I believe this is a must-read for anyone who has spent time in Japan. I was greatly concerned at some of the rubbish in the previous reviews, though, and couldn't resist adding some responses below:
"the author tries to detail how the hugely complex Japanese economy is a total mess, when in reality it is the second largest in the world... In fact what they have achieved in 50 years may be one of mankind's greatest economic miracles" - T Biamonte
Response: Actually, Kerr himself states that the rapid development of the Japanese economy was a miracle, but Biamonte's preceding statement relies on the "Biggu izu bettaa" fallacy through which many Japanese banks have merged, becoming the world's largest in terms of assets, while remaining essentially bankrupt due to even greater liabilities. An economy is large in GDP terms if it spends/consumes a lot, but if this consumption is founded (as in Japan) on massive borrowing which can't be repaid without massive inflation which the government won't allow, then it really is "a total mess".
"Example [of stupid arguments]: Japanese businesses really have no capital and inflate all earnings beyond actual facts. Hey, if this was true, wouldn't someone have noticed before him?" -chimara27
Response: Well, yes, but the fact that this hasn't come out in a major newspaper or academic journal doesn't mean that nobody noticed, simply that it hasn't been made official. Why not? As Kerr patiently explains, journalists not satisfied with being spoon-fed official accounts from industry and the bureaucracies are blacklisted from press-clubs and can't do their jobs; any bureaucrats who informed the public of these issues would be missing out on a profitable semi-retirement as an amakudari "consultant" for a large corporation; general employees who exposed this issue would be sacked and probably refused employment by other companies (this last point is my own, but pretty much common sense to anyone who has worked for a Japanese company).
"[Regarding payments to surgeons, Kerr] got Y100,000-200,000 right, but that is not under the table, it is OVER the table (as a gift)" - A reader from New York city, New York
Sorry, friend, but "gifts" of money to supplement what should be an arm's-length transaction between surgeon and patient are, by definition "under the table", regardless of how many people know about them or where, physically in relation to the furniture, the handover takes place.
"In the intro, Kerr admits himself that ["Dogs and Demons"] is a CHINESE reference and not even a Japanese one. The taking one bit of Other culture to represent anOther is classic racism. Then again also isn't it a little suspect for someone who has supposedly lived in Japan for 35 years to compare Japanese people with animals and supernatural specters to describe them?" - A reader from New York city, New York.
Response: It's interesting to see someone cry racism after swinging round a derogatory term like "gaijin" just a paragraph earlier. The "dogs and demons" metaphor is just that, a METAPHOR for the aspects of society which have been overdeveloped or neglected by the bureaucracies. If you seriously think Kerr is likening Japanese citizens to canines or evil spirits, then you either haven't read, or have completely misunderstood, this book. To claim that openly applying an apt metaphor from another culture to Japan constitutes racism is just ridiculous! Is it racism to say that financial accounting in Japan has a "through the looking glass" feel to it? What if a non-Chinese country were said to be "riding the tiger" (e.g. the US in Iraq), would that be racism? Surely not!
"he suggests that the Japanese government's replacing foreign teachers who have been in Japan for a long time with foreign teachers who have short term contracts is a result of xenophobia and racism... his argument doesn't make sense. One would expect foreigners who have been in the country longer to be less "foreign" than newly arrived foreigners." - Justus Pendleton
Response: As Kerr explains (how many of these critics haven't read this book properly?!?), the result of this policy is that new foreign teachers are kept on a shorter leash than the previous long-term teachers. They have less time to become familiar with Japanese people, or become proficient in the language to the point where they could disseminate ideas which might disrupt the bureaucratic stranglehold on the peoples' thinking, for example spreading the fact that equivalent citizens in supposedly "poorer" developed nations enjoy a much higher standard of living than the Japanese, or that a democracy should allow the government and its agencies to be answerable to the people (which is clearly not the case in Japan).
"Virtually every one of his references to dividends - and their applicability to corporate finance, desirability, etc, etc - are just plain wrong. A company can either pay dividends or use the capital. In reality, not paying dividends is BETTER (at least in the US) since dividends are subject to income tax. But if the company keeps the money then capital appreciation occurs... so proceeds are taxed at capital gains rates (which are less)." - Justus Pendleton
Response: Oh dear, a little knowledge is truly a dangerous thing. Reinvestment of earnings is only "better" than paying dividends PROVIDED THAT the earnings can be reinvested so as to allow a higher cash return (taking into account tax effects) to equityholders in the future. Capital appreciation of stock IS NOT a given, despite MOF efforts to make it so, but rather an occasional change in present value estimation based on expectation that a company which reinvests its earnings now can pay an even higher dividend (or buy back the stock at a higher price) in the future. If, as occurred during the Bubble, a company doesn't pay dividends, but instead invests earnings into buying overpriced land, to build a new factory which uses outdated, inefficient production methods to turn out products for which there is no demand, HOW ON EARTH can you expect the stock value to continually appreciate????
Read the book again, people!