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Japan ranking shrink’s 9 percent year on year

Japan ranking shrink’s 9 percent year on year

The country and its brands prepare for the great work ahead

2021 was always going to be a fresh new chapter for Japan. In the aftermath of what would have undoubtedly been successful Olympic games, and just two years into the new Reiwa era, the country was poised to write a new story of optimism and change.

Today, Japan’s capacity for change is, if anything, greater than ever. But the fact remains that 2021 will not, of course, unfold the way that anyone had thought – in Japan, or across the world. The country’s path forward will not be one of smooth ascendance. Instead, it will have to be one of agile, careful maneuvering.

For Japan’s workers, companies, and brands, this will be a year of recovery, rebuilding, and reprioritization. There is great work ahead.

Significant challenges await

This moment is more than a readjustment. COVID-19 is an unprecedented global crisis, for which there is no established rulebook. Japan has, in many ways, fared far better than most major countries, though the coronavirus’s impact on Japan’s most directly affected citizens has undoubtedly been tragic. As of early September 2020, Japan had recorded some 71,000 confirmed COVID-19 cases, and some 1,350 deaths.

Even in the face of a relatively milder national epidemic, Japan’s unique demographic and business climate means the country has less of a macroeconomic cushion – and less room to maneuver – when facing external shocks. Japan’s persistently low inflation rate, for example, has left the country’s central bankers and policy makers with fewer tools to address a global recession. It also means that Japan, more so than in other countries, will have to contend with the specter of deflation alongside its many other economic rebuilding challenges.

This rebuilding process will be significant. By the second quarter of 2020, the Japanese economy had shrunk to a level smaller than when Prime Minister Shinzo Abe first took power in 2012 - representing a projected yearly decline as large as 20 percent. This was not the situation Prime Minister Abe was hoping to leave his successor when he stepped down in September 2020.

What’s more, regardless of their opinion on Prime Minister Abe’s tenure, most people in Japan would agree that he’s left his successor a lot of unfinished work in launching the so-called “Third Arrow” of “Abenomics.” There remains significant debate about what Japan should do (if anything) to modernize its labor laws, trade protections, and tax codes. Even less contentious “Third Arrow” targets like improving business productivity and female empowerment face structural hurdles.

Business-wise, it’s no secret that COVID-19 has had an unequal impact across industries and sectors. Unfortunately, some of those worst impacted business sectors globally are also those in which Japan is a strong global leader. The country’s auto industry, for instance – the source of five entries in this year’s BrandZ™ Japan Top 50, including the country’s most valuable brand, Toyota – will have to get creative to counter lower levels of consumer spending for big-ticket items.  

Then there’s the travel industry, which is perhaps the most impacted brand category this year globally. Despite well-intentioned efforts by the Japanese government to prop up domestic tourism after the pandemic, 2020 was supposed to be Japan’s big re-introduction as a mass travel destination for foreign visitors, for whom visa rules had recently been relaxed. The country’s tourist infrastructure, public transit, and hotel stock had all been refreshed in the runup to the 2020 Olympics. The postponement of the Olympics was not quite a crushing blow – a global pandemic tends to put things in perspective – but nevertheless represented a dream deferred.

Repurposing Brands for the Future

A dream deferred – but not a dream extinguished. For just as surely as institutions like sport and travel will surely return this decade, so too will Japan still get a chance to write a new and hopeful chapter in its modern economic history. Japan is still third-largest economy in the world, and something of a singular business miracle.

Even if Japanese business is changing - in many ways, it will likely change for the better in the wake of the coronavirus crisis. Partly because of the way that Japan didn’t have a smooth transition to “work from home” during the pandemic, there is finally greater will on the part of government and business leaders to accelerate digitalization in everyday work life. This could be a crucial boon for Japan in the coming decade, as it could greatly benefit from increased productivity in the face of a declining and aging population. Greater workplace flexibility around work hours and telecommuting will also benefit the cause of advancing women in business.

Of course, it’s astounding how successful Japanese brands have been in the past decade even without full transitions toward omnichannel commerce and marketing. Modern Japan’s ability to export great products has never been in doubt – and, increasingly, it’s also exporting great brands. Has any company brought more joy to the world during this pandemic era than Nintendo? Has any product – short of a successful vaccine - been more coveted than a Nintendo Switch?

Going forward, genuine opportunities for Japanese growth and recovery will not be scarce. Indeed, China’s emergence from the worst of the pandemic has already begun to spur demand for Japanese electronics and industrial equipment. In the coming years, Japanese businesses’ supply chains and demand planning will need to be more flexible and resilient than ever before – but then, this new world of agility was already taking shape before COVID-19.

One irony of the current moment for Japan is that in returning its GDP back to pre-pandemic levels – a process that could extend through 2022 or 2023 – Japan, like much of the world, will probably finally see the kind of elevated year-on-year GDP growth rates that it had long coveted in normal times. What this means is that real achievement of the next few years will not be captured in headline economic figures, but in the ways that Japanese society pulls together to create an even more resilient and inclusive economy. Going forward, businesses and brands will have a crucial role to play in building a stronger Japan.

It won’t all be easy going: Constrained household income will undoubtedly be a stubborn reality in the years to come. But while Japanese consumers may be worrying about their budgets, they are also some of the most discerning, sophisticated, and trendsetting shoppers in the world. When they see true innovation and value, they are willing to champion it well before the rest of the world catches on.

As this year’s BrandZ™ analysis will show, Meaningfully Different businesses are still rewarded in Japan – and the country’s iconic brands are just as capable of changing the world as they were during the country’s 20th century economic miracle.