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In a courageous bit of cross-platform marketing, the chief executive of Japanese investment bank Nomura has begun appearing in adverts for the country’s most aggressive online job-seeking platform, Bizreach.
“Let’s take on exciting challenges together,” says Kentaro Okuda, who may prefer not to know exactly what percentage of his staff have quietly uploaded their CVs to Bizreach and are seeking those exciting challenges outside Nomura. Probably, these days, at a start-up.
Okuda is by no means alone. The CEOs of five other major Japanese corporations (Asahi, JFE Steel, Lotte, NEC and Dai-ichi Life) have also appeared in the new Bizreach adverts clearly hoping that, in a time of acute labour shortage, they will project an image of themselves as open-armed hirers in the now hard-fought mid-career recruitment game.
But the message underlying the adverts is unmistakable: corporate metabolism has resumed in Japan after a long dormancy. A system that once inefficiently hoarded human resources is now watching those self-deploy elsewhere. Recruitment-themed TV commercials in Japan are at an all-time high, say ad-industry executives, because the potential for movement has risen so quickly. According to the research firm Teikoku Databank, a record number of new Japanese companies — roughly 153,000 — were established in 2023, despite Japan’s shrinking population.
Attitudes are shifting fast too. Quitting a high-end corporate job to join or establish a start-up is deemed less a risky punt than a mark of decisiveness and self-interest.
After decades of resource misallocation, risk-aversion and stagnancy, Japan’s job market looks more liquid. Critically, it feels like an environment where start-ups can aspire to recruiting the nation’s best people, say managers at venture capital funds.
All this provides a strong tailwind for the Japanese government, which has invested a great deal of hope and funding into transforming the country’s once anaemic start-up scene. It is, on one viewing, a grasp for panacea. The ambitions are charged with the faith that start-ups can drive GDP growth and productivity, rescue the country from a long-term innovative tailspin and channel its talent in the right — or at least less wrong — direction. It has a belated, even desperate feel to it, but start-ups now seem to be Japan’s core industrial policy.
The extent of both central and local government backing is striking. In addition to the many subsidies now on offer, state-backed entities like the Japan External Trade Organization have been drafted into the effort by providing acceleration programmes and other services. The government-backed Japan Investment Corporation has invested close to $1bn into 32 private venture capital funds.
Under heavy government pressure, Japan’s three biggest banks have recently begun offering start-ups loans backed against current and future cash flow, breaking their long, entrepreneurialism-crushing habit of only lending against hard collateral such as the property of a would-be start-up founder.
By many metrics, all this is working. In 2013, said the Ministry of Economy, Trade and Industry in a recent paper, the total investment into start-ups in Japan was a minuscule $600mn; a decade later, that had risen to over $6bn. Between 2014 and 2023, the number of university start-ups more than doubled to 4,288, with METI research showing that roughly half of university students would prefer to start their careers at one.
Looming over all this achievement, though, is a coming moment when, if it wants the private sector to come in as a big investor in its start-up market, Japan must confront what it actually means to have a working capitalist metabolism. After decades of holding the cost of money as low as it can go, the country has shown a high tolerance for zombies and a low tolerance for carnage. If private money is to flow, that won’t work this time.
A start-up-driven economy, with lots of private investment, only works if participants and overseers accept that failure is as necessary a function of this metabolism as success. Investment in start-ups is driven by a promise of extraordinary returns, but that promise can only be kept if everyone is tested against a pressing threat of demise. For too long, Japan’s deflationary economy and ultra-low interest rates meant that low profitability survival was a valid corporate option: that would never — and did never — bring in the VCs and risk capital.
But Japan is now normalising, and there is a real sense that things are going to break. The problem with an industrial policy, for all the good intentions, is that it draws legitimacy from the pledge of long-term nurture. Japan will soon see if it has a taste for state-backed destruction.
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