By Ichiro Suzuki
The Bank of Japan (BOJ) has recently has announced Ms. Junko Nakagawa enters its policy board as of July 1, if confirmed by the Diet (Parliament). Ms. Nakagawa is currently chief executive officer of Nomura Asset Management, and was formerly deputy co-Chief Financial Officer with Nomura Holdings, Japan’s premier brokerage/ investment banking house. Ms. Nakagawa has been a pioneer as a female executive with Nomura that is often believed to be trapped in a male-dominated culture (though the firm in fact is ahead of the pack in the country in enhancing diversity and promoting women.) She is the first woman to rise to the top of a major company under an umbrella of Nomura Holdings. Ms. Nakagawa’s rise as a female executive is remarkable not only at Nomura but also in Japan’s corporate world in general. By the standard of the rest of the world, however, Ms. Nakagawa is under-qualified for a seat on the policy board of a central bank. She is set to enter the board with BA in philosophy. She has no extensive and hands-on experiences either in economic research or in capital markets, despite having been deputy co-CFO for several years. She is intelligent, street smart and well-balanced. Nonetheless, is it enough to sit on the board that decides monetary policy for Japan, the third largest economy? In fact, qualification of BOJ’s nine policy board member is depressingly insufficient, by the standard of major central banks. None of the nine has a Ph.D in any field, let alone in economics. Two of them used to be enrolled in a doctoral program in economics but did not finish to get a Ph.D. Governor Haruhiko Kuroda has a masters degree in economics from Oxford. Five others also have a masters degree in economics or management, including the two who didn’t finish their Ph.D programs. The number of masters degree holders will be reduced to five when Ms. Nakagawa enters the board replacing Ms. Takako Masai. While board members without a graduate degree are not uncommon, BA in philosophy is a bit stretch. Appointment of Ms. Nakagawa to replace Ms. Masai as the only female board member maintains a ‘flavor’ of diversity.)
Currently neither Federal Reserve Bank Chairman nor European Central Bank President has a Ph.D in economics. Both Mr. Jerome Powell and Ms. Christen Lagarde are lawyers. However, these two are decisive aberrations, whereas BOJ governor without a Ph.D is a norm. In fact, no BOJ Governor has ever had a Ph.D in economics or in anything. In addition, both the Fed and the ECB are loaded with economics degrees not only in their policy board but also among staff members. Could analyses at the BOJ be as rigorous as they are at other leading central banks, one wonders. (The last Fed chairman without a Ph.D in economics was G. William Miller who served 17 months through August 1979 and was replaced by Paul Volcker due to his inability to tackle the raging inflation. Like Mr. Powell, Mr. Miller also had a JD.) Young professionals and bureaucrats are regularly sent to graduate schools overseas (the U.S. and the U.K. usually) by the Bank of Japan and the Ministry of Finance, the two institutions that supply BOJ governors. However, they never let young men and women stay long enough to finish a doctoral program. Fair enough, from an organization’s perspective. On the other hand, they don’t have a system of bringing in Ph.D holders, either. Degrees in social science fields are hardly taken seriously in Japan while degree holders in science do have their places. Advanced degree holders often find it hard to land a secure and well-paying job. Corporate Japan is built on a system of hiring bachelors’ degree holders straight out of college, shutting down opportunities to those who did not get on board at that timing of their life. Doors can be open later to people with work experiences, but not to those who keep studying until their late 20s. Corporate Japan often sticks to its own human resource programs and outside expertise knowledge is rarely sought after from social science fields. Corporate Japan once sent a large number of its employees to business schools in the U.S. in the 1980-90s. Japanese companies did so because doing it was a fashion not because they wanted to take advantage of what they learn at MBA programs. The expertise they acquired at school was largely ignored. In the worst case, young men who returned home with their MBAs were sent out to branch offices in mid-sized local cities far away from the metropolitan area, for the purpose of having them de-Americanized. The Corporate Japan way of doing business was built over the decades that followed WWII, with limited infusion of new ideas and expertise from outside. Such a system displayed little flaws as long as the economy was growing fast. Then, once the economy had stopped growing, it made Japanese management clueless in their next steps as their accumulated knowledge based on their experiences lost value in a world of a different paradigm. The way Corporate Japan ran their businesses met with almost a wholesale denial beginning in the 1990s, and they fell hard. They might not have fallen that far, or might have rebounded more quickly, if they had an open and flexible system to outsiders fresh ideas and expertise knowledge. Studies of social science keep evolving in a changing world. Those studies wouldn’t have been where they are today if they had been concluded as valueless. Experiences and common sense are valuable assets without doubt. However, Disrespecting academic credentials and expertise has its price, as Japan may or may not be finding out in the bureaucracy, the central bank or the corporate world. About the author: Mr. Suzuki is a retired banking executive based in Tokyo, Japan.