Twenty years ago, though the term did not exist as such, there was a “Tokyo consensus” reflected in a series of Japanese phrases that became part of universal business jargon: gyosei shido (administrative guidance), whereby the all-powerful Ministry of International Trade and Industry picked winners among sectors and companies and, thus, drove Japan to ever higher competitiveness; keiretsu (industrial groups), whereby Japanese companies were joined by various financial and managerial links, thus achieving both horizontal and vertical integration; kanban (just in time), whereby Japanese manufacturers obtained parts directly from suppliers and sub-contractors that were immediately installed on the assembly line, hence abolishing inventory and greatly enhancing productivity; and kaizen (continuous improvement), whereby all members of the “corporate family” participate in multiple improvements, no matter how seemingly small.

During the 1980s, when Japan’s gross domestic product was recording very high growth, a monumental asset inflation was occurring. As the stock market and real estate prices soared, interest rates were kept very low, banks provided ample and easy credit and companies invested continuously, especially in construction, resulting in massive loans and overcapacity. Then the bubble burst. The stock market and real estate prices crashed and the banks were faced with mountains of bad loans. Furthermore, during these years, Japanese industry continued to rely on existing strengths, with very little innovation to meet the new challenges of globalisation, information technology and the services revolution and, thus, to act as growth engines. There are some very strong companies in Japan that weathered the crisis, but they are in traditional sectors such as automotive (Toyota and Honda) or electronic office equipment (Canon) rather than in what might be termed 21st-century leading sectors. Japan remains especially weak in services. Consequently, the state of its economy remains highly dependent on exports.