In today’s Finshots, we tell you how Japan’s businesses have continued to survive for ages despite frequent disasters.

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The Story

If you glanced at the morning paper or scoured through internet headlines you probably know that Japan is in distress. Yet again. The New Year didn’t begin very well in the country of the rising sun. Courtesy, a major earthquake that struck central Japan. Thousands of people have been displaced and the death toll slowly seems to be picking up.

But this isn’t new for Japan since it’s among the most seismically active countries in the world. It regularly stays in the news for damage caused by disasters so much so that quakes have become a part of people’s lives. In fact, Japan has about 1,500 earthquakes every year that people can feel. And some kind of seismic activity is recorded about once every five minutes. So after a point people get used to them, as the BBC puts it.

Yet, Japan is the fourth largest economy in the world. And it has had one of the most impressive per capita GDP growth rates between 2012 and 2019, second to just the US during the same time. And mind you, these were the years just following the Great East Japan Earthquake that killed nearly 20,000 people in 2011.

So here’s something to ponder about. How does Japan’s quake-prone economy bounce back every time?

Well, you could say that Abenomics has had a role to play. When Japan was hit by a crisis nearly 13 years ago, its former Prime Minister Late Shinzo Abe stepped in to contain the damage. He believed that Japan could make progress if he could get the multiple levers that drove its economy to work together. He visualised renewed Fiscal Policy, Monetary Policy and Structural Reforms, and got them to work in unison, to achieve just one thing  —  Growth. Interest rates on debt were lowered to help people and businesses get better access to credit. And it materialised into higher spending, increased demand and a better economic picture.

But that’s just on the broader side of things. Japan’s disasters and crises have taught it to always be on its toes. The country has invested heavily in disaster prevention measures and early warning systems. Since 1980, its government has poured in about $6.4 billion on average every year in disaster prevention measures including earthquake insurance for businesses.

Besides, a lot of money also goes into revival and support measures. To begin with, the Japanese government goes beyond its means to cover most of the costs required to rebuild businesses in disaster-affected areas in the form of tax measures.

See, when a region is affected by a natural disaster, businesses find it hard to expand in that area again. So incentives like special treatment for lost assets in the form of income and local tax deductions can help. Areas affected by parallel calamities, say a tsunami get real estate tax exemptions. So if businesses were to invest in these affected areas to build their office spaces and other infrastructure they get tax incentives and financial subsidies.

Small and medium enterprises enjoy these benefits too. So companies never shy away from springing back to normalcy.

But here’s something people may not often talk about when it comes to Japan’s business resilience. Businesses here aren’t just survivors. They’re also entities that last really really long.

You see, more than 52,000 companies in Japan are over a century old. They’re also called shinise which translates into old shops in Japanese. For more context, the country houses the world’s oldest hotel Nishiyama Onsen Keiunkan which opened in the year 705. It also boasts the world’s oldest tea house Tsuen Tea, which poured its first brew in Tokyo in 1160. And beat all of that, the world’s oldest company Kongō Gumi also survives in Japan. It’s a construction company that has been surviving for over 1,400 years and counting.

And these businesses probably didn’t have the kind of disaster preparedness that modern-day governments brought about. Then how did they even survive?

Well, the secret might lie in the fact that most of these long-surviving businesses have thought beyond the sole objective of generating profits.

A beautiful example of this could be Ichiwa, a small mochi (snack) shop founded by a Japanese family in the year 1000. Even today it serves toasted mochi — the only item on the menu — to visitors of the shrine next to which it runs its business. It obviously had multiple opportunities to expand its business. It could sell more stuff like tea or cakes. But Ichiwa never even thought of them. Because making a quick buck was never the goal. Rather, it just stuck to serving customers who stopped by when they visited the shrine with one simple snack. In short, it prioritised long-term sustainability over short-term profits.

And here’s something a study by the Bank of South Korea found out about this practice. Most Japanese companies that focused on their core businesses also rebuilt their businesses easily when disasters struck.

And that’s not the only secret sauce. Japanese businesses also tend to invest in rebuilding the community in turbulent times. It’s something they choose above minimising losses during a disaster.

When the 2011 disaster hit Japan, one of its popular convenience stores Lawson decided to deliver nearly 200,000 meals to victims. It could have just shut down and kept its employees safe while cutting costs. But that’s not what it did. It chose to help the community without considering how much it affected its already struggling business. The end result was that people remembered how the company helped them in times of crisis. And when the chain opened its store in a disaster-affected area just 11 days later, customers flocked to boost its business.

Many other popular and young companies like Yakult and Uniqlo also did what Lawson did. And that could probably create a lasting impression on customers, giving new-age companies the shinese label in the future too.

That’s probably why Japan’s businesses are also a cut above the rest even when their growth curve is disrupted by disasters time and again.

Time for global businesses to take notes from Japan? Perhaps.

Until next time…

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