This chapter will critically examine the distinctive features of the Japanese economy, in particular what has been termed the “Galapagos” syndrome, and the reasons for it, which include the legacy of the “developmental state” and the outcome of interest group politics. The chapter will identify, among other things, anti-competitive business practices within industries and government regulations that protect Japanese companies from foreign rivals and deter competition at the cost of consumers. The chapter aims to identify the myths and realities of the Japanese economy.

“GALAPAGOS “ SYNDROME: JAPAN 's FAILURE TO MEET THE GLOBAL STANDARD

In Japan, there are some unusual, often inefficient, business practices and services that do not meet the global standard. Together these practices have been termed “Galapagos” syndrome, as an analogy to the Galapagos Islands which underwent its own evolutionary changes in isolation from the mainland. The term was first used to refer to “non-smart” Japanese mobile phones, which were widely adopted in Japan, but unsuccessful elsewhere. These phones are called “Garakei”, or Galapagos keitai (keitai is the Japanese word for a mobile phone) and before smart phones appeared, they were a technologically advanced product, which allowed people to use the Internet, send email and watch TV programmes. Even after smart phones first appeared in Japan, 40 per cent of mobile phone users in Japan still use Garakei and Japanese mobile phone service providers continue to offer Garakei services. In the case of Japan's largest mobile phone service provider NTT “Docomo” (“Do Communication by Mobile”, a typical example of “Engrish”), which has a larger number of older users compared to the other two major providers (KDDI au and Softbank), around 50 per cent use Garakei. Japanese mobile phone service providers also offer newer “Garaho” (Galapagos smart phones), which are Garakei-type flip handsets that can use smartphone apps like social networking services. All three major mobile phone service providers offer Garaho plans and Japanese companies (Sharp, Fujitsu, Kyocera, NEC and Panasonic) manufacture them. Instead of disappearing, Japanese Garakei, and the more advanced Garaho, continue to exist and develop in their own Japanese way.