Home Leadership The Enigma of Low Trust in Business in Japan

The Enigma of Low Trust in Business in Japan

With

Richard Edelman

January 13, 2023

Using Japanese Values to Thrive in Global Business

Japanese companies have unique cultural, communication, and operational challenges. But they also have values that have led to remarkable longevity. Check out this seminar to hear how these values help earn trust from overseas head offices and develop employees.

Turnaround Leadership: The Differences Between Japan and the West

What's the best way for leaders to communicate a shift in corporate strategy? How do you even know when it's time for such a change? This course explains how Japan might have one answer, Western companies another.

Trust in business and institutions is on a downward trend worldwide. This trend has hit Japan especially hard. Public trust in major institutions like business and government has remained low since the 2011 Fukushima disaster and has yet to recover.

Using Japanese Values to Thrive in Global Business

Japanese companies have unique cultural, communication, and operational challenges. But they also have values that have led to remarkable longevity. Check out this seminar to hear how these values help earn trust from overseas head offices and develop employees.

What was the catalyst for the decline in confidence in institutions, and what can be done to correct it? Are Japanese values changing?

Richard Edelman, President and CEO of the research firm Edelman shared his thoughts at a 2022 GLOBIS University seminar. Below is a partial transcript of the seminar, edited for clarity.

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How has trust in institutions changed over the last decade?

Richard Edelman: I want to start by telling you that Japan was fatally wounded in terms of trust in 2011 with Fukushima, and it has never recovered its trust levels. I will make the case that all institutions failed. They didn’t tell the truth, and the Japanese people held them responsible for what was, in effect, a complete debacle.

Take a look at the declines in trust. In one year, Japan moved from a solid middle position akin to Holland or Germany, a sort of European-like level to the lowest in the world. The biggest drop was in government, NGOs, then the media. Business hardly moved.

Remember this number: forty-seven. It’s relevant because that’s what the number is today. There’s been zero increase in trust in business since Fukushima, but the other institutions have recovered. So when there is a dramatic event, you see significant trust loss.

You also see the destruction of belief in leaders. Leaders as spokespeople, but again, a fifty-five-point drop for government officials. Forty-three for CEOs, forty-three for regular employees. Thirty-eight for academics. Only seventeen for persons like myself. So people close to me.

Turnaround Leadership: The Differences Between Japan and the West

What's the best way for leaders to communicate a shift in corporate strategy? How do you even know when it's time for such a change? This course explains how Japan might have one answer, Western companies another.

But again, I trust nobody. In effect, this is a nullity. Japan is a nation of distrusters. And I would argue that it makes it very difficult to run forward when you’re looking back over your shoulder. And it’s part of Japan’s malaise. The lack of trust in institutions.

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Trust in Business vs. Trust in Government

So let’s quantify this. Japan is second from the bottom. Only the Russians trust their institutions less. This is hardly something to be recommended. I also want you to see, though, that America and Britain have become fourth and fifth from the bottom. And American trust is a phenomenon. Republicans are the reason for the loss of trust in America. Meaning Republican trust in institutions, media, and government in the twenties. So America’s number is lowered by low trust in institutions by Republicans.

The sad reality is that you’ll not find a democracy over sixty. We consider sixty as the dividing line of trust. If you’re sort of in the OK level, you’re in the fifties, but not a single democracy is on the top. That is in the West. You see democracies in Asia, but none in the West. So when I talk about institutional failing, democracies in the West are losing.

The Failure to Re-establish Trust in Japanese Business

All institutions are distrusted in Japan.

Remember I told you that number forty-seven was to be remembered? Business today is forty-six. It has not budged since 2012. There have been significant rises in government, media, and NGOs. But in effect, they’re sort of recovering to somewhat less than they had before. So you see a new low level across the board.

But business is the most trusted institution. This is true in Japan, as well. It’s true in almost every country in the world except for autocracies. Except for China. Except for Saudi Arabia. Of all the slides I’m going to show you today, this is the most important one. The mass class divide in Japan is today twenty-one points. Five years ago, it was two points. Going from two to twenty-one, and the reason for this is actually low trust in business.

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Take a look at the delta between high-income earners and low-income earners regarding trust in business in Japan. It’s twenty-eight points. This is about the highest in the world of any country we study. This is a bad thing for business. I have some hypotheses about why that is, but it has to do with wage levels. It has to do with a sense of fairness. Okay. It’s not great for the other institutions either, by the way, media, government, etc.

But business, this should be circled with a big red line because this is going to cause trouble. Trust inequality in Japan has not been this high since the recovery period from Fukushima. The mass class divide is back to where it was in the year after Fukushima. And again. We haven’t had a disaster. We haven’t had an event. We haven’t had a causing thing, which was Fukushima. So you can’t explain it away through, “Oh, it was a crisis.”

No, this is a slow, developing crisis which business better wake up to.

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Hori-san and I really have to talk about this: the why, the how, and the what to fix. Also, again, this is a change for Japan that was caused by Fukushima. The lowest levels of trust are the establishment leaders who are the classic authority figures: government leaders, journalists, and CEOs. All distrusted in Japan.

Who is trusted? Scientists. And trust is local in my CEO. This is a very important trend.

Trust moved from a top-down Moses model to peer-to-peer ten years ago. Now, because social media is a cesspool, it’s moved to local. My CEO, my company, and my company’s publications because I can control that relationship. If I don’t like it, I can quit. I can go somewhere else.

What can companies do to increase trust in business?

Edelman: I think the first thing that Japanese companies must do is the same as in America, which is re-skilling. The guy who is on the line at Sega is an instance.

You might need one-third fewer employees in five years. What happens to that one-third? Bye bye.

But is the government going to deal with it? I think businesses should deal with it now and upskill everybody so that they feel as if they’re investing in their future. I also think the difference between business and government in democracies on trust is competence. And that’s why on so many issues like sustainability, don’t wait for government, don’t wait for the mandate. Move.

For example, if you see that people are gaming too many hours, fix the problem before the government says we need to intervene. You can do something before it’s required.