Doing It Their Way

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Helping them do so has become the personal mission of William Saito. U.S.-born Saito, then in his 20s, started a company that developed security software, which he sold to Microsoft in 2004. A year later he relocated to Japan to persuade others to follow in his entrepreneurial footsteps. In April, IMPACT Japan, an organization co-founded by Saito that promotes entrepreneurship, helped open Creative Lounge MOV, a gathering place and funky office space in Tokyo's hip Shibuya area for youngsters looking to start companies. In an attempt to re-create the venture-capital system of the U.S., Saito consults and invests in start-ups through his firm InTecur. In January, he was appointed to a subcommittee of the Prime Minister's new Council on National Strategy and Policy, where he argues for greater entrepreneurial spirit as a means to fix the economy. Since Japan already has top universities and technology, Saito believes the hard part of building a more creative society has already been accomplished. "The intellect and innovation is here," says Saito, 41. "The last mile is not a very difficult thing."

Finishing that mile, though, sounds more like running a marathon. In Saito's view, making Japan more entrepreneurial requires an overhaul of a society that conditions people from a young age to fear risk. The exam-obsessed education system stifles independent thinking while instilling a highly competitive atmosphere. The need to attend cram schools — after-hours classes that drill young Japanese to pass tough college-entrance exams — deprives kids of the time to explore hobbies and communicate with peers. The result, says Saito, is a country that in reality is very different from its self-image. Instead of sustaining a culture based on consensus and cooperation, the cutthroat education process has made it impossible for Japanese to trust one another. "You created a society that can no longer work together," he says. "You are mentally programmed to hate each other."

Most of all, by stigmatizing those who fail — at their exams, in the office — the system has squelched entrepreneurship, stopping people from taking chances. "That has been the biggest problem with Japan," says Saito. "You cannot have innovation without failure." Changing such fundamental aspects of Japan won't come easily, but Saito believes the desperate economic conditions are finally making some Japanese more willing to take risks. "People are looking for avenues and options," he says. "There is a new perfect storm where we have students, entrepreneurs, even people in their middle age that are saying, I realize that there is a better world outside of this rat race."

"Strange People" It's not only young Japanese who are trying to make a difference. Yanai of Fast Retailing is 63 years old, but he is striving to recapture the swashbuckling spirit that animated the corporate Japan of his youth. While some big Japanese firms are retreating from the global marketplace — Nomura, for one, said in September that two-thirds of its planned $1 billion in cost cuts would come from the investment bank's American and European operations — Yanai is making greater efforts to conquer it. In 2005, he attempted to break into the hotly contested U.S. retail market by opening three Uniqlo stores in New Jersey shopping malls. Failing to get attention for his unfamiliar brand or basic casual wear, he closed them a year later — but refused to give up. Learning from his mistakes, he relaunched his assault on the U.S. in 2011 with higher-profile stores, starting with a flagship shop on Fifth Avenue in Manhattan. Uniqlo now has five outlets in the U.S. and is targeting 200 by 2020. "Japan has to rechallenge the global market," he says. If it doesn't, "all we would end up with is deterioration."

Encouraged by a strong yen and the slow economy, some Japanese companies are buying up foreign firms at a record pace — trading house Marubeni's $5.6 billion acquisition of U.S. grain merchandiser Gavilon and advertising giant Dentsu's $5 billion purchase of Britain's Aegis are two of the more notable deals. But in other ways, Yanai remains a corporate oddball. Unlike his peers, Yanai recruits year round and doesn't automatically hire grads from a handful of top universities, preferring to cast a broader net. To support his global ambitions, he seeks staffers with skills not normally desired by corporate Japan, such as foreign languages and overseas experience, and he hires non-Japanese on equal terms with local employees. "Japanese companies still would like to remain in the warm water of working with Japanese people," Yanai says. But "if you are truly serious about expanding the business, you have to have diversity." He had hoped that other Japanese CEOs would take his lead, but has been disappointed. "We thought we were going to revolutionize human resources, but other Japanese companies don't seem to be interested," he says. "We are regarded to be a weirdo."

If Japan is to resurrect itself, practices long considered distasteful or odd will have to become the new normal. Saito believes that the process is finally under way. "We have a pretty good community who in the Japanese parlance are 'strange people,' who are willing to shake things up," he says. The goal is "changing one person at a time." Perhaps one day that will add up to an entire nation.

—with reporting by Chie Kobayashi / Tokyo