoko Miake, International Monetary Fund University of Tokyo, and the Australia-Japan Takeo Hoshi, Stanford University and NBER Discussant: , The University of Research Centre (AJRC) at the Crawford Tokyo School of Public Policy of the Australian Anil K. Kashyap, The University of Chicago National University (ANU). Professor and NBER Managerial Talent and Economic Weinstein organized this two-day academic Performance: Evidence from conference with Professors Shiro Armstrong Discussant: Kawaguchi, The University Discontinuities in Douglas MacArthur’s of ANU, Charles Horioka of the University of Tokyo Economic Purge of the Philippines, Takeo Hoshi of Stanford Meritocracy and Its Discontents: Evidence Authors: University, and Tsutomu Watanabe of the from Centralizing and Decentralizing University of Tokyo. The organizers are grate- School Admissions Melissa Dell, Harvard University and NBER ful to the Asian Development Bank Institute for its generous assistance and support. Authors: Sahar Parsa, Tufts University

The ESRI International Conference, spon- Mari Tanaka, Hitotsubashi University Discussant: Hideaki Miyajima, Waseda Glenn Hubbard sored by the Economic and Social Research University Yusuke Narita, Yale University Institute (ESRI) of the Cabinet office of the Government of Japan, is held jointly with the Chiaki Moriguchi, Hitotsubashi University Japan Project meeting every year. This year’s Discussant: Yeon-Koo Che, Columbia ESRI International ESRI Conference was titled “AI, Robotics, and University the Labor Market.” Conference: “AI, Robotics, The Collateral Channel versus the and the Labor Market” Please see below for the agendas for both Bank Lending Channel: Evidence from the Japan Project and the ESRI Conference. Keynote: “The Effect of AI and Robotics on a Massive Earthquake the Labor Market” Authors: Tyler Goodspeed, Member, Council of The Japan Project Meeting Iichiro Uesugi, Hitotsubashi University Economic Advisors

Welcoming Remarks Daisuke Miyakawa, Hitotsubashi University First Session: “Empirical Analysis; the Naoyuki Yoshino, Asian Development Effect of the Introduction of AI and Kaoru Hosono, Gakushuin University Bank Institute Robotics on Labor Market in Japan”

The Impact of E-Commerce on Urban Arito Ono, Chuo University Chair: Fumihira Nishizaki, President, ESRI Prices and Welfare Hirofumi Uchida, Presenter: Daiji Kawaguchi, Professor, University of Tokyo Authors: Discussant: David S. Scharfstein, Harvard University and NBER David Weinstein, Columbia University and Commentator: Robert J. Gordon, Professor, Northwestern University NBER Policy Uncertainty in Japan Second Session: The Effect of AI and Yoon J. Jo, Texas A&M University Authors: Robotics on Work, Human Resources, Misaki Matsumura, Columbia University Elif C. Arbatli, International Monetary Fund and Employment

Discussant: Mototsugu Shintani, The Steven J. Davis, The University of Chicago Chair: Atsushi Seike, Honorary President, University of Tokyo and NBER ESRI

The Great Disconnect: The Decoupling of Arata Ito, Research Institute of Economy, Presenter: Ajay Agrawal, Professor, Wage and Price Inflation in Japan Trade and Industry University of Toronto

CJEB Annual Report 2018–2019 | 33 Symposia

Gerald Curtis From left to right: Fabiana Fedelli, Laura Nishikawa, and Fiona Stewart

Commentator: Koichi Kume, Visiting Senior Japan’s Politics and a tumultuous period with an unpredictable Research Fellow, ESRI American president; (2) dealing with China, a Economy: What Next? nearby rising power presenting economic and Third Session: The Effect of AI and October 31, 2018; Faculty House, security threats; and (3) managing relations Robotics on Economic Growth Columbia University with North Korea. Regarding North Korea, Chair: Anil Kashyap, Professor, The University Professor Patrick turned the discussion to CJEB cohosted a symposium with the of Chicago further explore the abduction issue. Weatherhead East Asian Institute (WEAI) Presenter: Charles I. Jones, Professor, featuring Professor Gerald L. Curtis, Burgess Stanford University Professor Emeritus of Political Science, and Hugh Patrick, R. D. Calkins Professor of Practical Applications Commentator: Koichi Futagami, Professor, International Business Emeritus and Director of ESG in Japan: How of CJEB. The main themes discussed were Investors Make Companies Fourth Session: How Will AI and Robotics domestic politics in Japan, the trajectory of Affect the Labor Market? the Japanese economy, and Japanese for- Better Global Citizens eign policy. Professor Curtis acknowledged Coordinator: Alan Auerbach, Professor, February 27, 2019; International Affairs that the declining population is one of the University of , Berkeley Building, Columbia University biggest challenges the Japanese government Panelists: faces as the growing electoral power of the On February 27, 2019, CJEB hosted a panel elderly is creating generational tensions in exploring the future applications of ESG by Tyler Beck Goodspeed, Member, Council of policymaking. Professor Curtis posed the examining the current practice from three Economic Advisors question of whether a dynamic leader would diverse vantage points. These perspectives emerge after Prime Minister Abe who would came from representatives of, respectively, Jesse Rothstein, Professor, University of have enough persuasive ability to convince large private asset owners; firms develop- California, Berkeley older generations to agree on policies that ing the practice of ESG ratings as well as Shumpei Takemori, Member, Council on would benefit future generations. Regarding expanding and refining the range of ESG Economic and Fiscal Policy Japanese foreign policy, Professor Curtis research products available; and public sec- outlined three major concerns. They included: tor and multilateral organizations. Three pan- Atsushi Seike, Honorary President, ESRI (1) maintaining a strong relationship with elists considered the issues for the evening: the United States while it is experiencing Fabiana Fedeli, managing director and global head of Fundamental Equities at Robeco;

34 | CJEB Annual Report 2018–2019 Lectures

Minister Katsunobu Kato From left: Hugh Patrick, Katsunobu Kato, Takatoshi Ito, and David Weinstein

Laura Nishikawa, managing director of ESG The Future of Japan’s society in the future. Minister Kato then high- Research at MSCI Inc.; and Fiona Stewart, lighted some of the key achievements of the lead financial sector specialist at the World Social Security and Work Abenomics reforms to date. Bank. Professor Alicia Ogawa, director of Style Reform Nominal wages in Japan, which are largely CJEB’s Project on Corporate Governance September 27, 2018; Faculty House, determined by annual negotiations between and Stewardship, moderated the event and Columbia University the large corporations in the country, have provided a brief overview of the growing increased steadily in recent years by 2 per- importance of ESG in mainstream investment On September 27, 2018, CJEB hosted cent every year. Also, the hourly wage of decision-making. a special lecture by Minister Katsunobu part-time workers has also increased by 16.7 Kato, minister of Health, Labor, and Welfare Ms. Fedeli began her speech by emphasizing percent. Furthermore, the minimum wage in Japan, as well as minister for Working- that ESG is not a fad; rather, it has become has been increased, and the administration Style Reform and minister in Charge of the an important part of due diligence. Robeco is continuing to target an annual increase, Abduction Issue in Japan. The event was has been actively applying ESG consid- ideally of 3 percent each year, to match GDP moderated by Professor Takatoshi Ito, profes- erations in its investment decisions since nominal growth. Minister Kato nevertheless sor at the School of International and Public 1999, when it launched its first sustainable observed that there are still serious and per- Affairs (SIPA) and the director of CJEB’s fund, and has incorporated ESG factors in sistent challenges that the Japanese govern- Program on Public Pension and Sovereign emerging market investment analyses since ment must continue to address. These issues Funds. Minister Kato and Professor Ito were 2001. Ms. Nishikawa emphasized that ESG include expanding support further for the welcomed by Professor Patrick. Minister ratings measure the long-term ability of large aging population in Japan, securing the Kato provided an overview of the primary firms to manage the ESG risks they face. labor force, creating employment opportuni- goals of the Abe administration with regard ESG ratings are not value judgments about ties for recent university graduates, increas- to labor and welfare, as well as the use the negative or positive externalities of the ing labor productivity, transforming corporate of “Abenomics” to address the structural operations of the firm, as they are commonly culture to build a work environment that problems of the Japanese economy. These misperceived to be. While Dr. Stewart also supports women and mothers, and adapting structural problems include a declining birth emphasized that ESG is becoming main- social security and pension systems to the rate and an aging and declining population stream, the current pool of evidence largely reality of increased longevity in Japan. size. The Abe administration has prioritized illustrates the benefits of ESG practices for addressing these issues to increase labor equities, while “materiality” is not yet there productivity, ensure sustainable growth, and for fixed income markets. lay the foundations for a robust, thriving

CJEB Annual Report 2018–2019 | 35 Takatoshi Ito Naomi Hirose

Agenda for 2020: Can to the international community, such as the Mr. Hirose provided an overview of the June 2019 G-20 Summit, the 2019 Rugby natural disaster and events precipitating the Japan Win Gold for Its World Cup beginning in September, and the accident at the Fukushima Daiichi Nuclear Economic Performance? 2020 Summer Olympics. In terms of changes Power Station (NPS) and its effects. TEPCO, to fiscal policy, the Abe administration has the Japanese government, and local people October 4, 2018; International Affairs scheduled a consumption tax increase from have been redressing this incident for eight Building, Columbia University 8 to 10 percent, effective October 1, 2019. years as of 2019. In comparing Fukushima CJEB hosted a special lecture delivered The result of this confluence of events for the from 2011 to 2017, radioactivity levels have by Professor Ito on the current conditions Japanese economy depends greatly on how decreased significantly, and the condition of the Japanese economy, as well as risks the Abe administration prioritizes different of the Fukushima Daiichi NPS is now stable. that weigh on the outlook for the economy policy agendas over the next two years. Furthermore, designated evacuation zones over the next two years. David Weinstein, have decreased as well. However, more Carl S. Shoup Professor of the Japanese than 20,000 persons who used to live in Economy, Columbia University, and director Leading after a the evacuation zones remain displaced of Research at CJEB, moderated the event. as a result of the incident, and TEPCO is Professor Ito highlighted several key events Nuclear Disaster continuing its work to restore the homes and that were expected to take place between communities of local residents in many ways. April 18, 2019; Faculty House, 2018 and 2020 and that would be crucial Columbia University Mr. Hirose provided a financial history of to the future trajectory of the Japanese TEPCO and discussed the implications of economy and Japanese politics. The LDP’s CJEB hosted Naomi Hirose, executive vice the accident in Fukushima for management support during the July 2019 elections for chairman, Fukushima Affairs, and former practices. Important lessons on governance the House of Councillors, the Upper House of CEO and president of the Tokyo Electric that Mr. Hirose believes can be shared Japan’s bicameral legislature, would reflect Power Company (TEPCO), for a discussion from the incident in Fukushima include the the level of public approval for Prime Minister about leadership following the nuclear importance of instilling a safety culture Shinzo Abe’s policies and the strength of the disaster in Fukushima in March 2011. He at TEPCO, improving communications LDP. In May 2019, there would be a dynastic described lessons the firm has learned from engineers in the field to corporate change as a new ascended and changes to the firm and its regulatory headquarters, and continuing to build the throne. Japan will also be the site of many practices that are poised to transform solidarity and shared responsibility among events of cultural and political significance standards for nuclear safety internationally. employees in the firm in light of the crisis. Professor Patrick moderated the event.

36 | CJEB Annual Report 2018–2019 Lunchtime Seminars

Satoshi Kitada Marc Goldstein Benjamin Adams

Mr. Hirose observed that, in studies of the related to Japan. Seminars held in 2018– companies’ behavior. He concluded functioning of TEPCO after Fukushima, it 2019 included: by stating that the combination of the was revealed that tradeoffs were often made corporate governance reform and the rise between budgets, scheduling, and safety. He of shareholder activism would lead to more noted, moreover, that further commitment M&A actively in Japan, including inbound to finding optimal and safe solutions is The Rise of Japanese transactions. something TEPCO has focused on improving. Cross-Border M&A in a New Additionally, he has encouraged engineers Era of Shareholder Scrutiny in the field to report crises even if they have not completely discerned the cause Zadankai Shareholder Activists Take yet, as sometimes delays can be crucial to on Corporate Japan October 15, 2018; Uris Hall, Columbia determining the severity of crises. Business School Zadankai This event was cosponsored by the Center Satoshi Kitada, Managing Director, SMBC October 24, 2018; Uris Hall, Columbia on Global Energy Policy, Columbia University. Nikko Securities America, Inc. Business School APEC Study Center, Columbia University was an outreach partner. Moderator: Alicia Ogawa, Director, Project Marc Goldstein, Head of U.S. Research, on Japanese Corporate Governance and Institutional Shareholder Services Inc. CJEB organizes a series of lunchtime Stewardship, CJEB seminars on campus for students, faculty, Benjamin Adams, General Manager, NY and members of the Columbia and New Mr. Kitada indicated that Japanese Branch, IR Japan, Inc. York community. These include zadankai, or companies are more active than ever in Moderator: Alicia Ogawa, Director, Project informal discussions, which involve lengthy outbound M&A activity, yet relative to the on Japanese Corporate Governance and question-and-answer periods with the rest of the world, Japan is still comparatively Stewardship, CJEB audience and are geared toward presenting inactive. He shared his views on Japan’s new and insightful angles for understanding corporate governance reform and the Mr. Goldstein and Mr. Adams gave a lunch- Japanese business and economic issues; and possibility of changing the conservative time talk that involved a discussion of brown bags, in which CJEB collaborates with nature of Japanese companies to invest structural reform and challenges to the old other organizations on campus to sponsor more. Mr. Kitada mentioned Takeda Japanese corporate governance model. talks featuring a diverse range of topics Pharmaceutical Company’s acquisition of Topics included shareholders’ obligations Shire PLC as a sign of change in Japanese and rights in Japan, voting transparency,

CJEB Annual Report 2018–2019 | 37 Yaz Iida Richard Folsom Minoru Nakazato

and takeover defense policies. They also company has expanded overseas and its Moderator: David Weinstein, Director of talked about the trend of independent board plans to become a household name in the Research, CJEB directors on boards in Japan. Mr. Goldstein United States. Rakuten was designed as Mr. Folsom discussed trends in Japan’s focused on his work at the world’s largest an online “grand bazaar,” where customers private equity market and its buyout market. proxy advisory firm. He also gave examples would feel like they were getting the per- He also spoke about how founder succession of shareholder activism at companies such sonal attention of a shopkeeper in a market, transactions are driving market growth. He as Sony, Fanuc, PanaHome, and Toshiba. Mr. but with the convenience of shopping online. shared his perspective on transactions and Adams discussed reforms to shareholder Mr. Iida explained the fundamental Japanese illustrated how mid-market transactions voting, including how a push for transpar- values that underlie Rakuten’s company continue to be the mainstream. Corporate ency led companies to reveal their own votes philosophy, including omotenashi, or the governance reforms in Japan are shifting on their own issues for the first time, which unique concept of Japanese hospitality that from “form” to “substance.” Additionally, Mr. led to stronger outside boards. prizes a high standard of customer service Folsom discussed the regional presence of and respect above everything. He also Advantage Partners by talking about the gave insight into the company’s strategy of locations of their offices in Tokyo, Hong Kong, increasing brand awareness in the United Shanghai, and Singapore. He also showed Rakuten: How to Promote States and abroad by partnering with some various portfolios of funds that are currently of the world’s best sports teams, including Global Innovation served by Advantage Partners across a range FC Barcelona and the Golden State Warriors. Zadankai of industries in Japan and Asia.

October 30, 2018; Uris Hall, Columbia Business School Private Equity Coming of Aggressive Use of Yaz Iida, President, Rakuten USA, Inc. Age in Japan Tax Shelters by the Moderator: David Weinstein, Director of Zadankai Wealthy and General Research, CJEB November 8, 2018; Warren Hall, Columbia Anti-Avoidance Rules Mr. Iida delivered a lunchtime lecture focus- Business School ing on the e-commerce company Rakuten. Zadankai He described Rakuten’s humble beginnings Richard Folsom, Representative Partner, February 13, 2019; Warren Hall, Columbia followed by incredible growth in Japan, Advantage Partners Business School and also provided an overview of how the

38 | CJEB Annual Report 2018–2019 Asako Osaki Robert Dohner Shinichi Matsuda

Minoru Nakazato, Professor of Law, Platform; Visiting Professor, Kwansei Gakuin Have We Seen This Movie Graduate School of Law, The University of University, School of Policy Studies Tokyo; Chairman, Tax Commission of the Before? China, Japan, Government of Japan Moderator: Dr. Yumiko Shimabukuro, Director, Industrial Policy, and Urban and Social Policy Program, School of Moderator: Hugh Patrick, Director, CJEB International and Public Affairs; Faculty Advisor, Trade Conflict Empowering Asian Women, Columbia University Professor Nakazato discussed why the Zadankai widespread use of aggressive tax shelters Professor Osaki discussed gender equality as February 19, 2019; Uris Hall, Columbia hurts government revenues worldwide and a global, economic imperative, arguing that, Business School discussed the long history of tax shelters, when women are economically empowered, dating back to their first uses in ancient they impact their households, communities, Robert Dohner, Nonresident Senior Fellow, Japan and China. He also explained the and future generations. She explored how Scowcroft Center for Strategy and Security, OECD’s Base Erosion and Profit Shifting economic growth is linked to economic Atlantic Council; Former Deputy Assistant (BEPS) project and its implications for the equality worldwide and detailed the political Secretary, U.S. Department of the Treasury world economy. Finally, Professor Nakazato and economic impact of gender equality explained General Anti-Avoidance Rules Moderator: Hugh Patrick, Director, CJEB in Japan, specifically. She contrasted the (GAAR), where they come from, and what country’s discriminatory, institutionalized Dr. Dohner compared the current trade conflict threats they might pose to democracies. gender policies against recent women’s between the United States and China to the advancement initiatives from Prime Minister trade tensions between the United States Abe, whose economic policy package known as and Japan in the 1980s. Today, the U.S. Closing the Gender Gap “Abenomics” included women’s advancement government is concerned about China targeting in Japan: Achievements, as a priority for the first time in Japan’s history. high-technology industries and unfairly Professor Osaki addressed the need for the acquiring intellectual property (IP) and trade Challenges, and Prospects Japanese government to align its domestic secrets from American firms. In the 1980s, Zadankai laws and policies with global standards and the United States dealt with many of the same accelerate their efforts to reverse the gender issues with Japan, including a scandal in which February 14, 2019; Uris Hall, Columbia inequality entrenched in society as well. She 18 Japanese businessmen were indicted Business School pointed out the important role played by civil when they attempted to steal IP from IBM. Dr. society, particularly by the youth. Asako Osaki, Director, Gender Action Dohner explained that the trade tensions with

CJEB Annual Report 2018–2019 | 39 Ryota Kimura Shin Furuya Hiroshi Nakaso

Japan in the ’80s were never fully resolved, of P&G step down. “Tenure disparity” between Sustainability and and predicted a similar outcome for the trade a CEO and his or her senior executives is a conflict with China, noting that disputes common occurrence in which the CEO’s term Promotion of Long-Term will inevitably continue beyond the current is longer than that of the other senior exec- Investing: The Role administration. However, the continuous rapid utives. Matsuda’s statistical research on top of Investors and the development of technology will change the corporations in both Japan and the United character of the disputes and force many of the States found a strong correlation between this Stock Exchange tenure disparity during the CEO’s term with a current issues to recede in importance. Zadankai decline in corporate value during the succeed- ing CEO’s term. A large tenure disparity means March 28, 2019; Uris Hall, Columbia that the senior executives are frequently Business School Breaking Generational replaced during the CEO’s term. In that situa- Ryota Kimura, Chief Representative, General tion, the top management meeting becomes a Curses in Corporations Manager, New York Representative Office, mere formality and creates a “Monster CEO” Tokyo Stock Exchange, Inc. What Is the Structure who makes all of the decisions by himself and of Top Management also creates a strong “silo mentality” among Shin Furuya, Impact Investment Strategist, Succession for the senior executives, which ultimately under- Domini Impact Investments LLC mines corporate culture. Sustainable Growth? Moderator: Alicia Ogawa, Director, Project Mr. Matsuda highlighted as a on Japanese Corporate Governance and Zadankai particularly relevant example of a “Monster Stewardship, CJEB CEO” and pointed out that this corporate February 28, 2019; Uris Hall, misfortune was not only Ghosn’s fault but Mr. Kimura and Mr. Furuya spoke at a lunch- Columbia Business School also a structural fault. Good corporations time discussion that focused heavily on the Shinichi Matsuda, Senior Management in both Japan and the United States have impact of ESG (environmental, social, and Consultant, Nomura Research Institute, Ltd. realized sustainable growth over generations corporate governance) in the investment by maintaining a comparable length of tenure world. They gave their differing perspectives Moderator: Hugh Patrick, Director, CJEB between the CEOs and senior executives in on the trend, with Mr. Furuya offering sup- port and encouragement for the practice and Mr. Matsuda discussed how to avoid the phe- each period. Mr. Matsuda concluded that the Mr. Kimura remaining more skeptical about nomenon of rapid corporate decline after great keystone habit for sustainable growth for its efficacy and application in the real world. CEOs such as Jack Welch of GE or A. G. Lafley corporations is appointing top management as a team, not an individual. The topic of proxy voting and proxy advisors

40 | CJEB Annual Report 2018–2019 Workshops

Rethinking the Asian Leadership Gap: Breaking the Bamboo Ceiling Yumiko Shimabukuro was also heavily discussed in light of the Mr. Nakaso considered some solid indicators recent crackdown on the presence of these A Target of Opportunity: of economic growth such as corporate figures in the United States. earnings, capital expenditures, and the Empowering Japanese unemployment rate in his discussion. He also Women in Leadership gave a comprehensive overview of the Bank Initiative The Puzzle of Japan’s of Japan’s monetary policy transition from February 1 and 8, 2019; Interchurch Center, Low-for-Long 1999 through the present day, with special attention to quantitative and qualitative Columbia Business School Zadankai monetary easing (QQE) with a negative Yumiko Shimabukuro, Director, Urban and interest rate. In considering the impact of low April 16, 2019; Warren Hall, Columbia Social Policy Program and Founder, Global interest rates on regional banks, he opined Business School Leadership Development Training Program that regional banks will either have to change at Columbia University; Faculty Advisor, their models or consolidate. Mr. Nakaso Hiroshi Nakaso, Chairman of the Institute, Empowering Asian Women, Columbia described the various reasons why a rise Daiwa Institute of Research Ltd.; Immediate University Past Deputy Governor, Bank of Japan in inflation takes time, including downward pressure from intensifying competition, This customized two-part workshop, created Moderator: Takatoshi Ito, Professor, School Japanese firms’ hesitance to raise both by Professor Shimabukuro and CJEB’s Ryoko of International and Public Affairs, Columbia wages and prices, and the improvement in Ogino, offered hands-on instruction and University Japanese labor productivity. constructive evaluation designed to advance one’s career and personal development. The Cosponsor: Central Banking and Financial first session featured participants engaging Policy @ SIPA in highly interactive career visioning and Mr. Nakaso discussed the Japanese values exercises to help them better economy’s real GDP growth rate, expounding understand their professional developmental on expectations about a gradual slowdown paths and identify potential obstacles. The that has been predicted to continue through second workshop provided a toolkit that one FY2019 as the effects of the slowdown in can deploy to communicate ideas effectively overseas economies take hold. This will be and augment one’s impact in a variety of followed by a moderate growth trajectory at domestic and global settings. around the level of the potential growth rate.

CJEB Annual Report 2018–2019 | 41 R. A. Farrokhnia speaking at a workshop in Tokyo

Cross-Cultural Negotiation Leadership Development Training Program May 30, 2019; The Classic House at at Columbia University; Faculty Advisor, Akasaka Prince, Tokyo, Japan March 29, 2019; Warren Hall, Columbia Empowering Asian Women, Columbia University Business School R. A. Farrokhnia, Adjunct Associate Professor, Monique Lopez, Executive Director, J.P. Columbia Business and Engineering Schools; Zachary Metz, Adjunct Assistant Professor Morgan; Lecturer of International and Public Executive Director, Dean’s Office, Columbia of International and Public Affairs, Columbia Affairs (part-time), Columbia University Business School University; Partner and Director, Consensus This workshop unpacked the various leadership The summit was designed and taught by Through case studies and simulation barriers, commonly referred to as the “bamboo Professor Farrokhnia, a recipient of the Dean’s exercises, this workshop provided a step-by- ceiling,” that Asians face and provided practical Award for Teaching Excellence. It offered a com- step explanation of how to engage effectively and transformative lessons to overcome these prehensive “gentle guide” introductory primer to in cross-cultural negotiation and high-stakes challenges. It strengthened self-empowerment the topics of machine learning and artificial intel- conversations. tools with academic research and discussion on ligence, intended for participants with limited or the real-life ramifications for employers. no technical background or prior knowledge. It Rethinking the Asian was well-received by the attendees. Leadership Gap: Breaking Demystifying Machine the Bamboo Ceiling Learning and Artificial Intelligence April 9, 2019; Uris Hall, Columbia Business School A Joint Educational Summit Organized by Advanced Projects and Applied Research in Yumiko Shimabukuro, Director, Urban and Fintech and CJEB Social Policy Program and Founder, Global

42 | CJEB Annual Report 2018–2019 RESOURCES

Faculty Advisory Committee

Panel at the CJEB Annual Tokyo Conference 2019

CJEB’s Faculty Advisory Committee was Fangruo Chen Sheena S. Iyengar formed to provide insight and guidance to MUTB Professor of International Business S. T. Lee Professor of Business CJEB’s governance, research, teaching, and Columbia Business School outreach activities. The diversity of intellec- Columbia Business School tual focus among the committee members is key to furthering CJEB’s mission of serving Wouter H. Dessein Merit E. Janow as a comprehensive forum for collaboration Dean and reflection on Japan, the United States, Eli Ginzberg Professor of Finance and Economics and the global economy. CJEB directors Professor of Professional Practice, receive valuable advice and recommenda- Chair of Economics Division International Economic Law and International Affairs tions on potential opportunities to expand Professor, Heilbrunn Center for Graham and and develop the Center. In addition to Dodd Investing School of International and Public Affairs Hugh Patrick and David Weinstein, the Columbia Business School Codirector, APEC Study Center members of the Committee are: Columbia University

Robert J. Hodrick Charles W. Calomiris Nomura Professor of International Finance Bruce M. Kogut Henry Kaufman Professor of Financial Institutions Academic Advisory Board Member, Program Sanford C. Bernstein & Co. Professor of for Financial Studies Leadership and Ethics Faculty Director, Program for Financial Studies Columbia Business School Director, Sanford C. Bernstein & Co. Center for Leadership and Ethics Columbia Business School Columbia Business School

CJEB Annual Report 2018–2019 | 43 2018–2019 Visiting Fellows

Each year, a small number of professional and academic fellows are selected to spend a period of time in residence at Columbia Business School. CJEB Visiting Fellows receive a unique research and networking experience at one of the world’s most pres- tigious business schools in a top-ranking university while experiencing the dynamic Masahiro Endoh Yuki Fujikawa Yoichiro Hashida Hiroshi Ishijima lifestyle of New York City. The 2018–2019 Keio University Sumitomo Senshu University Chuo University Visiting Fellows are: August 2017– Insurance Co., Ltd. April 2018– September 2018– August 2018 July 2018–June March 2019 August 2019 2019

Masaomi Kato Hiroki Kuranami Kiyotaka Hideaki Sakawa Ayano Sato Junko Shimizu Sumitomo Mitsui Company, Ltd. Nakashima Nagoya City Takasaki City Gakushuin Trust Bank, Limited July 2018– Konan University University University of University July 2018– August 2019 March 2019– September 2017– Economics March 2018–July May 2019 September 2019 September 2018 August 2017– 2018 August 2018

Joint Fellows with the Weatherhead East Asian Institute (WEAI) of Columbia University Takashi Unayama Kiyoshi Wada Erika Yamada Hitotsubashi Tokio Marine Hyogo Prefectural University Holdings Inc. Credit Federation of September 2018– May 2018– Agricultural Cooperatives August 2019 December 2018 May 2018–May 2019

Hiroyuki Kamimaru Koichiro Office of Integrated Bank of Japan Resort Regime July 2018– Promotion, Cabinet May 2019 Secretariat August 2018– August 2019

CJEB Visiting Fellows and CJEB staff at Yankee Stadium

44 | CJEB Annual Report 2018–2019 2019 Visiting Fellow Reunion Reception

CJEB held its annual Visiting Fellow Reunion Reception on May 29, 2019, at the Classic House at Akasaka Prince in Tokyo. The event was organized as a joint reunion and reception in partnership with CBS Office of External Relations and CBS Admissions Office and was attended by more than 130 CJEB Visiting Fellows, CBS alumni, and incoming and prospective students. The reception commenced with welcoming remarks from Hugh Patrick, who then introduced two special guests. First, Glenn Hubbard, CBS dean and Russell L. Carson Professor of Finance and Economics, shared a few words, followed by a toast from Yuzaburo Mogi ’61, honorary CEO and chairman of Corporation, and the first Japanese graduate of CBS. David Weinstein concluded the reception.

David Weinstein speaking at the Visiting Fellow Reunion

2019 Annual Visiting Fellow Business Field Trips

CJEB organized two corporate visits for its Museum. In addition to outlining the history Visiting Fellows in the spring of 2019. The of the Yankees as a sports team, the tour first visit was a tour of the Bloomberg office included explanations of the business models on March 13, 2019. They had the opportunity and strategies employed by management to see the company’s unique office, as well that have led to the team’s internationally-re- as learn about its history, company culture, nowned status. One of the highlights of the and business initiatives. They were also able visit was a unique experience for the Visiting to take a step behind the curtain and see Fellows to hold historic artifacts of Yankee his- real-time operations of tory. A museum curator allowed them to hold programming, a unique experience not jerseys used by the legendary baseball play- normally permitted to visitors. ers Babe Ruth and Lou Gehrig; they learned that Ruth wore one of those jerseys when For the second trip, the Visiting Fellows visited he played in Japan. The tour continued with Yankee Stadium on April 30, 2019. They were a special lecture and Q&A session delivered welcomed by CBS graduate George Rose ’00, by George Rose and concluded with lunch at executive advisor for the Yankees’ Pacific Rim Yankee Stadium’s Hard Rock Café. Operations, for a guided tour of the stadium, Monument Park, and the New York Yankees

Top to bottom: CJEB Visiting Fellows at the Bloomberg office and Yankee Stadium

CJEB Annual Report 2018–2019 | 45 Research Associates

CJEB benefits from an ongoing collaboration Peter Drysdale Takao Kato with Japan specialists from institutions other Emeritus Professor of Economics W. S. Schupf Professor of Economics and than Columbia, principally within the United Head, East Asia Bureau of Economic Far Eastern Studies States. Research associates are invited to Research Department of Economics communicate their research through partic- Editor-in-Chief, East Asia Forum Colgate University ipation of the Center’s projects and public Crawford School of Public Policy programs and by contributing to the Center’s The Australian National University Kenneth N. Kuttner Working Paper Series. Robert F. White Class of 1952 Professor of Robert Eberhart Economics Christina Ahmadjian Graduate School of Business Department of Economics Professor, Graduate School of Business Stanford University Williams College Administration Hitotsubashi University David Flath Patricia H. Kuwayama Professor Economist Shiro Armstrong Department of Economics Professional Fellow Director Ritsumeikan University Center on Japanese Economy and Business Australia-Japan Research Centre Emeritus Professor of Economics Columbia Business School Editor, East Asia Forum Poole College of Management Former Vice President Crawford School of Public Policy North Carolina State University JPMorgan Chase Bank, N.A. The Australian National University Koichi Hamada Edward Lincoln Schon L. Beechler Tuntex Professor Emeritus of Economics Professorial Lecturer Senior Affiliate Professor of Organisational Department of Economics George Washington University Behaviour Yale University INSEAD Special Advisor to the Cabinet Robert A. Myers The Senior Vice President Lee G. Branstetter Fairfield Resources LLC Professor of Economics and Public Policy Masanori Hashimoto Former Director of Technology Heinz College and Department of Social and Professor Emeritus IBM Japan Decision Sciences The Ohio State University Carnegie Mellon University Terutomo Ozawa Nonresident Senior Fellow Takeo Hoshi Professor Emeritus of Economics Peterson Institute for International Henri and Tomoye Takahashi Senior Fellow Department of Economics Economics and Director of the Japan Program Colorado State University Shorenstein Asia-Pacific Research Center, Jenny Corbett Freeman Spogli Institute for International Joe Peek Emeritus Professor Studies Professor of Finance (by courtesy) Vice President and Economist The Australian National University Stanford Graduate School of Business Research Department Rio Tinto Fellow Stanford University Federal Reserve Bank of Boston Foundation for Australia-Japan Studies Professorial Fellow, Griffith Asia Institute Anil Kashyap Adam S. Posen Griffith University Stevens Distinguished Service President Professor of Economics and Finance Peterson Institute for International Robert Dekle The University of Chicago Economics Professor of Economics, Department of Booth School of Business Economics University of Southern California

46 | CJEB Annual Report 2018–2019 Professional Fellows

William V. Rapp A professional fellow appointment at the undergraduate studies, he served in the U.S. Henry J. Leir Professor of International Center recognizes former government officials Peace Corps, including three years as a volun- Trade and Business and business leaders who have had distin- teer mathematics teacher at Chanel College School of Management guished careers in economics-related fields. in Western Samoa. Mr. Fallon is chairman Director This position facilitates his or her ongoing of the Council on International Educational Leir Center for Financial Bubble Research involvement with CJEB and its activities. Exchange, Inc., a member of the Asia Society New Jersey Institute of Technology and the Council on Foreign Relations, and a Robert E. Fallon is professional fellow of CJEB. He is a former Frances McCall Rosenbluth president and CEO of director of the Japan Society and of the Korea Damon Wells Professor of Political Science Phosplatin Therapeutics Society, as well as trustee emeritus of the Director, Program on Ethics, Politics, and LLC, a company he Ohio University Foundation. Economics helped found that is Department of Political Science developing a novel class Patricia Hagan Yale University of anticancer chemother- Kuwayama has been apy drugs. From 2008 studying the Japanese Ulrike Schaede to 2011, Mr. Fallon economy since she was Professor of Japanese Business was adjunct professor at Columbia Business a graduate student in Director, JFIT Japan Forum for Innovation School, where he taught international banking. the 1960s, completing and Technology Prior to his Columbia appointment, Mr. Fallon a doctoral dissertation School of Global Policy and Strategy (GPS) was chairman of Korea Exchange Bank, a pub- on effective tariff pro- University of California, San Diego licly listed $80 billion institution that is Korea’s tection of Japanese leading international bank. After taking over industry in 1970. She became a professional Michael J. Smitka as chairman and CEO in January 2004, he led fellow of CJEB in 2009, after retiring as a Professor Emeritus of Economics a successful reorganization and restructuring vice president and international economist Williams School of Commerce that restored the bank’s capital strength and at JPMorgan Chase in New York. Previously, Washington and Lee University achieved record profitability. He is also the she was JPMorgan’s chief economist in Tokyo first non-Korean to chair a public company in and earlier with Chemical Bank in Tokyo. From Tsutomu Watanabe Korea. Previously, Mr. Fallon was an interna- 1970 to 1986, Dr. Kuwayama was with the Professor tional banker based in Tokyo with JPMorgan Federal Reserve Bank of New York, serving Graduate School of Economics Chase, where he was Asia-Pacific division in various research and management posts University of Tokyo head for the Chase Manhattan Bank and a in the International Research, Statistics, and member of the Chase Manhattan Corporation Foreign Exchange Departments. She has Eleanor Westney Management Committee. He was responsi- been a visiting scholar at the Bank of Japan Professor Emeritus of Organization Studies ble, as senior executive in Asia, for Chase’s Institute for Monetary and Economic Research The Schulich School of Business activities in the Pacific Rim located across 13 and visiting consultant at the Bank for York University different countries. Mr. Fallon has lived in Asia International Settlements in Basel and taught for more than 30 years and enjoys a myriad as a visiting professor at Keio University in Jiro Yoshida of contacts across a wide spectrum of gov- Tokyo and at Kobe Gakuin University. Dr. Associate Professor of Business ernment, corporate, and financial institutions Kuwayama has written widely about Japanese Department of Risk Management in the region. He travels widely and speaks macroeconomic policy, balance of payments Smeal College of Business often on Asian economic and business affairs. issues, and financial institutions, including the The Pennsylvania State University He started his banking career with Citibank postal savings system. She assisted Eleanor Project Associate Professor in Hong Kong in 1975 and later worked in M. Hadley in writing Memoir of a Trustbuster: Graduate School of Economics investment banking and management posi- A Lifelong Adventure with Japan. She earned University of Tokyo tions in Tokyo. Subsequently, he assumed Asia her BA and PhD degrees in economics at regional responsibility with Drexel Burnham Harvard University and the City University of Lambert and Bankers Trust Company before New York, respectively, and did her Japanese joining Chase in 1992. Mr. Fallon holds a language studies at Columbia University. BA from Ohio University and an MBA from Harvard Business School. Following his CJEB Annual Report 2018–2019 | 47 International Advisory Board

Nobuchika Mori is a senior research scholar and adjunct professor at Columbia’s School of International and Public Affairs (SIPA). He joined CJEB as a professional fellow in 2018. Before joining CJEB and SIPA, he was the commissioner of Japan’s Financial Services Agency (JFSA), which oversees Japanese banks and holds broad responsibility for financial regulatory and policy issues. Prior to becoming the chief administrator of JFSA, he spent more than 30 years in senior posi- tions at that agency and Japan’s Ministry of Finance, as well as Japan’s Ministry of Foreign Affairs and the Inter-American Development Bank. He contributes to SIPA and the University’s work on central banking and finan- From left to right: Hugh Patrick, Yuzaburo Mogi, and Glenn Hubbard cial policy, particularly with respect to Japan and East Asia. He collaborates with senior The International Advisory Board provides Charles D. Lake II faculty and researchers at SIPA’s Center on overall guidance for CJEB. Members are dis- Chairman and Representative Director Global Economic Governance and Initiative on tinguished leaders in the fields of Japan-U.S. Aflac Life Insurance Japan Ltd. Central Banking and Financial Policy as well economic, business, and political relations. President as CJEB. He holds a BA degree in liberal arts Aflac International from Tokyo University and BA and MA degrees Richard Folsom in economics from Cambridge University. Representative Partner Yuzaburo Mogi ’61 Advantage Partners Honorary CEO and Chairman of the Board Kikkoman Corporation Shinji Fukukawa Former Vice-Minister Toshikazu Nambu Japanese Ministry of International Trade and Representative Director and Senior Managing Industry Executive Officer Senior Advisor Global Industrial and Social Progress Research Institute Atsushi Saito Chancellor Commissioner Toyo University Incorporated Educational Nippon Professional Baseball Organization Institution Senior Fellow to KKR Global Institute KKR Japan Yasushi Kinoshita Chairman Taisuke Sasanuma Development Bank of Japan Inc. Representative Partner Advantage Partners, Inc.

Joseph G. Tompkins ’67 President Saga Investment Co., Inc.

48 | CJEB Annual Report 2018–2019 PROMOTING EXCHANGE OF IDEAS

CJEB in the News

CJEB and its academic directors are Who Pays the Trump Tariffs? We Do, These The Bank of Japan’s Stealth Tapering regularly featured in the media, providing Americans Say Project Syndicate, November 16, 2018 their insights and expertise on Japan-related The Wall Street Journal, May 15, 2019 matters. Highlights for this year include: BOJ Monetary Policy: Impact of YCC US Consumers Start to Pay Price of UBS Knowledge Network, November 21, 2018 David Weinstein Trade War How Goes the Trade War? Financial Times, May 15, 2019 (Interview) “How Should We Evaluate the The New York Times, March 3, 2019 Unprecedented Monetary Easing Policy” NY Fed Finds New China Tariffs to Cost US with Takatoshi Ito and Etsuro Shioji Real Time Economics: The U.S. Trade Households $100bn a Year The Keizai Seminar, Nippon Hyoron Sha Co., Deficit Is about to Break Another Record Financial Times, May 23, 2019 Ltd., November 27, 2018 The Wall Street Journal, March 4, 2019 The Direction of the U.S.-China Trade War Calamity Caused by the Abrupt Resignation Evidence Grows That Trump’s Trade Wars and the World Economy: Uncertainties in of the Governor of the Central Bank of India Are Hitting U.S. Economy Trade Policy and Negative Influences on Nikkei, Inc., Morning Printed Edition, Bloomberg, March 4, 2019 the Investment Market January 6, 2019/Electronic Version, Nikkei Veritas, June 23, 2019 December 27, 2018 Trump’s Trade War Is Costing Americans $3 Billion a Month in Higher Taxes, Study Says David Weinstein’s paper, “The Impact of the At the End of the Heisei Era (Part 2)— Time Magazine, March 4, 2019 2018 Trade War on U.S. Prices and Welfare,” “The Japanese Economy: The Past 30 Years was also discussed in other media outlets, and Remaining Issues” The Midwest Mindset: Why Does Trump including NPR’s “All Things Considered,” the NHK (Japan Broadcasting Corporation), Undervalue Trade? Washington Post’s “PowerPost,” Spiegel January 8, 2019 Chicago Tribune, March 4, 2019 Online, Associated Press, Fortune, CNBC, PBS NewsHour, VoxTalk, Vanity Fair, Yahoo World University Rankings: Better Than Repeat after Us: China Isn’t Paying Tariffs Finance, Barron’s, Business Insider, Japan the University of Tokyo? NPR Marketplace, March 4, 2019 Times, China Daily, South China Morning PRESIDENT Family, March 5, 2019 Post, and Washington Examiner. Trade Talks Will Probably End with Tariffs (Professional’s Views) “Delay the Still in Place Takatoshi Ito Consumption Tax Hike by Half a Year” “Morning Satellite,” TV TOKYO Corporation, The Economist, April 4, 2019 An Expert’s Perspective on the Decade May 24, 2019 since the 2008 Financial Crisis (Middle The Finance 202: Trump Is Volume): China’s Excessive Debt and Japan’s Quest to Balance Its Books Underestimating the Damage Higher Concerning Factors NHK WORLD-JAPAN, June 21, 2019 Tariffs Could Have on U.S. Economy Nikkei Inc., September 13, 2018 Washington Post, May 9, 2019 Side Effects of ESG Investment BOJ Has Taken Very Quiet First Step Forbes Japan, June 25, 2019 Who Loses Out in the US-China Trade War? towards Exit, Professor Ito Says BBC News, May 14, 2019 Bloomberg TV, September 19, 2018 An Evaluation of Abenomics in Its 7th Year (First Volume): Labor Reform Rather Than Columbia University Professor Takatoshi Monetary and Fiscal Matters Ito: “Don’t Despair in the Face of Nikkei Inc., June 26, 2019 Misfortune. Don’t Be Afraid to Take Chances When You Get Lucky.” Nikkei Inc., Morning Printed Edition, October 14, 2018

CJEB Annual Report 2018–2019 | 49 Enhancing the MBA Experience

Chazen International Study Tour participants at Shiseido Monique Lopez and Yumiko Shimabukuro speaking with Columbia Business School students

CJEB is a key contributor to the Columbia The 2019 Chazen Japan Study Tour took yakatabune dinner cruise, watching a profes- Business School’s (CBS) international com- place from May 19 to May 26 and was a sional baseball game, and visiting the Sensoji munity and seeks to pursue opportunities to huge success. Visiting Tokyo, Kanazawa, and temple. enhance the MBA student experience. In this Kyoto, the 40 MBA students met with repre- In Kanazawa, the tour group had a great endeavor, CJEB’s major collaborative partner sentatives from Japanese corporations and experience visiting the Fukumitsuya sake is the CBS Japan Business Association (JBA), immersed themselves in Japanese cultural brewery, where the students had an opportu- a student-led organization that promotes sights and experiences. Mattan Griffel, CBS’s nity to learn about the production process for Japanese business and culture to the CBS award-winning adjunct professor of business, the finest sake and to taste different kinds of community. The Center regularly meets with joined the group. sake. The students also enjoyed traditional JBA officers to exchange ideas on ways to In Tokyo, the students joined presentations Japanese beauty while strolling through the promote Japanese economy and business-re- from TeamLab, , Softbank, Shiseido, Kenrokuen garden and Higashichaya district. lated issues within CBS. Raksul, Selan (an education startup), and Kanazawa had never been included as a stop As an annual initiative, CJEB assists the JBA Longhash. The students enjoyed the variety in previous Japan Study Tours, but this year’s in organizing the Chazen International Study of companies they were able to visit, rang- tour organizers are now convinced that the Tour to Japan. Led by the Jerome A. Chazen ing from startups such as Raksul and Selan city is a worthwhile destination. Institute for Global Business, the Japan to Japanese giants such as Shiseido and At the final stop, Kyoto, the group visited Study Tour sends a group of students on a Softbank. They especially appreciated the the manufacturing plant to learn weeklong trip to Japan, providing a unique engaging presentation given by the CFO of about the company’s advanced initiatives on opportunity for the students to experience Softbank, Mr. Yoshimitsu Gogo. It was the employment for individuals with disabilities, cultural excursions and visits to Japanese first time in the program’s history that the vividly demonstrating a good example of cor- corporations. Since the tour’s initiation in Japan Study Tour was able to coordinate a porate social responsibility (CSR). In addition 1989, CJEB has helped fund the program visit to Softbank. On the last night in Tokyo, to experiencing Zen meditation at Taizoin and contributed to its agenda. Before each CBS alumni in Japan hosted the students temple, they enjoyed their visit to several trip, the student trip organizers consult with at a reception. By chatting with alumni, the historical sites, including the Golden Pavilion Professor Hugh Patrick and CJEB’s director students had a great opportunity to learn and the Fushimi-Inari Shrine. for administration, Ryoko Ogino, on possible thoughtful insights about Japan. Besides company visits and on the overall current company visits, the participants experienced As part of CBS’s International Week 2019, state of the Japanese economy. unique cultural activities, such as joining a CJEB cohosted “Rethinking the Asian

50 | CJEB Annual Report 2018–2019 Enhancing the Columbia Experience

Leadership Gap: Breaking the Bamboo Ceiling” on April 9, 2019. Working closely with the CBS Student Government Executive Board, CJEB invited Yumiko Shimabukuro, director of the Urban and Social Policy Program at the School of International and Public Affairs and faculty advisor for Empowering Asian Women at Columbia University and Monique M. Lopez, executive director of the Middle Market Banking and Specialized Interest Group at J.P. Morgan, to present on trends in leadership based on race and gender. They shared their own expe- riences and strategies regarding overcoming challenges in career development, such as Japan Study Student Association (JASSA) in Kyoto discrimination in the workplace. The event was cosponsored by CJEB and featured memorable interactive experiences that received great feedback from attendees. Columbia University offers many resources academia can connect through the celebra- and opportunities for students, faculty, and tion of Japanese tradition. On March 29, 2019, CJEB organized a special alumni interested in learning more about CJEB is continually active and committed workshop, “Cross-Cultural Negotiation,” which Japan outside the Business School. CJEB to promoting Japan-related activities at was led by Zachary Metz, adjunct assistant contributes to this initiative by assisting Columbia through the support of Japan professor of International and Public Affairs at other organizations on campus that are Study Student Association (JASSA) and its the School of International and Public Affairs. engaged in Japan-related activities. This initiatives. JASSA continues to organize Originally, the workshop was arranged for includes the Weatherhead East Asian its 13th annual student-led trip to Japan, CJEB’s Visiting Fellows, but because of the Institute (WEAI), the APEC Study Center, which is similar to the Chazen International value of the workshop’s contents and inter- the East Asian Languages and Cultures Study Tour to Japan, and is partially funded active exercises, CJEB extended invitations (EALAC) Department, the School of by CJEB. This year, 54 students, including to previous attendees of its Empowering International and Public Affairs (SIPA), and 14 organizers, from 12 countries partic- Japanese Women Leadership Initiative, as well many others. as other students on campus. ipated in the trip and traveled to Tokyo, CJEB continues to serve as a contributor Hiroshima, and Kyoto. CJEB’s annual welcome reception for its to the Columbia Japan Society (CJS), a The trip commenced in Tokyo, where Visiting Fellows, as well as members of the student-run organization that focuses on students had numerous opportunities to CBS student body and other CBS commu- educating the University community as exchange opinions and have discussions nities, was held on October 8, 2018. CJEB well as the greater New York City public on with leaders in both the public and pri- officers and staff welcomed the CBS com- Japanese culture, history, and language. vate sector. The students visited the first munity to the new academic year, allowing In 2019, CJEB provided a generous spon- female governor of Tokyo, Ms. Yuriko Koike, CBS students the opportunity to network sorship that allowed CJS to organize and to discuss how Tokyo is preparing for the with CJEB Visiting Fellows and CBS faculty partially fund its annual Matsuri event, a 2020 Olympic and Paralympic games, and staff from other departments. Japanese-style festival held on Low Plaza and three concepts which Tokyo aims to at Columbia University. The festival serves realize for sustainable growth: “Safe City, as a way to celebrate Japanese history, Diverse City, and Smart City.” After meet- food, and culture, while supporting local ing with Ms. Koike, they joined a tour of businesses, ultimately creating a space the to learn how decisions where the private sector, the public, and

CJEB Annual Report 2018–2019 | 51 are made in Japanese politics. They also visited the Office of the Prime Minister and met Mr. Yasutoshi Nishimura, deputy chief Cabinet secretary. Mr. Nishimura explained that Japan would try to solve common global issues by taking advantage of many important events, such as the G20 Osaka summit in June 2019, Tokyo Olympic and Paralympic games in 2020, and World Expo in Osaka in 2025. To learn more specific Japanese policies, the students visited policymakers at central ministries and discussed Japan’s current issues and how to solve them. They visited the Ministry of Economy, Trade and Industry, the , and the Ministry of Defense. As for the private sector, they met with Mr. Yoshiyuki Kasai, chairman emeritus of the Central Japan Railway Company. He explained the history of the privatization of Japan National Railways and the future strategy of the Central Japan Railway Company. Hugh Patrick with TOMODACHI Sumimoto Scholars After visiting Tokyo, the students headed for Hiroshima, where they learned about some of what Japan experienced during World War II. They visited the Atomic Bomb Kiyomizudera Temple, and Kinkaku Temple. to high-performing and proactive students and Hiroshima Peace Memorial Through this one-week trip, the students with relevant backgrounds and interests Museum. In the museum, they listened to a acquired a better understanding of the from across the University. talk by Ms. Keiko Ogura, a survivor of the “real Japan” by learning Japan in terms of 1945 atomic bombing. They were shocked economy, politics, culture and history. This by her horrible experiences and the discrim- trip surely contributed to an increase in the ination she faced after the war. number of foreign students who are familiar with Japan. In their last destination, Kyoto, the stu- dents participated in cultural activities that Aside from funding and programming, included wearing kimonos, experiencing a CJEB engages with the student community tea ceremony, and meditation. In addition, by providing opportunities for Columbia they were divided into two groups; one students to work at the Center as student group visited the Sasaki Sake Brewery to casuals. They are selected from a number learn how Japanese sake is made, and the of applicants, and their contribution to the other group visited the Kameya Yoshinaga CJEB team is invaluable, as they are deeply Company to experience making wagashi. involved in the day-to-day operations of the To learn about older Japanese history Center. The Center is committed to devel- through historic buildings, the participants oping our student workers professionally visited the beautiful Fushimi Inari Shrine, while providing a unique learning opportu- nity. Our student casual program is open

52 | CJEB Annual Report 2018–2019 Visits from Japan Fellowship and Scholarship to Columbia Programs

Groups of Japanese undergraduate and journals and publications such as Wired, graduate students often visit CJEB during Pacific Standard, Forbes, and Quartz, among their tours of the East Coast. In 2018–2019, others. student groups from Bunkyo University and Shogo Sakabe, the current Doctoral Wako University came to Columbia University. Fellowship recipient, has been working with Each group met with Professor Patrick, who Tatyana Avilova Cameron LaPoint Shogo Sakabe Professor David Weinstein on measuring gave a brief introduction and fielded ques- the effect of importing new knowledge from tions. Discussion topics included U.S.-Japan foreign countries on industrial productivity relations; U.S. trade policies and their impact CJEB provides select fellowships for growth when Japan opened its economy to to the world; Japan’s continuing workplace Columbia University students who demon- international trade in the 19th century. In challenges, especially for women, and related strate outstanding academic ability and another project with Cameron LaPoint, a policies; and Japan’s social problems. a specific interest in Japan and the Asia- fifth-year PhD candidate in the Department Pacific economies. These fellowships sup- of Economics, Professor Weinstein has been In spring 2019, the New York office of port research and participation in academic investigating consumers’ response to the CJEB’s longtime lead corporate sponsors, programs related to Japanese economic and arrival of pension paychecks using point-of- Sumitomo Corporation of Americas, vis- business fields. Further information on these sales data from Japanese supermarkets. ited CJEB and Columbia twice as part of opportunities is available at https://www8. its TOMODACHI Sumitomo Corporation CJEB Doctoral Research Grants and Summer gsb.columbia.edu/cjeb/resources/studentop- Scholars Program. Through this program, Stipends are also available to PhD students portunities under the heading “Fellowships & scholarship recipients, who come from at CBS or the Department of Economics who Scholarships.” Japanese universities, are given the opportu- wish to pursue Japan-related research proj- nity to study abroad in the United States for ects or language training programs. The CJEB Doctoral Fellowship was estab- one year. This year Sumitomo visited CJEB lished in 2013 to support PhD students on January 9, 2019, and March 26, 2019, The Sumitomo Fellowship Program was at CBS and/or Columbia’s Department of where Professor Hugh Patrick and CJEB’s established by the Center as part of an initial Economics who intend to develop Japan director for administration, Ryoko Ogino, operating grant from Sumitomo Corporation expertise, culminating in dissertations welcomed students and executives from of Americas. The program has provided focused primarily on Japan. Our CJEB Sumitomo to engage in a lively discussion on support to various Japan-related research Doctoral Fellowship recipients include Japan and the world economy and the stu- initiatives, and the fellowship recipients Guannan (Jackson) Lu, now teaching at MIT’s dents’ future prospects. Students were given engage in their own research as well as par- Sloan School of Management since the fall the opportunity to meet and exchange ideas ticipate in CJEB programs. Tatyana Avilova of 2018, and Shogo Sakabe, currently in with, and receive career advice from, CBS and Cameron LaPoint, both PhD candidates the Department of Economics at Columbia and SIPA graduate students. in the Department of Economics, were named University. Sumitomo Fellows this year.

Jackson Lu, our first PhD fellow, obtained The Mitsubishi UFJ Trust Scholarship his PhD in management from CBS in 2018. Foundation provides one Columbia His research at CBS focused on the benefits University student each year with tuition and risks of globalization for individuals, and living expenses for a program of either groups, and organizations. While teaching undergraduate or graduate study in Japan. at MIT’s Sloan School of Management, he CJEB conducts a University-wide compe- became the second-youngest professor tition on behalf of the Foundation to nomi- named one of the World’s 40 Best Business nate a student. The award was granted to School Professors Under 40 by Poets & Spencer Cohen of Columbia University for Quants on April 22, 2019. He was awarded 2018–2020, and he is continuing on to his this honor based on the popularity of his second year. classes among his students, and for his research published in premier scientific

CJEB Annual Report 2018–2019 | 53 Library and Data Resources

David Weinstein speaking at the CJEB Sponsor Dinner

Other data resources: Columbia University is home to one of David Weinstein. The databank is a the largest collections of Japanese- and compilation of statistical resources for faculty CJEB Research Associate Professor Tsutomu English-language materials in the United members and students conducting relevant Watanabe of The University of Tokyo (along States. CJEB evaluates Columbia University research. with Kota Watanabe of Chuo University and library resources and commits funding to The University of Tokyo) launched the UTokyo CJEB’s databank includes: procure new materials on Japan and the Daily Price Index project in May 2013, which Asia-Pacific economies. CJEB also maintains • Time-series and cross-section data on measures and publishes the consumer inflation a small working collection of materials on financial markets, institutions, and the rate on a daily basis. the Japanese and Asia-Pacific economies, macroeconomy from Nikkei NEEDS Financial including statistical resources, academic QUEST 2.0 and the Development Bank of journals, and periodicals. Japan’s Industrial Financial Database

• An online news and data retrieval system that provides essential corporate and economic Data Resources data as well as leading newspaper and journal The Center continues to develop its major articles on Japanese and other Asia-Pacific computer-based databank on the Japanese economies from Nikkei Telecom, which is economy, with an emphasis on financial accessible via Columbia University Libraries markets, under the direction of Professor (CLIO)

54 | CJEB Annual Report 2018–2019 Discussion Groups

U.S.-Japan Discussion Group

Shortly after CJEB was founded, the then- CEO of Sumitomo Corporation of Americas and Professor Patrick took the initiative to organize, on a private and individual basis, an evening discussion group attended by senior Japanese and American businessmen and professionals living in the New York area. The group continues to convene to discuss frankly Japan Economic Seminar 2019 and informally—and off the record—issues and prospects in U.S.-Japan business, economic, Discussants: Tsutomu Watanabe, Professor, Japan Economic Seminar and political relations. Masaki Nakajima, the The University of Tokyo; Roberto Rigobon, current CEO of Sumitomo Corporation of The Japan Economic Seminar (JES) was Professor, MIT Americas, and David Weinstein, CJEB’s direc- founded in 1966 by the late Professor James Scarcity and Spotlight Effects on Term tor of research, are the co-organizers of this Nakamura of Columbia and Professors Hugh Structure: Quantitative Easing in Japan group. The members come from the business Patrick (then at Yale) and Henry Rosovsky and financial communities, together with sev- of Harvard. With a membership of up to one Presenter: Jun Uno, Professor, eral specialists on Japan from the Columbia hundred individuals, it originally was an inter- University faculty. The group avoids identifica- university forum for faculty, other profes- tion with any particular companies or groups sionals, and advanced graduate students to Discussants: Etsuro Shioji, Professor, and meets twice in the fall and spring for din- discuss ongoing research in preliminary form Hitotsubashi University; Gauti B. Eggertsson, ner and discussion. by specialists on the Japanese economy. JES Professor, Brown University now meets once a year, sponsored by CJEB, Forgiveness versus Financing: The discussions naturally focus on the and is held at Columbia in the spring semes- The Determinants and Impact of SME wide-ranging political economy and how ter under the leadership of Takatoshi Ito, pro- Debt Forbearance in Japan Japanese and American corporations operate fessor at Columbia’s School of International domestically, abroad, and with each other. and Public Affairs and director of the Presenter: Arito Ono, Professor, Topics discussed in 2018–2019 included the Program on Public Pension and Sovereign Chuo University U.S.-Japan trade negotiations, Trump’s trade Funds at CJEB. Special arrangements have policy on Japan, Japan’s monetary policy, and Discussants: Takeo Hoshi, Professor, been made to include economists from Japan regional banks and financial stability in Japan. Stanford University; Cynthia Mei Balloch, as paper authors and discussants. Postdoctoral Research Scholar, This year, the JES was held on March 8, Columbia University 2019, and had four sessions. The Japan Free for Children? Patient Cost-Sharing Economic Seminar thanks the James and Health Care Utilization Nakamura Fund for its support. Presenter: Toshiaki Iizuka, Professor, The following papers were discussed: The University of Tokyo Trade with Cyberspace: Estimating the Discussants: Ashley Swanson, Professor, The Welfare Gains from E-Retail Wharton School, University of Pennsylvania; Presenter: David Weinstein, Carl S. Shoup Adam Sacarny, Assistant Professor, Professor of the Japanese Economy, Columbia University Columbia University

CJEB Annual Report 2018–2019 | 55 FINANCIAL SUPPORT

Financial Support

Columbia University and Columbia Business School (CBS) give basic support for the Center by providing faculty salaries and office space, library and administrative support, and other essential services. However, the Center relies on external sources of financial support from foundations, corporations, and individuals for its programs and research activities. Income is derived from the Center’s endowment, The 2019 CJEB special luncheon in Tokyo operating and project grants, and, especially, from its Corporate Sponsorship Program, a special luncheon at the Classic House at Corporate Sponsors which was established in 1995. Academic Akasaka Prince in Tokyo for our corporate ($10,000+ annually) independence has not been an issue, as there sponsors in Japan to demonstrate our deep Aflac Life Insurance Japan Ltd. are no special restrictions attached to any of appreciation for their continued support. ANA HOLDINGS INC. these gifts. Professor Weinstein presented his latest paper, Canon U.S.A., Inc. “The Impact of the 2018 Trade War on U.S. Co., Ltd. The Sponsorship Program has been Prices and Welfare,” at this luncheon as well. Hyogo Prefectural Credit Federation of instrumental in expanding the Center’s Agricultural Cooperatives* activities and guaranteeing their long-term ITO Corporation financial support. The companies listed below ITO EN (North America) INC. support CJEB through funding to help establish Sponsorship Program Japan Industrial Partners, Inc. an endowment or provide funding on an annual Sponsors for the year 2018–2019 are as J.C.C. Fund of the Japanese Chamber of basis. Sumitomo Corporation of Americas follows: Commerce and Industry of New York, Inc. made an initial significant contribution that MinebeaMitsumi Inc.* enabled the Center to be established in 1986 Lead Corporate Sponsor Mitsui Sumitomo Insurance Co., Ltd.* and has continued to be a major Center donor. ($100,000+ annually) Mitsui USA Foundation The Center also greatly appreciates and Sumitomo Corporation of Americas Mori Building Co., Ltd. benefits from the income derived from the Nikkei Inc. generous endowments funded by Fuji Xerox Senior Corporate Sponsors Nikko Asset Management Co., Ltd., Sanken Industrial Policy Research ($50,000+ annually) Nomura America Foundation Institute, the Marine and Fire Insurance Advantage Partners, Inc. Tokio Marine & Nichido Fire Insurance Co., Ltd.* Association, the Federation of Bankers Daiwa Capital Markets America Inc. TV TOKYO Holdings Corporation Association, the Security Dealers Association, Effissimo Capital Management Pte Ltd Yaskawa Electric Corporation the Life Insurance Association, and Mitsubishi Mitsubishi UFJ Trust and Banking Corporation UFJ Trust and Banking Corporation during the Mizuho Bank, Ltd. Individual Sponsors first years of the Center’s establishment at SMBC ($10,000+ annually) CBS and now. Tokai Tokyo Securities Co., Ltd.* Robin and Brian Kelly On November 13, 2018, Professor David Jun Kokui Weinstein, CJEB’s director of research, Major Corporate Sponsors Shigeru Masuda presented his paper, “Financial Regulation in ($25,000+ annually) Japan, the U.S. and Europe,” over dinner with Kikkoman Corporation Friends of the Center a small group of CJEB sponsors and other (Americas) (up to $9,999 annually) * Regularly sends guests at Faculty House, Columbia University. Ricoh Co., Ltd. * Miyoko Davey visiting fellows This was a great opportunity for our guests Sumitomo Mitsui Trust Bank, Ltd. * Hiroko and Satoru Murase to discuss and exchange ideas on the current Suntory Holdings Limited Tsunao Nakamura Japanese economy in a private setting. On Tsuchiya Co., Ltd. Hugh Patrick May 29, 2019, CJEB was delighted to hold Shelby Ruch Michael D. Van Zandt 56 | CJEB Annual Report 2018–2019 Table of Contents

Letter from the Directors 2 Closing the Gender Gap in Japan: Achievements, Challenges, and Prospects 39 CJEB Team 4 Have We Seen This Movie Before? China, Japan, Leadership and Staff 4 Industrial Policy, and Trade Conflict 39 Core Faculty 7 Breaking Generational Curses in Corporations 40

Research and Faculty Engagement 10 Sustainability and Promotion of Long-Term Investing: The Role of Investors and the Stock Exchange 40 “Japan’s Economy: Stable in a Turbulent World” Design/Production: The Puzzle of Japan’s Low-for-Long 41 by Hugh Patrick 10 Columbia Creative Workshops 41 Current Research Highlights 22 Office of Communications and Public Affairs Faculty Engagement 24 A Target of Opportunity: Empowering Japanese Women in Leadership Initiative 41 Research Paper Series 26 Editor: Cross-Cultural Negotiation 42 CJEB Programs 28 Rethinking the Asian Leadership Gap: Breaking the Ryoko Ogino Program on Public Pension and Sovereign Funds 28 Bamboo Ceiling 42

Corporate Governance and Stewardship Program 28 Demystifying Machine Learning and Artificial Intelligence 42 Assistant Editors:

The New Global Financial Architecture 29 Resources 43 Taylor Cook

Events 30 Faculty Advisory Committee 43 Emiko Mizumura Conferences 30 2018–2019 Visiting Fellows 44 Shoko Nakamoto Conference on Public Pension and Sovereign Funds 30 2019 Visiting Fellow Reunion Reception 45 Julio “JP” Perez U.S.-Japan Relations in a New Era: Trade, 2019 Annual Visiting Fellow Business Field Trips 45 Governance, and the Global Economy 31 Research Associates 46 Photography: The Japan Project Meeting with Joint ESRI Professional Fellows 47 Eileen Barroso International Conference 32 International Advisory Board 48 ESRI International Conference: Michael DiVito “AI, Robotics, and the Labor Market” 33 Promoting Exchange of Ideas 49 Yuki Kato Symposia 34 CJEB in the News 49 Shoko Nakamoto Japan’s Politics and Economy: What Next? 34 Enhancing the MBA Experience 50 Practical Applications of ESG in Japan: How Investors Enhancing the Columbia Experience 51 Make Companies Better Global Citizens 34 Visits from Japan to Columbia 53 Lectures 35 Fellowship and Scholarship Programs 53 The Future of Japan’s Social Security and Library and Data Resources 54 Work Style Reform 35 Discussion Groups 55 Agenda for 2020: Can Japan Win Gold for Its Economic Performance? 36 Japan Economic Seminar 55 Leading after a Nuclear Disaster 36 U.S.-Japan Discussion Group 55 Lunchtime Seminars 37 Financial Support 56 The Rise of Japanese Cross-Border M&A in a Sponsorship Program 56 New Era of Shareholder Scrutiny 37

Shareholder Activists Take on Corporate Japan 37 Rakuten: How to Promote Global Innovation 38 Private Equity Coming of Age in Japan 38 Aggressive Use of Tax Shelters by the Wealthy and General Anti-Avoidance Rules 38 CENTER ON JAPANESE ECONOMY AND BUSINESS AND ECONOMY JAPANESE ON CENTER

Center on ANNUAL REPORT 2018–2019 REPORT ANNUAL Japanese Economy and

475 Riverside Drive Room 312F New York, NY 10115 Email: [email protected] Business Phone: 646-745-8569 Web: www.gsb.columbia.edu/cjeb ANNUAL REPORT 2018–2019 (JULY 2018–JUNE 2019) CJEB Representative Office in Japan c/o Terumi Ota 1-19-18-1003 Shibuya Shibuya-ku, Tokyo 150-0002 Phone/Fax: 03-5467-6012