ad info

TIME Asia Home
Current Issue
Magazine Archive
Asia Buzz
Travel Watch
Web Features
  Photo Essays

Subscribe to TIME
Customer Services
About Us
Write to TIME Asia
TIME Canada
TIME Europe
TIME Pacific
TIME Digital
Latest CNN News

Young China
Olympics 2000
On The Road

  east asia
  southeast asia
  south asia
  central asia

Other News
From TIME Asia

Culture on Demand: Black is Beautiful
The American Express black card is the ultimate status symbol

Asia Buzz: Should the Net Be Free?
Web heads want it all -- for nothing

JAPAN: Failed Revolution
Prime Minister Yoshiro Mori clings to power as dissidents in his party finally decide not to back a no-confidence motion

Cover: Endgame?
After Florida's controversial ballot recount, Bush holds a 537-vote lead in the state, which could give him the election

TIME Digest

TIME Asia Services
Subscribe to TIME! Get up to 3 MONTHS FREE!

Bookmark TIME
TIME Media Kit
Recent awards

TIME Asia Asiaweek Asia Now TIME Asia story

NOVEMBER 1, 1999 VOL. 154 NO. 17

Great News: No More Jobs for Life
Nissan's plan to axe 21,000 workers may herald a tough new approach in Japanese business culture

Stuart Isett/Corbis Sygma for TIME
SUPERMODELS: Nissan launched new cars at the Tokyo Motor Show.

In February, after Nissan Motor took the radical step of putting itself up for sale, chief executive Yoshikazu Hanawa was asked whether he would consider breaking Japan Inc.'s long-standing taboo and fire workers to cut costs. His answer to Time: "We'll handle the employment issue carefully." Last week, the country's second-largest carmaker announced that it would shut five plants, cut ties to hundreds of suppliers and--gasp!--let go of 21,000 workers. Hanawa's explanation: "We don't have other alternatives. To survive, we must do this."

Hanawa isn't the only Japanese business leader to have seen the light. In recent weeks, a number of high-profile corporations have said they will sack staff, shed suppliers and sell subsidiaries. Two large banks, Sakura and Sumitomo, will merge after decades of fierce rivalry: they have already announced the axing of 9,300 jobs. Another bank merger, involving Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan, is expected to occur within the next few years, at the cost of perhaps 6,000 jobs. Sony and telecommunications giant NTT have begun major downsizing, and Toshiba is abandoning many unprofitable subsidiaries. Each announcement chips away at the foundations of Japan Inc., striking at traditions that many Japanese hold sacred, like lifetime employment for all workers and the cozy networks of interlocking businesses and banks known as keiretsu.

Cover: The Vision Thing
Abdurrahman Wahid has trouble seeing and needs help walking, but 210 million Indonesians must now hope their new President can lead them out of the darkness

Numbers Game
Gus Dur's first task: fix a catatonic economy

A voice of moderation in a strident land

Pakistan: It's Good to be Dictator
The military starts to enjoy the business of running things

Japan: Here Come the Pink Slips
The announcement of massive layoffs at Nissan heralds the start of a new era in the way the country does business

Taiwan: Facing the Firing Squad
An antiquated law puts three teens on Taiwan's death row, sparking calls for criminal justice reform

Malaysia: Lessons Never Learned
It's only a matter of time before Malaysia's economic boom goes bust

Letter from Japan: Lean and Mean
Finally, Japan wakes up to economic reality

Breaking news from East Asia

Japan's Bank Mergers
Another giant is born. Expect more to come

It's too early to call this a full-scale revolution: there are still plenty of adherents and champions of the old ways. Last week, Prime Minister Keizo Obuchi warned Nissan that it should think hard about the impact of its drastic cost-cutting program on workers and subcontractors. And investors, skeptical that Nissan can actually implement its restructuring strategy, drove the company's stock down 12%. Indeed, some suggest Hanawa himself is a reluctant reformer, that his hand has been forced by Nissan's new partner, Renault. Many credit Carlos Ghosn, the executive seconded to Nissan by the French carmaker, with masterminding the bold revamp. "Only a foreigner could make such changes," says Yukio Noguchi, an economist at the University of Tokyo. "No Japanese could solve the problem because of the keiretsu and its employees." The chairman of rival automaker Toyota, Hiroshi Okuda, predicts Nissan's far-reaching plans will be difficult to carry off. "Companies that fire employees simply because of an economic downturn will lose the trust of workers and eventually lose the competitive edge," he told the Japanese press.

One can forgive the doubters. Promises of reform have been made repeatedly before. Scripts for a "new Japan" have been written and re-written. "In Japan, everything continues for as long as it can continue," says Akio Mikuni, president of a credit-rating company. "Most people don't get excited when they see 'changes' taking place, because usually we end up disappointed." Indeed, there are still structural impediments to a dramatic overhaul of Japan's corporations. Accounting systems aren't transparent, bankruptcy laws are inadequate, the judicial process is slow. And, astonishing as it may sound, Japan simply doesn't have enough accountants or lawyers to cope with massive corporate restructuring.

Cautiously, then, analysts are watching to see if the recent flurry of corporate remodeling is the real thing. "The pace is picking up," says Brian Rose, senior economist at Warburg Dillon Read in Tokyo. He expects the mergers to trigger something of a domino effect. As banks consolidate, the keiretsu will disintegrate. Stronger companies will no longer need to rely on allied banks for capital; weaker firms will find themselves without banks to depend on.

If that scenario pans out, it will mean an end to ways of doing business that date back to the early part of this century, when Japanese companies were grouped as zaibatsu (the precursors of today's keiretsu) and backed by the government. These powerful business alliances supplied Japan's war machine, and they survived attempts to dismantle them during the post-World War II U.S. occupation. "We used it to our advantage then, with every worker cooperating and getting together for a single-minded purpose," says economist Noguchi. "The problem is, the technology changed but our system didn't." The keiretsu face their biggest threat yet, the Internet, as manufacturers worldwide are starting to click directly on to supply routes that are fast, cheap and eliminate middlemen.

In recent years, Japanese companies have repeatedly opted to shield one another from the need to change. The keiretsu tend to protect their money-losing businesses. Nissan is a good example. It has been using barely half of its manufacturing capacity and yet supporting a large network of suppliers that have little incentive to offer competitive prices. Despite declining market share and sales, nobody dared tinker with the system, despite its stunning inefficiencies. Keiretsu ties are extensive and touch every part of the lives of a group's employees. At Sumitomo Bank, for example, staff are encouraged to drink only Asahi beer because the brewery is in its keiretsu. Some business groups even have marriage counselors who help young employees find mates from within the keiretsu.

The decline of these groups is being hastened by powerful new forces. Foreigners are now allowed to invest in long-shielded sectors of the Japanese economy, like brokerages, banks and insurance companies. An invasion of the financial sector is also under way. A Western consortium, Ripplewood Holdings, is buying the Long-Term Credit Bank of Japan. On a visit to Japan earlier this month, General Electric Co. chairman Jack Welch, whose GE Capital is one of the Ripplewood investors, gave a clue as to what he has in mind: "It's an abuse of management rights to try to keep a weak business going in the name of lifetime employment. It's better for the employees to leave the weak business and have it merged with a stronger company."

Japan's workers are growing familiar with that sort of warning. Unemployment has reached a post-war high of 5%, and large-scale layoffs have just begun. "I meant to work here until my retirement," says Masahiro Yoshino, 48, riding a bus from the Nissan plant that makes hatchbacks in the Tokyo suburb of Murayama, one of the factories Nissan plans to shutter. He has put in 28 years at the automaker but says he will quit rather than accept an expected transfer to another plant that would be a two-and-a-half hour commute from his home.

Some company men aren't waiting for the inevitable. Yasufumi Takahashi, a trader in precious metals at Nissho Iwai, has enrolled in a class to study financial planning. The trading house suffered huge losses last year, slashed salaries and announced it would cut at least 1,000 employees--nearly a fourth of its workforce--by March 2002. Takahashi, 31, saw his income fall 20%. He fears it might drop further and that he may even lose his job--hence the financial-planning course. "I thought I'd work here a long time," he says. "But there have been a lot of bankruptcies, mergers and acquisitions, foreign investors coming in. The situation in Japan has to change." At Nissan, it already has.

With reporting by Donald Macintyre, Sachiko Sakamaki and Hiroko Tashiro/Tokyo

This edition's table of contents
TIME Asia home


Quick Scroll: More stories from TIME, Asiaweek and CNN


U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

Launch CNN's Desktop Ticker and get the latest news, delivered right on your desktop!

Today on CNN

Back to the top   © 2000 Time Inc. All Rights Reserved.
Terms under which this service is provided to you.
Read our privacy guidelines.