Collapsed Cakes And The Price Of Perfection In Japan

(Bloomberg Opinion) -- Compared to the chaos that has engulfed Japan in the opening days of 2024, the final days of last year seem like a halcyon age. 

Before an earthquake caused devastation across the Noto peninsula and Japan Airlines Co. flight 516 narrowly avoided disaster at Tokyo’s Haneda Airport, the biggest news item that preoccupied the country was the great Christmas cake scandal. After some 800 strawberry shortcakes arrived at households across the country damaged and misshapen, executives of department store operator Takashimaya Co. bowed in apology at a press conference carried on national television. 

Around the same time, a more serious briefing was being held: Daihatsu Motor Co., the Toyota Motor Corp. unit, revealed that an internal investigation found that most of its vehicles hadn’t been properly collision-tested. The maker of cheap, fuel-efficient cars has been forced to pull its entire range of vehicles off the market. 

Naturally, the potential impact from Daihatsu’s misdeeds might seem far graver than those from a squished Christmas cake. But there’s a thread linking these issues: one of expectations that might be higher than the willingness to pay for them. 

The picture that emerges from Daihatsu isn’t one of devious attempts to subvert the testing procedures. Volkswagen AG’s Dieselgate scandal is a frequent point of comparison, but an inexact one. In that case, the German firm was deliberately seeking to sidestep emissions tests it knew it couldn’t pass. With Daihatsu, what we see are workers pressured and incentivized into doing a slapdash job. 

The report shows workers taking shortcuts, such as conducting collision tests only on the passenger side and not the driver’s, or cutting corners of other bothersome requirements such as triggering airbags with a timer rather than causing a collision as the rules required. It reveals a mentality at the firm where tests were assumed to be passed as a matter of course — with “severe reprimands and accusations” for those who failed. In addition, departments were understaffed, with employees already stretched. Cost cutting was so ruthless it extended to limiting the number of cars made available for crash tests. 

Even as Japan’s wages have flatlined over the past few decades, an expectation of perfection hasn’t gone away. One thing about the Christmas cake scandal that seemed to surprise bemused colleagues abroad was its cost — just over $40, including frozen delivery to your door. Of course, customers deserve to get what they paid for. But at that price, if some were a little smushed, should it rise to the level of national scandal? 

This expectation of perfection is responsible for many of Japan’s most charming aspects — from the tradition of service at a traditional inn, or apologies for a train that departs 20 seconds late (or even for one that leaves early.) In recent years, firms have learned to do more with less — one reason corporate profits have surged even as revenue has broadly remained static.

But as the cake tempest episode shows, the country might be reaching the limits of those productivity gains as the labor supply grows ever tighter. Already, Japan residents have had to adapt to relatively minor nuisances — convenience stores that no longer stay open all night, or subway services that finish 30 minutes earlier than they used to. The looming “2024 problem” that will limit overtime for truckers later this spring will only make this worse. Takashimaya has so far been unable to identify what caused the issues with this year’s cake, when an identical one last year was delivered without issues. But it doesn’t seem a stretch to imagine that the tight labor supply in the services industry could have contributed somewhere along the way.

Pay peanuts, get monkeys? Generally not in Japan. But it certainly doesn’t seem like a coincidence that the auto brands that have suffered the biggest testing scandals have been Daihatsu, Suzuki Motor Corp. and Mitsubishi Motors Corp., all of which target cost-conscious customers. 

The answer isn’t to cut corners. If Japan needed an example, it couldn’t have asked for a clearer one than that from the Japan Airlines incident at Haneda, where flight attendants’ impeccable performance — reinforced by annual training sessions — is widely credited with helping to prevent a larger disaster. 

But standards shouldn’t be so high that a squashed cake needs to be elevated to the level of national disgrace. Likewise, while Daihatsu has questions to answer — and the faulty testing obviously invalidates existing road-worthiness certifications — regulators should make clear what, if any, impact cutting corners has had on actual vehicle safety. And if the answer is none, then are testing standards overly strict? Regulators, themselves understaffed, typically outsource testing to the manufacturers themselves, meaning it’s easy for them to add laborious additional checkboxes when all the work is done by the firms themselves. In the last decade, suspect testing data has been found affecting everything from steel to rubber earthquake absorbers, with manufacturers frequently complaining that the standards are too strict to meet. What’s less common to find is actual safety issues.  

As its labor crunch worsens, Japan might see more cases of skimping or slipshod quality. Industries that can afford to charge more will suffer less. Prime Minister Fumio Kishida complains frequently of the “thirty years of cost-cutting that has enveloped the Japanese economy.” The country needs to get comfortable with the idea of paying more for its impeccable standards. Or otherwise get used to a few more squished cakes. 

More From Bloomberg Opinion:

• Japan’s Killjoys Are Driving Away Top Talent: Gearoid Reidy

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• No, Seriously, This Japan Scandal Is Important: Gearoid Reidy

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas. He previously led the breaking news team in North Asia, and was the Tokyo deputy bureau chief.

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