After years of painful and politically difficult reform, Japan, Inc. is back on track economically, and experts seem confident that the process, if managed properly, will continue. At the same time, however, they caution that unexpected developments in the global economy, as well as potential problems with domestic consumption and income growth, could derail the reform effort. In this special report, Knowledge at Wharton looks at the strengths and weaknesses of the Japanese recovery; the current real estate boom, at least in some parts of the country; Japan’s thriving animated entertainment industry, known as anime; ongoing corporate governance reform, and attempts to lock up much-needed energy resources in the face of shifting global demand.

Japan: Optimism about Its Recovery, Concerns about Its Sustainability

It was a tiny increase, from zero to just 0.25%, but when the Bank of Japan raised interest rates this summer for the first time in six years, the little bump heralded the end of 15 years of a deflationary spiral and painful economic restructuring that has forever altered the Japanese way of life. Japan seems to be back on track economically, but Wharton faculty and analysts warn that the country may still hit some potholes down the road.

Going Up: Real Estate Is on the Rise Again in Japan

Nothing symbolizes Japan’s bubble economy, or its subsequent long slump, more than real estate. Now, after dropping by as much as 70%, real estate prices are ticking up, signaling a renewed Japanese economy. A major restructuring of the nation’s financial system, along with an injection of foreign capital and the introduction of publicly traded real estate investment trusts, are driving the real estate revival, according to Wharton faculty and real estate analysts working in Tokyo.

Anime: Japan’s ‘Gross National Cool’

Giant robot men, wide-eyed princesses and epic battles in a post-apocalyptic age: Can this be the stuff of Japan’s next great industry? Japan built the world’s second-largest economy on electronics and automobiles. Now animated entertainment, known as anime, is a growing global industry whose fans spend more than $5 billion on film and DVDs and an additional $18 billion on anime-linked merchandise. “Anime is creating new interest in all things Japanese, including business,” says one anime-watcher.

Japan’s Own Brand of Corporate Governance: Shareholders Don’t Rule

As Japan, Inc. continues to restructure, enthusiasm for corporate governance reform is gaining ground. Japan is encouraging companies to add more shareholder-friendly elements, such as accounting and auditing practices. Some firms are also restructuring boards, appointing outsiders and paring down the number of directors. Even a few hostile takeover attempts — long considered a business taboo in consensus-seeking Japan — have erupted. Yet Japan still lags behind Western economies when it comes to respect for shareholder rights.

Japan Strives to Balance Energy Needs with World Politics

As much of the world grapples with higher oil prices, no industrial country is as vulnerable to rising energy costs as Japan. Almost entirely dependent on foreign oil, Japan has focused on conservation and alternative fuels, but recently has begun to push hard to get new access to overseas oil. Wharton faculty and energy analysts say Japan’s new posture has led to tensions with other countries as it tries to lock up much-needed energy resources.

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