Can socio-cultural factors aid in the understanding of economic problems? The case of Japan

We analyse the current Japanese economic downturn in the context of unique Japanese socio-cultural features, and contrast the Japanese conditions with those in the US. We find that socio-cultural factors shed light on economic conditions. In particular, the Japanese collectivist culture, keiretsu system, and corporate governance structure have all contributed to overcapacity, an inefficient allocation of resources, lax corporate oversight, and a reluctance to assume personal responsibility for problems. The "iron triangle" and the amakudari tradition have fostered corruption and excessive government spending which has stifled the entrepreneurial spirit, led to the failure of banks, slowed the reform process and increased reliance on government-financed growth. We conclude that a long-term economic problem of the Japanese kind is unlikely in the US.