Reimagining Japan~ Challenges and opportunities in Japan

February 14, 2012

India Leadership Forum

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited

Reimagining Japan, released in July, features an unprecedented list of contributors

Our objective: Jump start a more structured and constructive dialog on the future of Japan

75+ contributors (35% Japanese, 65% non-Japanese)

20+ CEOs from many countries and industries

Key Japanese cultural figures (author, architect, coach, politician)

Renowned international journalists (FT, NYT, Economist, etc.)

Three Pulitzer Prize-winning writers

International economic experts

What’s inside: Japan’s challenges more significant than ever

▪ Stagnant economy (despite a strong yen)

– Public debt approaching 300 percent of GDP and deficits of pensions and health systems growing

– Growing unemployment and temp workers

▪ World’s oldest, and fastest declining population in world

– Huge financial burden on society

– Increasingly demoralized younger generation

– Ignoring opportunities for women, immigration

▪ Weakening competitiveness across most industries

– Huge challenges globalizing

– More intense competition from Korea, China, others in core industries

▪ Fading influence/importance on the world stage and an increasingly inward-looking orientation

▪ Turbulent, ineffective political order and lack of leadership

– Ineffective government

– 16 Prime Ministers since 1989! (The United States has had four Presidents)

What’s inside: Japan’s formidable assets

▪ Large scale economy – 3rd largest in the world

– 3rd largest economy in the world

– Large scale companies, many with large war chests

▪ Deep technology benchstrength

– 2nd largest investment in R&D

– Largest share of technology patents in many field

▪ Strong work and service ethics

– Attention to quality and precision

– Ethos of cooperation and service spirit at work

– Highly disciplined workforce

▪ Creativity and sense of design

– Strong culture and art tradition/connoisseurship

– Innovation in games and design

▪ Undertapped potential in women

– Fast rise of women education level

– Women rise in workforce offers large potential for growth

Offering a 20-year roadmap to move forward …

Restructuring and globalizing Japanese companies Reducing overcapacity Creating global champions Refining the performance culture Unleashing entrepreneurism

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The case for radical education reform Developing more independent-minded students Creating global citizens; making English a second national language Making leading Japanese universities regional academic centers

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Turning demographic change into opportunity Developing businesses related to seniors Taking advantage of a highly educated female workforce Seeing immigration as a source of possibility

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Leadership for a new era Making leadership and performance a priority Globalizing corporate management Promoting leadership development

Looking to an Asian future: Building closer ties with Asia Living with, and trying to benefit from, China Investing in the future of Asia

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