JFIT has a long-standing research program on Japan’s ongoing business transformation, from earlier research on zombie companies and the decline of post-WWII business institutions to 21st-century strategic repositioning.

For example, we explore how changes in Japan’s financial markets and the rise of private equity and M&A have combined with corporate governance and employment system changes to enable Japan’s leading companies to operate at the technology frontier. This is particularly clear in upstream advanced materials and components, but also in advanced production machinery and factory automation, and system engineering solutions. By supplying indispensable upstream inputs and machinery into global value chains, Japan has become a quiet yet critical supplier to many industries, in particular semiconductors.

Related to this reinvention is the topic of innovation. With the support of Japan’s NEDO, JFIT has produced an in-depth study about San Diego’s IOT innovation ecosystem in 2018. Download the report on San Diego’s IOT innovation ecosystem (PDF).

AI and high-processing computing are also included in this research program. In a recent paper, Schaede argues that Japan has made high-processing computing and quantum computing one of its “moonshot” projects, in the foresight that AI will eventually be too limited in a 0-1 setting; see paper on high-processing and quantum computing in Japan (PDF).

Our research explores how Japan’s position in the global economy is changing with technology, the rise of China, and shifts in global production such as decoupling and supply chain pressures. Shin Kikuchi’s work examines how these forces reshape trade patterns and comparative advantage, with implications for wages, inequality, and the gains from trade. Relatedly, we look into how AI may impact specialization, skill demand, and the geography of production over time.

A second research theme focuses on exchange rates and prices. Recent work studies the long-run depreciation of the yen and why Japan has become relatively inexpensive compared with other advanced economies, including the role—and limits—of productivity-based explanations. Ongoing projects use detailed microdata to study price adjustments and inflation in Japan, including how firms respond to changing wages, import costs, and global price pressures.

Japan’s labor market is undergoing a major transformation. Rapid technological change, population aging, globalization, and changes in corporate organization are reshaping what kinds of jobs are available, how workers are paid, and how economic opportunities differ across workers and regions.

Our research studies these changes using Japanese microdata, with particular attention to the forces that are likely to shape the future of work. This includes a project on automation and the disappearance of routine occupations, the effects of automation and offshoring on wage inequality, and the evolution of employer concentration in national and local labor markets. We also study how demographic and social changes interact with the labor market, including the employment and earnings penalties associated with childcare and eldercare, as well as differences across workers in their exposure to major economic shocks.

An increasingly important part of this research agenda is the impact of AI and new generations of automation. These technologies may affect not only job availability, but also job content and required skills, as well as the organization of occupations, wage inequality, and firms’ decisions about where and how to produce. Japan provides an especially important setting for studying these questions because technological adoption is occurring alongside rapid population aging and persistent labor shortages.

Ongoing research will examine how AI, automation, globalization, and demographic change jointly reshape employment, skills, wages, and the organization of work in Japan. These issues are central to understanding the future of the Japanese economy and also provide broader lessons for other advanced economies facing similar technological and demographic transitions.

A new emerging research theme is the larger question of Japan’s role in the world, Asia, and the Indo-Pacific – both in terms of security and political power-balancing, and also by presenting an alternative way of organizing the economy and society that stands up to the American version of capitalism. We know that monocultures lose innovation and creativity in the long run, and for humankind to survive over time, variations in capitalism and organizing society may offer helpful insights.

Japan offers a clear alternative to the U.S. by placing emphasis on social stability (e.g., through employment protection) over fast turnaround and hyper-liquid labor mobility. The tradeoffs Japan makes in organizing its productive and social activities are significant and offer a wide range of possibilities to explore.