Commentary / Japan

‘Omotenashi’ underlies Japan’s low economic productivity

by Xiaochen Su

THE DIPLOMAT

On a narrow side street in a residential neighborhood in the suburbs of Tokyo, a new apartment building is being built from scratch. Six construction workers are putting up the four-story building using prefabricated parts, while another six workers are manning the different roads leading into the construction site. Holding light wands, the six non-construction workers direct the trucks transporting materials to the site and apologize to each pedestrian who happen to walk by the construction.

In a nearby university, an important exam is taking place. Some 500 test-takers are divided into about 20 classrooms. Aside from the 20 people who each monitor one classroom to prevent cheating, the exam operator also hired an additional 60 staff to count the right number of chairs, tables and papers needed for each classroom. Given that the 20 staff who monitor the classrooms can, by themselves, do the counting and checking before and after the exam is finished and the test-takers leave the classrooms, the 60 “extra” staff do little but sit around, in case their assistance is needed in unforeseen circumstances.

Such everyday examples can help to illustrate Japan’s relatively low productivity levels compared to countries at similar levels of economic development. OECD data shows that in 2016, the Japanese created $41.54 in GDP for every hour worked, below the OECD average of $46.98 and the Group of Seven average of $55.39. Japan’s GDP per hour worked is the lowest in the G7, and lower than all major economies in the OECD except South Korea. Its productivity remains significantly lower than the United States at $63.26, the EU at $47.64, and roughly half that of top-ranked Ireland at $82.15.

Indeed, the above examples show that many workers are not adding value to the economic activity they are hired to partake in. Non-construction workers at the apartment site add no economic value, because transport trucks know exactly where to go after multiple runs and a nuisance to pedestrians does not, in the long-term, dent the value of the apartment being built or the construction firm. Similarly, during the exam, those not monitoring the test are adding little value to the operation of the exam itself. In both cases, the same economic activity can take place with significantly less labor costs. Productivity, in turn, would increase.

However, one idiosyncrasy unique to corporate Japan prevents the simple reduction of unessential workers to improve productivity. That is the concept of omotenashi, which the Japan National Tourist Organization defines as “the Japanese mindset of hospitality … an implicit understanding that there are no menial tasks if the result ensures a great experience for a guest.”

The thinking is that the construction company needs to provide services beyond just construction and the exam operator beyond just monitoring the exam, to ensure their “guests,” whether they are pedestrians, clients or exam-takers, are well looked after. Adding extra workers, then, become a necessary step to achieve omotenashi.

The question here is whether such a perception of hospitality is worth having, given that it will increase labor costs, reduce the average productivity of staff, and thus increase the overall costs involved in business operations. Without a doubt, the costs associated with increased labor are mostly passed on to customers. By toning down omotenashi, Japanese businesses can reduce the operational costs, without even affecting the quality of the final output.

There is little doubt that many Japanese business leaders realize the negative impact omotenashi has on their businesses’ productivity. Yet, to suddenly go against the adherence to omotenashi is to fundamentally rebel against an important corporate norm in Japan. Clients are used to extra workers as a visual expression of omotenashi, meaning a sudden emphasis on leanness on the part of business decision-makers can be interpreted as a decline in service, even if the price tag for clients also decreases. The adherence to the unwritten norm prevents people from being flexible enough to boost productivity in exchange for small sacrifices in perceived service levels.

Fortunately, the paramount importance of omotenashi is being slowly eroded as more Japanese become budget-conscious in their consumption choices. The belated introduction of no-frills budget airlines to the Japanese domestic market is one example of the shift in mentality. Reuters reports that, years after foreign low-cost competitors like JetStar and AirAsia set up long-haul divisions, Japan Airlines is finally following suit. As Japanese consumers signal their willingness to pay less for less service, Japanese businesses will continue to reduce the emphasis on omotenashi to improve their productivity and reduce pricing.

Moreover, Japanese norms that are designed to minimize inconveniences for all parties involved will face a grim reckoning in the future as there simply are not enough laborers to do omotenashi with the same attitude. Neither robots nor foreigners are likely to follow through on the cultural concept as heartily as the Japanese workers used to both giving and receiving omotenashi in their daily lives from a young age.

Perhaps instead of waiting for those days to come, Japanese norms can be reformed pre-emptively to change the expectations of customers being served in every possible way, no matter what labor costs are involved.

Xiaochen Su is a Ph.D. candidate at the University of Tokyo specializing in immigration issues. © 2018, The Diplomat; distributed by Tribune Content Agency,