To the overseas buyer, everything in Japan is looking like a bargain these days.

An investor from Hong Kong is checking out a luxury condo with a price tag of some 5 million dollars.

That's very nice.

Yeah, very high ceiling, very western style design.

He's on the hunt for properties in Japan's major cities and tourist destinations.

I think the price is OK.

Everything in Japan is basically at a discount right now.

Inquiries from overseas about buying up small and medium-sized businesses have also seen a sharp rise.

This Chinese company is looking to
acquire a whiskey brewery.

We have others looking for everything from
an electronics manufacturer, to a kindergarten...

Over the past 2 years we've seen a five or
six-fold increase in such inquiries.

For overseas companies and investors,
it's as if Japanese companies are on sale right now,

and at some 20% off.

As commodity prices soar, wages have also finally begun to rise again in Japan.

Yet the three "lost" decades since Japan's economic bubble burst,

have fundamentally transformed the country's global image and spawned the term "Cheap Japan."

Is Japan's current economic trajectory really on safe ground?

Our far-reaching investigation uncovers the considerable challenges that still need to be overcome.

The Japanese market wants the cheapest,
the best, and the quickest.

The maximum I can ask you to pay me is 5 cents more.

Japan should raise salaries to the same
levels as other countries.

If not, it stands to lose a lot of talent.

There's still lingering trauma from the bubble era.

That has kept Japan from demonstrating its true potential.

What will it take for the world's third largest economy to truly be reinvigorated?

With expert guidance, we launched an in-depth analysis of a wide range of available data.

The clues we uncovered shed new light on the question of Japan's economic revival.

For me, the concept of diversification is key.

It can act as a catalyst for all kinds
of new creative interactions.

In our investigation, we explore the possible roads out of Japan's 3 long decades of stagnation.

With COVID-19 entry restrictions lifted,

Japan's ancient capital of Kyoto bustles with foreign tourists.

Just across the road from Kyoto Station,

this hotel in a prime location was bought by a US investment fund in 2021.

After a 48-year history of ownership by a major regional private railway group,

the sudden announcement came as a surprise to locals.

Nice to meet you all.

The new owner is one of the largest investment funds in the world.

The hotel is one of eight it acquired for some 448 million dollars in total.

Australia's biggest casino hotel operator
is now one of our subsidiaries.

It may be of benefit to your staff to receive
some training experience there.

I'm sure our younger staff would love that.
Thank you very much.

As owner, the investment fund now heads the management of the hotel.

By updating facilities and services,

the fund is looking to increase the hotel's corporate value and secure higher returns.

With the yen now depreciating significantly,
prices in Japan naturally look cheaper from outside.

We believe there are still many businesses,
properties and hotels whose value can be increased.

For the private railway group, selling the hotel was a tough decision,

and one compounded by the pandemic.

Bookings literally evaporated from all of our hotels.

There is a limit to cutting staff and other running costs.

We wanted to protect jobs, while continuing to
serve our customers. That was the deciding factor.

The same investment fund is now accelerating the expansion of its portfolio in Japan.

And how is the business environment?

Very good. Our portfolio companies have really started seeing pretty good rebound.

Fantastic.

With over 7 billion dollars already put in over a 4-year period,

the firm is set to further double-down on its Japanese investments.

Right now, as we look around the world, and in particular in Asia,

Japan is a real standout for us as far as the stability of its interest rate policy

and the availability of financing from banks...

We're also pursuing opportunities and hope to continue to grow our business here in Japan.

As Japan's wage levels have slid to become some of the lowest among developed economies,

the plight of its workforce has also been attracting global attention.

This R&D facility was set up by a Chinese electric appliance manufacturer some three years ago.

It employs more than 160 Japanese engineers.

Nearly 80% of them came here from leading domestic appliance manufacturers.

This function allows sweaters and
other delicates to be washed without damage...

One such engineer is Imai Shunji.

He previously worked on washing machine development at a major Japanese manufacturer for more than a decade.

I've found the degree of freedom
here to be surprisingly high.

I'm able to pursue all the development projects
I'd always wanted to try, but never had the chance to before.

I'm very grateful for the opportunity,
and I'm enjoying every minute of it.

The Shandong-based company, with global sales topping some 27 billion dollars,

actively recruits Japanese workers.

- Hello.
- Nice to meet you.

The company owns research and development facilities at 23 locations across eight countries,

including Japan, staffed with talent from all over the world.

For some of the more experienced engineers, the salaries on offer can top 7,500 dollars a month.

Additional performance-based compensation can even exceed a million dollars.

We believe the technology behind superior products
is the cornerstone of our growth as a company.

Engineers are our greatest resource.

Increasing our investment in R&D globally,
allows us to acquire better people and tech,

which all contributes to the products we create.

The manufacturer is currently focused on developing a new model of washing machine.

The team in charge includes Japanese engineers.

We're collaborating with Ocean University of China,
who are strong in specializing in sterilization technologies.

I see.

Imai from the Kawasaki R&D center, who we met earlier, is a core member of the project.

We want to improve the spin-dry balancer
for the 8kg model.

I see.

We have an idea, so let me send a sample to China
so you can give us your assessment.

The Chinese firm is counting on the knowledge and skills Imai developed

during his time working at a major Japanese manufacturer.

I'm welding plastics.

Imai feels the secret behind the growth of the Chinese firm is its quick decision making, something rarely found among its Japanese counterparts.

Whenever I present a new prototype,
the response from above is always, "Let's try it."

When I was at the Japanese firm, there were gatekeepers
whose permission you had to get first.

As a young engineer, I'd go from one manager
to another to collect signatures.

It was like a baseball team
with too many coaches and managers.

The Chinese manufacturer hopes to further attract Japanese engineers

by offering compensation that truly reflects ability.

Wages for engineers in China,
Europe and the US have risen in recent decades,

yet the income of engineers
in the Japanese market remains stagnant.

Japan should raise pay
to the same levels as other countries.

If not, it will lose a lot of talent.

The pattern of overseas firms acquiring Japanese companies and workers

intensified in the wake of bursting of Japan's economic bubble in the early 90s.

Now, the trend is gaining more momentum than ever.

This firm brokers mergers and acquisitions of small businesses.

Inquiries about buying Japanese companies have soared four-fold over the past two years.

This year, numbers are climbing at an even faster pace.

In addition to inquiries from China, Europe and the US, those from Southeast Asia have seen an upswing too.

Some 25% now come from ASEAN countries
like Singapore and Malaysia.

The region may even be gradually outpacing Japan.

Japan has come to be seen as "cheap" in the eyes of the world.

Yet some three decades ago, when NHK reporter Hoshi Makoto was born, it was a very different situation.

This is the spot this photo was taken.
It still has the same purple roof.

Hoshi has come to visit a place that still carries traces of that now distant era.

The former home of Juliana's, a symbol of bubble era exuberance.

In the nightclub's heyday, Japan's economy was overheating.

Growth was fueled by the plethora of iconic Made-in-Japan products sweeping the globe at the time,

from automobiles to consumer electronics.

In an era where lifetime employment was the norm,

companies invested substantial time and money in developing their human resources,

as they released a never-ending succession of high value-added products onto the market.

This created a virtuous cycle of increased profits feeding into wage hikes.

Yet by the time Hoshi entered elementary school, the situation had been dramatically turned on its head.

Is this one of the dancing platforms?

As Japan's economy tanked, businesses across the country fell like dominoes.

Juliana's too would eventually close its doors.

The bubble era was such a giddy period.
It's hard to imagine in today's Japan.

Just the sheer level of energy
the country was emanating...

I wish I could have experienced
what life was like back then.

When the bubble burst, Japan found itself swallowed up by the forces of globalization.

The country was plunged into a new norm marked by chronic wage and price stagnation, that would continue for the next 3 decades.

The generation born as the bubble era ended, would grow up taking shelves filled with cut-price commodities for granted.

Professor Miyamoto Hiroaki of Tokyo Metropolitan University

previously served as an economist at the International Monetary Fund.

How did Japan end up in this situation?

The collapse of the asset price bubble prompted
Japanese companies to shift their focus to cost-cutting.

Reducing debt became their top priority, with corporate restructuring an inevitable part of that.

Cost-cutting led to price reduction,
sparking a new price war.

If you look at Japan alone, that doesn't
necessarily sound like a bad situation...

When commodity prices are low,
employers cannot raise wages.

So, incomes don't go up, preventing
households and consumers from getting rich.

Japan thus fell into a deflationary spiral
where both wages and prices continued to stagnate.

Comparing Japan's wage growth over time against that of the United States,

we see that both high and low-income US salaries have risen by more than 15% over the past 30 years.

By contrast, Japan has seen wages decrease by some 10 to 20% across all income levels during the same period.

In its pursuit of price competition, Japan has been left behind globally in terms of growth.

The bursting of Japan's bubble pushed the country onto a deflationary path.

Now though, as other economies continue to grow, Japan is being confronted with the limits of that approach.

Vietnam represents a major garment production hub for the Japanese market.

Ieda Yosuke works for a textile trading firm that's been operating in the country for 3 decades already, harnessing Vietnam's low cost of labor.

The company produces clothing for Japanese department stores and specialty shops at its dedicated factory in Ho Chi Minh City.

However, the nearly 2,000 workers it once employed at its peak is now down to just 500.

The issue is labor shortage.

There just aren't enough workers to meet demand.

Over the past 30 years, Vietnam's GDP has grown sevenfold. Average wages have also been on the rise.

Meanwhile, unit prices of clothing purchased in Japan have dropped to some 60% of their previous value.

As a supplier to the Japanese market, this factory can't offer sufficiently competitive wages, and is struggling to attract workers.

We could hire more staff if we paid higher wages,
but that would push up the price of our products.

Our mission is to offer quality products
at affordable prices.

Here in Ho Chi Minh City we've begun to reach our limit.

Even in Bangladesh, where manufacturing sector wages are among the lowest in Asia,

Japanese cut-price businesses are reaching a deadlock.

Matsushita Tomokazu works for a textile trading company.

He's currently having trouble procuring products for Japan.

On this day, he's visiting a factory whose principal clientele are fast-fashion and cut-price brands.

Matsushita is negotiating a deal to produce T-shirts to be sold in Japan for some 6 dollars each.

To be able to make a profit, the item must be manufactured for no more than a dollar and 65 cents per piece.

As we already discussed and shared with you, the difference is so big, around like 15 to 20 cents.

- 15 to 20 cents?
- Yeah, the difference.

The factory‘s best offer is to produce for a dollar and 80 cents per piece.

Factory managers are concerned about Japanese quality control, which is far stricter than that for Western companies.

They say the time and labor required to meet those standards adds to their costs.

The problem is the product inspection.

Japan is strict about quality, requiring a full inspection.

Enter it again.

The factory eventually reluctantly agrees to further cut their production cost,

something which directly affects the wages workers can receive.

Now, you can note down the prices. 1.70 from, as said, 2.10.

That's not going to work.

- No chance to reduce?
- I've given you a very good price.

I don't think so.

I think you can easily convince your buyer to approve it.

On this day, the two parties fail to reach a deal.

Matsushita continues his search for a factory that can accept his terms.

Wherever he goes, he finds himself rebuked for not offering a fair price for the value of his product.

The Japanese market wants the cheapest,
the best, and the quickest.

You sell T-shirts for less than 5 dollars in Japan, so
how can I ask you for 5 dollars?

The maximum I can ask you to pay me
is 5 cents more.

If Japan were a rich country, where wages were higher,
and people could spend more on clothing,

then our business would be easier.

But that's not the case.

Most recently, in an ironic twist, garment factories in Japan that were once undercut by cheap labor overseas,

are now suddenly being inundated with orders again.

It says,
"Can you make 200 shirt dresses and 300 work shirts?"

I declined citing labor shortage.

We'd need at least two or three more workers to handle it.

See you.

For over two decades, this factory hasn't been able to hire new graduates, leaving its work force to age.

It now can't even afford to meet extra demand.

They drove many of us out of business
by shifting their production overseas.

Now they're moving it back to Japan.
It's all a bit too convenient on their part.

We saw how the quality companies demand
doesn't much the price they're willing to pay.

In the past, Japanese companies shifted
production overseas to reduce labor costs.

But over time, those countries' economies developed.

In countries like Bangladesh and Vietnam,
that serve as production hubs for Japanese labels,

labor costs have increased 2.5-fold in the last 10 years.

We often use the terms "developed countries"
and "developing countries."

I think Japan is in some ways now
in a state of becoming a "declining country" of sorts.

Professor Miyamoto describes Japan as being in a phase of decline.

It's a situation that's become quite evident in Thailand, where many Japanese companies operate.

At an employment agency in the capital Bangkok, job seekers are steering clear of Japanese companies, citing the low salaries on offer.

This Japanese company is offering
about 3,000 dollars a month.

I can negotiate higher pay with a Thai company.

Let me think about it.

This chart compares average annual salaries in Japan and Thailand.

Fresh graduates earn more in Japan, but Thai workers overtake their Japanese peers before they reach section chief level.

After that, the gap just continues to widen.

Japanese firms have started losing out on the
recruitment side over the past couple of years.

Job seekers apparently see more
potential with Thai employers.

They believe they'll see their pay go up some
20 to 40% within two or three years.

Another data set reveals a decline in Japan's overall competitive status globally.

Swiss business school IMD publishes annual world competitiveness rankings.

Until 30 years ago, Japan topped the list, but its ranking has since continued to fall.

It now stands in just 34th place.

That's below Southeast Asian nations such as Malaysia and Thailand.

A country's economic power determines
how much influence it can exert in the world.

China's presence is growing internationally
because its GDP is now the second-largest in the world.

Countries cannot afford to brush China aside.

By contrast, Japan's status continues to slide,
making it tough to get its voice heard.

That's not good.

How do you think Japan can remedy the situation?

To turn things around I believe foreign investment is key.

Cash injected from abroad can help reinvigorate
companies and give them a global perspective.

It can be a huge boost for a firm,
and can really help revive the Japanese economy.

Some companies are now actively seeking to harness foreign investment in an effort to bolster their business.

In 2021, this pharmaceutical company was bought by a US investment fund for around 1.8 billion dollars.

We saw better performance than expected
in the first half of this year.

We're definitely seeing change.

An executive with a proven track record appointed by the fund took the risk of expanding the business into a new area.

The products concerned became a massive hit.

Many firms in Japan have not been able to reach
their full potential, or even consider how to do so.

I think the cultural climate in Japan
really creates obstacles to risk-taking.

Increasingly, Japanese firms are beginning to regard international partnerships,

or acquisition by foreign firms as a chance to breathe new life into their business.

This event in Tokyo brought together startups, both from across Japan and overseas.

Our city, Ota City, is very famous for manufacturing.

You can rent office space here at very low cost.

The Ota City Industrial Promotion Organization is advertising its small local factories to visitors from abroad.

It's also encouraging joint ventures, such as the construction of a factory-office complex where foreign firms can set up base.

The past year has seen some 18 new projects.

We want to attract businesses keen to launch R&D
and production bases in Japan,

or procure materials from Japanese companies.

Their coming here would give Ota a big boost.

This precision equipment manufacturer with 52 years in the business is pinning its hopes on the initiative.

Its principal products include cutting machines for nori seaweed.

Cutting this type of seaweed
produces waste known as nori powder.

Cutters from other manufacturers create
far more of this waste.

Kumakura Kenichi is the company's chairperson.

He is keen to sell products based on their high-precision technology to overseas firms.

In its manufacturing heyday some 40 years ago, Ota was home to over 9,000 small factories.

I wonder if they've closed down.

But their number has more than halved since then.

Many small factories struggled as their clients, Japanese companies, sought to aggressively cut costs following the collapse of the bubble economy.

I was called to a client company
where I found managers from several other factories.

The client demanded we give a quote
for a particular job in front of everyone gathered.

When someone answered, they asked others
to offer a lower price. It was awful.

Seeing that doing business with domestic firms would always involve a cut-throat price war,

Kumakura decided to look abroad for new opportunities.

Like buds unable to bloom,
we haven't been able to put our full capability to use.

It's now time we seek partners abroad
who can help us truly blossom.

Today, the Industrial Promotion Organization rep has brought the vice president

of a semi-conductor layout design company from Taiwan to meet Kumakura.

Could you give him a brief presentation
on your products, including the nori cutters?

You might assume nori to be hard, but it's
actually rather spongy and difficult to cut.

Our machines can open holes or cut sharp corners on it.

The Taiwanese executive believes that Kumakura's precision-cutting technology can be used for something totally unexpected.

The nori cutter could be applied to various fields.

A company in Taiwan is looking to produce solar panels.

We might be able to jointly develop a machine
to cut them using this technology.

Sure, we would be happy to help.

Good work! Cheers!

Agreement is reached to continue talks toward forming a partnership of technical cooperation for the development of new products.

Overseas there's a plethora of needs.

Japan has the seeds but nowhere to plant them.

These guys know how to use the seeds.

I believe that's where the path for Ota's revival lies.

Kumakura's technology is crucial to the
processing of a range of materials.

In another part of Tokyo, this company has drastically changed its management style after coming under the umbrella of a foreign firm.

Good morning, good afternoon, good evening, everybody.

Thank you for joining Envision AESC group board.

The company produces batteries for electric vehicles.

Its batteries have a reputation for safety and reliability,

and have so far been used in some 800,000 vehicles.

The firm was established in 2007 as a subsidiary of a major Japanese automaker.

It originally produced batteries chiefly for its parent company.

But the carmaker sold the firm four years ago, citing high running costs.

The turning point came when it fell under the umbrella of a Chinese energy group.

I get spurred on by my colleagues abroad every day.

Working with them brings a lot of pressure.

They're very aggressive.

The new parent firm is keen to expand the business.

Under its management, the battery maker now proactively pursues sales worldwide, something it didn't do so much before.

We'll go wherever we're asked to.

- Even to the other side of the globe?
- Of course.

A recent destination was an automaker in France.

The firm is eager to expand its presence in Europe, where the EV market is growing rapidly.

For this meeting, we have prepared 100 percent perfect presentation.

The presentation in question focused on next-generation technologies such as energy efficient batteries.

The two parties agreed to continue talks toward using the batteries in the automaker's EVs.

The battery maker is also soliciting fresh investment both at home and abroad.

On this day, it invited an official in charge of international financing from an overseas bank.

- How many years is the plant operating?
- More than 12 years.

- No accident? Nothing?
- Sure.

We are proud of that.

Safety is the most important point.

I think they have shown ambitions.

Anywhere in the world, their products are good quality and very well known.

I really wish them a lot of success.

The firm has taken risks to expand its business, harnessing investment from right across the globe.

It's scheduled to be completed in early 2024.

It's currently building a new plant in France at a cost of some two billion dollars.

Construction is underway on similar facilities at more than 10 locations worldwide.

The firm aims to boost its production capacity 20-fold over just three years.

Honestly, I'm very nervous.

We Japanese are not normally comfortable
taking on so many new customers.

We're worried if we can really serve them all.

But if we stop, our business will go south.

We have to think ahead and create a system
that ensures sustainable profitability.

We've seen efforts to join forces
with businesses abroad just to keep afloat.

What's your take on this kind of approach?

Executives have to continue seeking
profits under whatever economic conditions.

When needed, they have to borrow money
from banks or issue bonds.

This lets them expand their business
and make a profit.

That's the role companies are expected to play.

Outside Japan, firms strictly follow this principle.

That can be a much-needed good influence
on Japanese firms.

Professor Miyamoto explains that foreign investment is now key to Japan's revival.

Foreign investment in Japan has been increasing relative to GDP in recent years,

yet the country still ranks bottom among OECD countries.

However, Miyamoto says that this actually suggests ample room for growth.

He insists that investment in human resources forms a vital component.

You might assume Japanese firms spare
no expense on employee training.

However, data shows they've been spending
less and less on workers since the mid-1990s.

I suspect that previously assertive
management styles have given way to passivity.

This chart compares how much money businesses spend on personnel development, including seminars, in OECD countries.

Spending by Japanese companies is now just a twentieth or less of that of their US counterparts, and decreasing year on year.

If we don't spend enough money on people,
that would put the brakes

on growing their skills, or human capital,
the mid-to-long term.

That's not good for our country's economic expansion.

It's important to encourage businesses to
spend enough money on their employees.

We met someone who has joined forces with a foreign company to help create an environment ideal for nurturing young talent,

who can one day go on to lead the next generation.

Nagoshi Toshihiro previously worked as a creator at a major Japanese gaming company.

He led the development of a hugely popular franchise, which sold close to 20 million units over 15 years.

In 2021, Nagoshi quit the company and set up his own studio,

fully financed by a Chinese firm with bases in the US and Europe.

I can't tell you what we're working on
or how much progress we've made.

That all has to remain top secret
until the very last minute.

Nagoshi now works with his 50 employees to create global megahit games.

When he launched the studio, he pledged to nurture young creators who could go on to spearhead the next generation.

During my interview, I asked Nagoshi about
his own vision for the future.

Well, I do have a dream. My focus is on
how to raise the next generation of creators.

I feel it's my mission to give them support.
I hope to see many new studios open their doors.

Nagoshi feels a sense of crisis about the younger generations, who have had fewer opportunities to take on fresh challenges.

Due in part to ballooning development costs, Japanese
companies have grown reluctant to take on big challenges.

That dilemma really created a big headache for me.

It was a major Chinese IT firm with global sales topping 13 billion dollars

that finally offered Nagoshi a new kind of work environment.

We understand it takes years to make really high-quality, original, innovative video games.

So, the moment we decided or committed to work with Nagoshi, this was part of what we call calculated plan or risk.

And it's creators' studios who make the games.

So we wish they could focus on what really matters to them, which is making the best possible games.

They are now working on a new action-adventure game.

At just 29 years old, Takahashi Tomoya is a key member of the production team.

Becoming a game developer had been Takahashi's dream since childhood.

He entered the gaming industry after graduating from university,

but for a long time had no opportunities to work on any major projects.

At Nagoshi's studio, he's in charge of designing characters' actions.

In other companies you don't have the luxury
of putting detailed thought into narrative and setting,

so I'm really thrilled to be part of this company.
I want to make the game a success.

There are foreign firms with ample funds and
Japanese creators hungry for a challenge.

If they can join forces, build a win-win
relationship and produce results,

that might also change Japanese
firms' perception and approach.

I believe that's where Japan can find the
inspiration to make new breakthroughs.

Resolving long-standing issues, such as reluctance

to accept foreign capital or invest in human resources, is hard to achieve overnight.

However, Professor Miyamoto believes the current global attention Japan is getting

actually presents a unique crossroads moment and a chance to finally put an end to 3 lost decades of stagnation.

For me, the concept of diversification is key.

When foreign firms invest in Japan,
they bring with them not just capital,

but also new management styles, strategies,
technologies, and people.

When mixed with Japanese elements, these create a chemical
reaction that can result in something truly innovative.

Something bold like that is really
what is needed to change the status quo, right?

Indeed. Some foreign firms are triggering changes
in their Japanese partners already.

In that sense, Japan is at a critical crossroads.

We need to look not just within the country but beyond.

It's very important for Japan to take a fresh
look at itself and its position globally.

The Tokyo nightclub Juliana's symbolized a heady era, when Japan dominated world markets.

Part of the premises has been converted into shared office space for startups,

helping these fledgling ventures grow into globally competitive businesses.

This blue chair is from Juliana's VIP room.

The frenzied boom of the bubble era gave way to the 30 years of doldrums that have shackled Japan's growth.

But the country has not lost its drive to cultivate a new future.

This is an era that values freedom
and individual abilities.

If each of us works hard, we can generate
growth to rival even the bubble era.

I want Japan to keep evolving.

Throughout our investigation, we've searched for clues to Japan's economic revival.

It could be that the ingredient most needed is simply the courage to take that first step into unchartered territory.