"NO CREATIVE DESTRUCTION"

[Taro Toporific]

Fading innovation prowess adds to Japan's burden
"As if bust banks, entrenched deflation and 12 years of economic stagnation were not bad enough, Japan is having to face another unpalatable truth: the famed capacity of its companies for innovation is fading.

``When normal growth resumes, the maximum sustainable rate will depend in part on the ability of Japanese firms to develop and deploy new technology. If Japan's innovative capacity is growing at a slower rate than in past decades, this could limit Japan's future prospects,'' Branstetter and Nakamura wrote [in a new paper for the National Bureau of Economic Research, based in Cambridge, Mass.].

Japan's poor record in incubating innovative firms was also underscored by the results of last year's Global Entrepreneurship Monitor, which ranked Japan bottom of 37 countries it surveyed....

``Korea, which ahead of the (1997/98 financial) crisis was institutionally similar to 1980s Japan, has proportionately eight times as many entrepreneurs now,'' Eric Fishwick of CLSA Emerging Markets said in a note to clients.

``This more than anything shows that Japan can let creative destruction in, if it really wants to,'' he said.