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March 28, 2008

On the Road: Tokyo

Glenn Hubbard
Dean and Russell L. Carson Professor of Finance and Economics
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My trip to Asia began in Tokyo with a good omen — cherry blossoms in full bloom. I spoke at a reception with the Tokyo alumni club, coordinated by Hajime Kosai ’96, on the School’s continuing involvement in Asia and around the world. The topics of Master Classes and CaseWorks sparked interest. There were about 40 alumni and prospective students in attendance spanning four decades, including Ernie Higa ’76 — one of Japan’s leading entrepreneurs — who made many new alumni friends.

Later I attended a dinner hosted by Kunho Cho ’78, vice chairman of Lehman Brothers International, that included a small group of alumni. We had a frank insiders’ discussion on the current state of the world’s financial markets. We also talked about private equity strategy in Japan. One camp shared the typical American viewpoint, which is that firms must change board membership to add value to the company. Others thought a different strategy would be appropriate in Japan, given the culture and market realities, and proposed that PE firms should keep the senior leadership to help turn the company around. There is no doubt however that entrepreneurialism in Japan has become more prevalent as a byproduct of deflation as companies have had to innovate.

On Thursday, I spoke at the Tokyo American Center, where I presented an overview of the current economic outlook in the U.S. and Japan, forecasting a slight increase in GDP for both countries in 2009. I noted several issues revolving around political uncertainty: for the U.S., protectionism and tax policy, and for Japan, the political wrangling over Bank of Japan leadership.

Though there are challenges for the global economy, I do remain optimistic about prospects for long-term growth in the U.S. economy (productivity is the key) and also about Japan’s ongoing productivity growth prospects, with needed emphasis on structural reform.