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The prevailing image of the Japanese management system in very large companies is very similar, if not the same as the management system used in small Japanese companies, because business management systems are, after all, a product of their particular national culture. How can we explain the Japanese economic miracle? Since the end of World War 2, until about the 1970′s, Japan had experienced a profound economic transformation. By the 1980′s, Japan had become the second largest economy in the world, to the envy and admiration of other nations. This remarkable period of economic prosperity during the latter half of the 20th century has become known as the Japanese ‘Economic Miracle’. There are a range of arguments made by scholars who have attempted to explain the reason behind Japan’s economic success in the late 20th century, and these vary considerably. One of these reasons is that Japan’s economic success has been solely as a result of the culture and traditions of Japan. This argument is based on the assumption that culture is the main contributing factor of a nation’s economy. Morishima has emphasized that in the context of Japan’s economic success, the Confucian tradition of Japan has played a key role, arguing that “religious and ethical systems shape human economic behavior and consequently the nature and performance of their economies. ” Other ideas have been used to understand Japan’s rise to success in the late 20th century such as market regulation, for example, Japan’s response to market signals, bureaucratic regulation by selecting and fostering strategic industries and political, economic and social conditions in Japan. Japan’s successful economy started to decline in 1973 during the oil crisis, when the price of oil quadrupled, acting as a catalyst for economic failure in Japan. Effectively, the high price of oil had negative effects on the Japanese manufacturing industry. Japan responded by focusing its attention from energy dependent industry to a more knowledge-based industry, thus averting the crisis from worsening, and enhancing the health of its economy. Japan experienced a ‘bubble economy’ in the years 1987 – 90. This had come about as the result of asset prices rising far beyond their actual value, particularly those of land and shares. Land prices fell sharply in 1990 when the Bank of Japan increased the official interest rate, thus triggering a massive sell-off of shares. Since this time Japan has faced challenges such as an aging population and the currency crisis in Asia, but has recovered considerably and today still has a strong economy, rivaled by only the United States, China and the European Union. Almost every business policy that the Japanese are well-known for is as a result of the post-World War 2 economic reconstruction in Japan. The first root factor of the modern Japanese management system is a sense of national identity. This is mainly due to the fact that Japan is an isolated, island nation. Actually, this sense of national identity has existed since feudal times in Japan. The second factor of the modern Japanese management system is the notion of Confucianism; while imported from China long ago, the Japanese have their own version of Confucianism, which is central to understanding the modern Japanese management system. Confucianism in Japan has three main aspects; loyalty, filial piety and respect for learning. Loyalty and filial piety in Japan are reflected in Japanese management with honne and tatemae, or one’s own feelings and one’s public stance, which may and often differ between each other according to the individual. Loyalty is also seen in very large companies in Japan, where on graduating from high school or university and entering into employment with a Japanese company, one will usually gain ‘lifetime employment’ with his or her company, thus reflecting the Confucian aspect of loyalty. In this sense, Confucianism plays a major role with Japanese management practices. Group orientation, or shudanshugi also plays an important role in modern Japanese business management practices. This is also a prominent attribute in Japanese society, for example to see a group of Japanese tourists in a foreign country, one will notice that the people in the group will always stay close together. This aspect of Japanese culture is of course also very apparent within Japanese companies, and has been deeply ingrained into Japanese society itself since the Tokugawa period. Shudanshugi can be seen with almost any social aspect of Japan, thus it is evident with both large and small Japanese companies. Although this desire to be part of a group may be also apparent with other countries, Japan in particular sees this group mentality as natural, not an exterior phenomenon as it may be seen with other cultures. Individual responsibility is not important in Japan, as it is in the West. Instead, groups are given the responsibilites. This is another example of the group-orientated ethics of Japan and the Japanese workforce. There are also two types of attitudes towards authority in Japan: kengen and ken’i, or simply, formal authority and personal influence. As such, Japanese companies both small and very large tend to be run on ken’i, personal influence, which is different from a general Western perspective, where emphasis is usually placed on delegated authority. The fourth important aspect of Japanese business culture is based on regional competition, something that has existed in Japan since feudal times. This is not so much an artificial construction of modern Japan, but something that has been rooted in Japanese culture for a long time. For one example, the competition between firms in Japan in the kantou and kansai regions in modern times reflects the regional competition between these same areas as far back as the beginnings of the Tokugawa period. This cultural aspect of modern Japan is probably reflected more visibly in the business management systems more often with very large companies, than smaller companies in Japan. There are two basic forms of obligation in Japanese society, which can be seen in the business culture of Japan. On refers to a debt that is not able to be repaid, for example one’s debt to their parents or the debt incurred from saving another’s life. While it cannot be repaid, one will try to repay it. This type of obligation is also apparent with entering into lifetime employment with a very large Japanese company, and is tied in with the Confucian notion of loyalty. The second form of obligation, giri, is incurred from receiving a favour, such as leasing an apartment to a tenant. Along with the aforementioned aspects of Japanese culture, there are many more aspects present with Japanese culture, and along with it the Japanese management systems of both small and very large companies. In simple terms, Japanese business management styles are a by-product of the Japanese national culture, as such, each type of management system is not much far removed from the other. In fact, we see such cultural aspects in almost any facet of society in Japan. It is immediately apparent that culture influences business practices and in effect business management systems. Entire theses have been written around this idea. One such example is Kahn’s ‘Confucian Economic System’, used to describe Japan, Hong Kong, Taiwan, Singapore and Korea’s cultural links to business practices. Kahn describes the features of these ‘neo-Confucian’ economies to be related to a number of factors, including sobriety, a high value for education, a desire to succeed, seriousness about life and a hard-working ethic. Along with a culturally ingrained, Confucian sense of loyalty, there is also a sense of harmony in the Japanese workplace, as there are with the group-oriented mindset of Japanese society. This is evidenced by strike-free workplaces in modern Japan, thus placing an emphasis on co-operation and mutual obligation, rather than equality. The cultural values, relations and structure of modern Japan clearly affect how Japanese society operates, and this is also the case with modern Japanese business management systems in both very large and smaller Japanese companies, as has been proven in this essay. Japan is a very unique country, in that its culture does not completely resemble that of any other one nation, although Japan has borrowed much from other countries to construct its own national identity. It is apparent that Confucianism plays an important role in Japanese culture and in effect its society, business practices and so on. What has been covered in this essay is only a brief glimpse of the complicated and detailed Japanese business management world, including such cultural aspects as group orientation, authority, regional competition, obligations, and overall, the Confucian-based business culture of Japan, which in itself has many important aspects which are used in Japanese social practices and business management systems alike. The reason why the prevailing image of Japanese management systems in very large companies and small companies is very similar, if not the same, is because the Japanese economy, and with it the business structure of virtually any kind of business or large company in Japan is directly influenced by Japanese cultural values, relations and structure, in particular, those of Confucian origin. Many scholars have argued about the reason why Japan has become so successful in the late 20th century, in an attempt to describe the Japanese ‘Economic Miracle’. The first argument that is usually presented is that Japan’s recent economic success is as a result of her culture and tradition. While it has not been proven beyond doubt that this is the only reason behind the ‘Economic Miracle’, it is certainly a compelling argument and clearly demonstrates the powerful influence that culture has over the structure of a national society such as Japan.