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CHAPTER 1

Tokyo, 2050

It’s spring 2050, and you’re embarking on a business trip to Tokyo, a city you haven’t visited for thirty-five years. You board your All Nippon Airlines flight in Washington, DC, and after a smooth ride of about two and a half hours find your Mitsubishi 808 supersonic jetliner circling Haneda Airport in preparation for landing.

Though it is not the world’s first supersonic jetliner, the 808 is almost twice as fast as the Anglo-French Concorde of the 1970s, carries more than three times the Concorde’s passenger load, and has almost three times the Concorde’s range. Made of carbon nanofiber and the most advanced electronics, the plane and all its components were entirely developed in Japan after Mitsubishi Heavy Industries acquired Boeing in 2020. This occurred as a result of Boeing’s bankruptcy in the wake of the continuing fires and groundings of its 787 Dreamliner, which many analysts had waggishly come to label the “Nightmare Liner.” Now all of the world’s major airlines depend on the 808 for their long-range flights. Exports of this plane, which is made only in Japan, have helped drive the Japanese trade surplus back to levels last seen in the 1980s.

As the flight settles into its landing pattern, you see spread out below one of the world’s most advanced and convenient airfields. Haneda long ago replaced Narita Airport as Tokyo’s main gateway, and visitors immediately fall in love with it because of its user-friendly systems and the fact that it lies within only thirty minutes of downtown. There is no need for passport or customs control because your travel documents have already been scanned on the plane and reviewed electronically during your flight. After deplaning, you are met by luggage-carrying robots programmed to recognize you as the owner of the suitcases; they accompany you to the train or intelligent vehicle terminals you have preselected.

Here is where you truly make first contact with modern Japan. There are no limousine buses and no taxis with drivers from the airport to downtown Tokyo and other destinations. Rather, there are only robot-driven high-speed trains and driverless vehicles to transport each passenger or group of passengers. No one drives in Japan any longer; the vehicles are all smart, as are the roadways and buildings. A passenger simply steps into a vehicle and tells it the desired destination. The vehicle then automatically moves the passenger to the destination via the fastest route at that particular time. Thanks to these innovations, there are virtually no transportation-related accidents and thus no transportation-related injuries or deaths in Japan anymore.

Smart transport is safe, but also inexpensive, because Japan has developed a variety of low-cost wind, photovoltaic, ocean current, and methane hydrate energy sources and energy-storing devices, linking them all together in a country-wide smart electrical distribution grid. This has reduced the cost of electric-power generation to almost nothing, far below the cost of Japan’s former outdated mix of nuclear and fossil-fuel power plants.

As the vehicle quietly enters the outskirts of Tokyo, you are surprised at the height of the buildings. Because of the instability of much of the land of Japan due to the prevalence of earthquakes, Tokyo had always been a relatively low-rise city. Of course, advances in earthquake-resistant construction had enabled the construction of skyscrapers there beginning in the 1970s. But Tokyo did not then go on to develop a skyline like those of New York and Hong Kong. Now that has changed. Always the leader in earthquake-proof building designs, Japan has pushed its metallurgical and structural technology for dealing with earthquakes to even higher levels, so that the risk of earthquake damage to buildings in the Tokyo area is virtually nonexistent. But even more important has been Japan’s development of the carbon-fiber-based UltraRope technology. First introduced by Finnish elevator-maker Kone in 2012, and then further advanced by Japan’s carbon-fiber and heavy equipment makers, this technology has created cables that are one-seventh the weight of conventional steel cables. Before UltraRope was developed, skyscrapers required riders to change elevators once or twice in going to the top of the building. The extra elevators also made the buildings heavy and thereby limited their height because of pressure on the foundations. The UltraRope cables allow elevators to rise more than a kilometer in a single run, making lighter buildings possible. This has led to the construction in Tokyo of a multitude of office and apartment buildings higher than Dubai’s Burj Khalifa, which was the world’s tallest building in 2015.

Not only has this allowed for more efficient use of space and more comfortable office and living arrangements, it has also resulted in numerous unexpected economic benefits. Greater urban density, as it turns out, fostered a smart city environment that stimulated entrepreneurial activity, which in turn led to more and faster innovation. Of course, other cities around the world have followed Tokyo in building taller structures, but Japan is the global center of advanced structural design and know-how. Its engineering and construction companies are in great demand worldwide, acting as the leaders for most of the world’s major engineering and construction projects.

Upon arrival at the designated hotel, you are greeted in impeccable, unaccented international English by the staff. (This is just a small piece of evidence that Japan has become a fully bilingual country, in which all students must master English as a condition for graduation from high school and for obtaining a job. You also quickly note that many television and Internet broadcasts carry English subtitles, and that many programs are broadcast in English with Japanese subtitles.) You are guided immediately to your room without going through any check-in procedures—those have all been handled electronically from your vehicle while you were en route from the airport.

Indeed, to say everything has been handled electronically may give a false impression. As far as the individual is concerned, it would be more accurate to say that everything is handled verbally. Japanese electronics, telecommunications, and software industries have evolved to the point at which people can simply give verbal commands, statements, or queries to ubiquitous smart devices that perform the necessary and requested operations. People wear watches or other jewelry with embedded electronics and voice-recognition capability. These devices communicate with enormous networks that link vast clouds of databases and hypercomputers. Needless to say, the development of all these capabilities has required the invention of completely new materials, industrial processes, sterile environments, tools, communications technologies, and much more. Of course, Japan is not the only country with such capabilities, but it is where most of them were invented or developed, and where they are the most advanced and the most numerous.

For instance, many visitors come to Japan these days for health reasons. Some have health problems and come for the latest treatments—including stem-cell-based regeneration of severed nerves and malformed limbs—and advanced diagnosis services. Others come to undertake health-related study or to work in Japanese hospitals and institutes. From all perspectives, Japan has become a mecca for people interested in health care, particularly those interested in sustaining their quality of life after age sixty-five. It is easy to understand why. The average life expectation at birth in Japan is now ninety-five, about eight years longer than in any other country. For those who make it to eighty, an age of more than a hundred is virtually certain. Most importantly, the incidence of Alzheimer’s disease and dementia has been dramatically reduced, so that most older Japanese are not only alive, but living well.

This is partly due to diet and positive environmental factors such as public hygiene, clean air and clean water, community health programs for elders, and regular exercise. But it is also due to the most advanced medicines and health-care services on earth. Medical tourism has become one of Japan’s leading industries, topping even the aircraft industry in the yen value of its exported services. Today, everyone in the world with serious medical problems seeks to have a Japanese doctor assist with any operations via video linkup, and they typically seek second opinions from Japan’s best and brightest doctors. The Japanese pharmaceutical industry has become the world leader in mass production of the antibacterial agents that have replaced antibiotics in the fight against infectious diseases, as well as a multitude of drugs and treatments for dealing with dementia, Alzheimer’s disease, and other illnesses of old age.

At the same time, Japanese makers of medical instruments such as CAT and MRI scanners, robots for automated surgery, and patient-monitoring equipment have become by far the world’s leading producers. In addition, Japan’s expertise in life-support systems, chemical medical analysis, and smart artificial limbs, eyes, ears, hearts, hormones, and even partial brains is unmatched. Even more impressive is what the Japanese medical industry has been able to do with stem cells and stem-cell technology. Aged skin can be rejuvenated and replaced. Badly damaged or diseased internal organs such as the liver and pancreas can be mostly removed and recreated. Of course, many genetic disorders can be diagnosed during the fetal period and prevented by use of a combination of targeted gene removal and replacement and stem-cell treatment.

Perhaps the most important and impressive advance has been the evolution of the Japanese medical profession into the unquestioned world leader. Students and interns from all over the world strive for admittance to Japanese medical schools, postdoctoral positions, and internship programs. Japanese doctors, with their advanced medical training, are eagerly sought by foreign hospitals and as speakers and lecturers at leading universities and conferences. At this moment, if you’re going to have surgery, you want your doctor to be Japanese. If you are planning to have a partial brain transplant, the doctor has to be Japanese, because no non-Japanese doctor has yet mastered the technique.

As in medicine, so in athletics: anyone aspiring to be a world-class player in almost any sport will need a Japanese coach. This was made very clear by the complete dominance of Japanese athletes in the 2020 Tokyo Olympics. In the twentieth century and even in the first two decades of this century, Japan was not renowned for its world-class athletes—except in the Japanese martial arts, where Japan dominated the list of world champions. But in the just-completed Timbuktu Olympic Games, Japanese athletes took eighty gold medals, twice as many as the runner-up Americans. In the past, the Japanese had always been handicapped by small stature, largely as a result of inadequate nutrition in childhood years. By the turn of the twenty-first century, however, Japanese nutrition was not only good; it was better, broadly speaking, than that of any other country, as were medical treatment and disease prevention. The competitive drive of Japanese athletes had always been strong. Once they also had competitive size, they wasted no time in becoming the world’s most feared opponents. Soon they were producing outstanding coaches and developing entirely new training techniques, and increasingly dominated global sports in the same way they came to dominate global construction and global medicine. It has been years since any non-Japanese made it to the top sumo ranks, while Japanese baseball pitchers now hold virtually all the global pitching, batting, home-run, and other baseball records. It goes without saying that Japanese golfers, soccer stars, and tennis players dominate the world matches, and the old America’s Cup sailing race is now called the Yamato Cup.

Not only are Japanese bigger now, but there are also more of them. Japan is one of the few major countries with a growing population and workforce. Women of childbearing age are having an average of 2.3 children per woman, significantly above the population replacement rate of 2.1. In addition, Japan has begun to welcome immigrants, especially those with advanced education and skills. Thus, after a dip in the first decade of the twenty-first century, Japan’s population is growing again and will soon surpass the 150 million mark, even as surrounding countries such as China, Korea, and Russia continue to suffer the slow death of population decline. Naturally, the population growth is driving economic growth. As a result of a growing workforce, combined with strong productivity increases and advances in technology, Japan’s GDP is now increasing at 4.5 percent annually, far beyond that of any other major country and just under double that of China.

The foreign businessmen who visit the headquarters of Japanese corporations quickly see a key element in this explosion of population and economic growth. Almost half of the executives with whom they meet are women and non-Japanese. Indeed, if the event is a board of directors’ meeting, foreign executives sometimes wonder whether their airplane accidentally landed in Oslo or Stockholm instead of in Tokyo. There are so many women on Japanese corporate boards that they actually surpass the Scandinavians in percentage of female board members. This, of course, has revolutionized the policies, mindset, mode of operation, and character of the Japanese corporation. Offices are mostly empty after 5 p.m., as are the bars and fancy watering holes to which Japanese businessmen famously resorted late into the night in the not-so-distant past. Company golf weekends have also become rarer and less lavish, replaced by family-oriented visits to nice resorts and child-friendly attractions. Also a thing of the past is the elaborate system of formal sign-offs (the ringi system) on new proposals by every corporate office. This has been replaced by Skype calls and quick approvals. In the wake of these changes, Japanese companies have become admired and feared for their bold, risk-taking attitudes and quick decision making.

Of the leading global companies in the Nikkei 1000 (formerly the Fortune 500), fully a quarter are Japanese. Partly this is because Japan now boasts the world’s best business schools. For example, Harvard Business School is now ranked no better than number ten on the global scale, with Japan’s Hitotsubashi, Keio, and Kyoto University business schools considered the top three and the European INSEAD ranked in the fourth spot.

The rise of Japanese business schools, along with the new role of women executives, has sparked dramatic shifts in corporate governance. The concept of necessary and adequate profit has replaced maintenance of employment as the main objective of the Japanese corporation. Beyond this, two shifts in the global economy have tended to favor Japanese management and economic doctrines and practices. Rather than becoming more interdependent, as long predicted, the world economy has tended to become somewhat less integrated and less globalized over the past thirty-five years. It has also developed more along the lines of China’s part-state, part-market capitalism, as opposed to America’s mainly free-market capitalism.

Contrary to the predictions of most experts in the period around 2015, global finance and production grew more nationally and regionally based, rather than ever more globalized, over the ensuing years. Partly this was due to the impact of several financial crises in the early years of the century. For instance, the 2010–2014 euro crisis actually drove some members of the European Union to impose capital controls, making it clear to investors everywhere that financial integration without political integration was a recipe for disaster. Similarly, the collapse of the US real-estate bubble between 2006 and 2012 led to greatly increased and more nationally oriented regulatory measures. At the same time, China’s push to make its renminbi (RMB) a reserve currency competitor to the US dollar tended to splinter financial markets further. The dollar had been as close to a global currency as the world had seen since the gold standard of the late nineteenth century, and the effort to substitute the RMB thus led in the direction of less, rather than more, globalization.

New technology developments such as 3-D printing, in concert with rising global wages, ever-increasing automation, and the imposition of carbon taxes, made the extensive global supply chains of the early twenty-first century more and more obsolete. With 3-D printing came the capacity to build a product like a car or a home, or almost any other device, using essentially the same technology used to print books. An operator simply takes cartridges of different materials (metal powder, ground plastic, etc.) and feeds them into the printer like ink. The printer deposits the materials according to a pre-programmed pattern and eventually produces a three-dimensional object—a lock, a hammer, a fork, or what have you. This process sparked a veritable revolution by reducing the importance of economies of scale while also automating or doing away with the necessity of assembly operations. It thus tended to move production of items as close as possible to the source of demand and away from low labor-cost locations because very little labor was involved.

The imposition of steep carbon taxes to offset the impact of pollution and to encourage development of alternative energy raised the cost of air and sea delivery, which also moved production closer to the source of demand. This all worked in favor of the Japanese, whose managers had always tended to control production directly instead of relying on extended and complicated global supply chains. And, it was, after all, the Japanese who had, in the 1950s, actually invented the government-backed capitalism that today is associated with China. Thus has the world moved Japan’s way over the past two generations.

Another important element of the Japanese corporate renaissance has been its extension from manufacturing into the service sectors in which Japan historically lagged. Now Japan’s market share in hotels, insurance companies, banks, online retail stores, and other service industries is equivalent to its strength in manufacturing, and Japan’s overall productivity leads the world.

Business visitors and tourists to Japan these days are also greatly impressed by the size and elaborate outfitting of Japanese homes, apartments, and condominiums. Large living spaces have given ordinary Japanese families room to have live-in domestic or elder-care helpers. In the 2020s, Japan fully abolished tariffs on imports and farm subsidies in accord with the rules of the Trans-Pacific Partnership free-trade agreement. Around the same time, the laws around land use, land taxes, and the transfer of property in Japan were modernized and made open and transparent, so that a true market in land and real estate came into being. A series of deregulatory measures transferred land used for small farming into residential or commercial farming use.

The Japanese had always argued that, as the country was densely populated with mountainous terrain, there was little land available for housing, and houses therefore had to be small and cramped. In the 1970s, these typical Japanese houses were referred to as “rabbit hutches” by a British trade negotiator—a description that became prevalent. Thus, today’s first-time visitors familiar with long-held stereotypes are surprised to find that the combination of advanced smart transportation and the opening of the agricultural land to development has totally transformed the landscape. In place of the “rabbit hutches” are spacious homes surrounded by pleasant gardens. Because Japan has super-high-speed Internet connections throughout the entire country, telecommuting is prevalent, and most homes include fairly extensive office space. These larger homes require more furniture, appliances, and material of all kinds than were needed for the “rabbit hutches.” Of course, this demand has also been a big factor in the country’s rapid economic expansion.

The major factor in this growth, however, has been cutting-edge technology and the development of whole new industries often started by new immigrants to Japan. Whether in the field of biotech, nanotech, electronics, materials, aviation, chemicals, or software, Japanese researchers and corporations—as in the cases of medical and aircraft technology—are in the lead. Government and private-sector support of R&D now accounts for nearly 6 percent of Japan’s GDP. But what has also made a major difference is the fact that this R&D is not random; rather, rigorous review at all stages of funding has made it extremely focused. Moreover, to facilitate and promote technology development, Japan offers bonuses to leading technologists from around the world if they come to work in Japan. Skilled foreigners who move to Japan receive automatic Japanese citizenship, along with grants and assistance in acclimating to the Japanese way of life. This influx of foreign technologists, combined with the entrepreneurial efforts of many new-generation Japanese, has given rise to thousands of new companies and hundreds of entirely new industries centered mostly in Japan.

The increase in Japan’s population and the boom in the economy have allowed Japan to avoid the problems of aging and austerity that have come to plague China, Germany, Korea, and most other major countries. As a result of continuous budget surpluses, the national debt has shrunk from 240 percent of GDP to 50 percent, while health-care costs have fallen from about 9 percent of GDP in 2013 to only 6 percent today. Considering Japan’s still relatively large population over sixty-five years of age, this decline in health-care spending, accompanied by improved health-care results, has itself been a kind of economic miracle. Japan has become the envy of the rest of the world because no other country can match its record of improved health care with falling costs.

At the same time, Japan’s expenditure on defense has grown from 1 percent of GDP to about 3 percent. This expansion began in 2014 when, in the wake of Chinese threats to the Japanese-administered Senkaku Islands, Japan redefined the extent of its defense powers under Article 9 of its constitution, which prohibited Japan from making war. This article had previously been interpreted to mean that Japan could only defend itself against direct invasion; it could not even provide support to an ally who might be under attack while defending Japan. The reinterpretation broadened the self-defense powers to enable cooperation with and support of allies. Later, the article was again redefined to allow Japanese forces to conduct forward defense and to support allies as part of such a defense. Under these reinterpretations, Japan now considers that it effectively has full sovereignty, including the right to go to war when vital national interests are threatened. The military buildup in response to China’s buildup has turned Japan into the world’s third-ranking military power, with a full nuclear arsenal and advanced cyberweapons, along with a panoply of international ballistic missiles. Its ships patrol the western Pacific, the Straits of Malacca, and the Indian Ocean. The combination of technological leadership, a booming economy, and military strength have made Japan an attractive alliance partner; most of the countries of East, Southeast, and South Asia, as well as the EU and the United States, have full security treaties or other security arrangements with Japan.

Japan’s revitalized status in the world has greatly increased the country’s already extensive soft power. In the 1990s, even as the Japanese economy was faltering, important parts of Japanese culture were adopted internationally. Sushi became a global food, kanban just-in-time delivery became a global management technique, karaoke became a global music form, and reading manga became a leading global pastime. Now, with Japan revitalized and booming, Japanese innovations in design, art, food, engineering, science, and much else are penetrating to the far reaches of the globe. The world’s thirst for Japanese performers, professors, chefs, painters, writers, engineers, designers, composers, and scientists—not to mention its political, economic, and social analysts—seems unquenchable. What some hoped would be the Second American Century—and what many predicted would be the Chinese Century—has, in fact, become the Japanese Century.

None of this appeared at all likely just a generation ago. Indeed, in 2014 the prevailing view was that Japan was a national basket case in grave danger of implosion. It was predicted that by 2050 the population would have declined to only about 85 million people, with 40 percent over the age of sixty-five. Some suggested that the last Japanese person might die before 2300. The low birthrate was destroying aspects of Japan that many had always considered fundamental to being Japanese, such as robust families, children as the center of family life, filial piety, respect for and care of elders, and closely knit villages. Men and women delayed or avoided marriage; when they did marry, they had few or no children. The extended Japanese family disappeared as elder care became too burdensome. Thus, from the traditional extended family, Japan progressed to only a nuclear family and often to no family at all. With a shrinking and aging population, the cost of pensions and health care appeared prohibitive in the face of minimal economic growth and a national debt that was a crushing 240 percent of GDP. Japan’s high national savings rate had always enabled the country to finance its own debt internally, but with savings falling and debt rising, analysts were predicting that Japan would soon have to sell its bonds to foreign investors. This, it was felt, would drive interest rates up and soon have debt service payments alone eating up three-fourths of the national budget before any other expenses could be covered.

The once-great Japanese corporations of the 1980s had become mere shadows of their former selves, with some near bankruptcy. Sony, formerly dominant in the electronics industry, had been surpassed by Korea’s Samsung and America’s Apple, suffering loss after loss. In 2012, Japan’s third-largest employer, Panasonic, suffered a US$10 billion loss—the biggest ever by a Japanese manufacturer—which led to the layoff of nearly 40,000 workers. Once world leaders, Japanese semiconductor makers Elpida and Renesas essentially went bankrupt in 2012 and had to be rescued. In the auto industry, Honda had become virtually an American company and Nissan had been flying in formation with Renault of France since the mid-1990s. The important innovations of Japanese management, such as kanban just-in-time delivery, kaizen continuous improvement, and six-sigma quality control, had all become global standards, but new management concepts were slow to emerge. Indeed, many observers noted that Japanese managers seemed slow to adopt the flexibility, hybrid approach, flat organization, and emphasis on innovation of other global managers in Korea, America, Germany, Taiwan, and Singapore. In place of Japanese management techniques, global business schools had begun using case studies of Sony and other Japanese companies to teach how to avoid stagnation, decline, and failure.

Ironically, Japanese business leaders who had been in the habit of criticizing American CEOs for outsourcing and offshoring jobs were now doing the same thing. Similarly, just as the Americans of the 1980s and 1990s had complained that the dollar was too strong, Japanese businesses in the early 2000s were complaining that the yen was too strong. Some analysts wondered whether the whole Japanese economic miracle of the 1960s and the storied virtuosity of Japanese management had been mainly a matter of an undervalued currency and a protected home market. It seemed that Japanese industry was unable to compete on a truly level playing field. In particular, it seemed to be failing at innovation. With a few exceptions, such as Softbank and Rakuten, the hot new ideas and companies of the early years of the twenty-first century like Skype, Google, Huawei, and Samsung came not from Japan but from Europe, the United States, China, and Korea. Smart young people with an eye to learning new things and advancing their careers and ideas flocked to America, China, and even to India, but not to Japan. Meanwhile, young Japanese, instead of traveling or studying abroad or learning English or Mandarin, seemed to stay more at home and to know less about the world than their parents did. It was said that Japan was so comfortable and pleasant there was no need or attraction for Japanese to leave. But clearly this was at best a partial justification, because a large number of young Japanese had become hikikomori, people who isolate themselves and stay at home, locking themselves in their rooms, unable to cope with the pressures of living in Japanese society.

The terrible tsunami and subsequent nuclear-reactor radiation release of 2011 had dealt a hard blow to Japan. Not only were entire communities destroyed, along with much farmland, but all of the country’s nuclear reactors—accounting for 25 percent of its total electric energy supply—were shut down. While a few were restarted, most were not, and this meant that Japan’s dependence on high-priced oil rose dramatically in the years immediately following the catastrophe. With energy so expensive, the prospects were poor for production of anything requiring significant energy inputs.

To add insult to injury, between 2011 and 2012 China moved to humiliate Japan and to drive a wedge between it and the United States by taking quasi-military and even some overt military action against the Japanese-controlled Senkaku Islands (known in China as the Diaoyu Islands), which the Chinese claimed for themselves. In addition, China later encouraged and provided covert support for the independence movement in Okinawa, the site of most of the US military bases in Japan. Clearly China saw Japan as a state in terminal decline—one that could be pushed around as an example to others who might want to contest Chinese claims and power. The United States was bound by treaty to defend Japan against attack. Yet Washington desperately wished to avoid conflict with China, and tried to please all sides. On the one hand, the United States said that it took no position on the validity of the various historical claims to the islands. On the other, it said that it recognized the fact of Japan’s present administration and the importance of not settling the issue by force. President Obama stated publicly in April of 2014 that the islands fell under America’s defense umbrella. But many in Japan and in the rest of the world rightly doubted that the United States would actually go to war with China over anything that happened in the Senkaku Islands. And this doubt only further weakened Japan’s position.

In sum, the outlook for Japan in 2015 was extremely poor in every way. Certainly no one imagined the reality of Japan’s current position in 2050.

What happened? How did Japan change the trajectory of its future?

The purpose of this book is to answer those questions.