This book tries to explain how Japan and Japanese companies transformed themselves during the strategic inflection point of 1998–2006. Ulrike Schaede notes that there are the ‘Old Japan’ and the ‘New Japan’, and that the Old Japan is slowly giving way to the New Japan. She suggests a new model of Japanese business innovation that differs from the traditional business models that have dominated Japanese postwar economies. She terms this new approach the ‘Choose and Focus Strategy’ which characterizes the new economic face of twenty-first century Japan.

Schaede begins by providing a background to the legal, political, and systemic changes in Japan since 1998. According to Schaede, the need for these reforms was triggered by unprecedented social crisis in the late 1990s, globalization and the banking crisis. Indicators of social distress such as unemployment, bankruptcies by small firms, homelessness, crime, divorce rates, child abuse, and suicides hit record highs in the late 1990s and early 2000s, exacerbated by the collapse of financial/banking institutions. Since 1998, new laws have been created, new government reforms have been made to speed up the reorganization and restructuring process. These reforms are the backdrop to Japan's strategic inflection point.

In Part II: the Old Japan (Chapters 3–4), Schaede, by using Porter's Five Forces Framework, shows how the Japanese firms adopted the diversification strategy as a rational response to the postwar business environment. Because of Japanese government policy and cross-shareholding practice, the Japanese companies tended to maximize sales revenue over profitability, and the diversification strategy adopted to increase the number of products or lines of business was suitable for this goal. However, according to Schaede, the strategic inflection point has altered the competitive dynamics of the Japanese market such that stability and diversification have become a liability in corporate strategy.

In Part III (Chapters 5–9), Schaede discusses how the strategic inflection point has affected Japan's industrial architecture and the rise of the New Japan through discussions on the following topics: business groups and main banks, ownership and governance, subcontracting, price competition, and lifetime employment. For example, Schaede shows that the prewar zaibatsu (Mitsubishi, Mitsui, and Sumitomo) and the three groups anchored by banks (Fuyo, Sanwa, and Dai-Ichi Kangyo)'s influence and weight in Japan's overall economy has greatly declined. Japan's large banks faced with ongoing deregulations, have merged into four financial holdings and are begiining to give more emphasis to profitability and performance. Other changes include the reduction of cross-shareholdings between main banks and group relations. She points out that the ratio of listed firms’ shares owned by other listed firms fell from 33% in 1990 to 10% in 2006. Mergers and acquisition (M&A) activities increased sharply after 1998. The pattern of M&A activities also changed from ‘in–out’ deals (Japanese acquisitions of foreign firms) in the late 1980s to ‘in–in’ deals (Japanese acquisition of Japanese firms) and ‘out–in’ deals (foreign acquisitions of Japanese firms) in the early 2000s. The arrival of foreign private equity funds and their buy-out activities of underperforming assets/companies created pressure for Japanese firms to improve their performance or face the risk of being bought up.

In Part III (Chapters 10–12), the last part of this book, Schaede introduces companies and markets that represent the New Japan. She examines the series of new legislations encouraging viable venture capital and money market reforms, and the changes that invited entrepreneurs setting up new start-up companies to obtain other means of financing besides bank loans. In Chapter 11, in order to show the New Japan, Schaede picks up four case-studies that have greatly challenged the markets in which they operated: Softbank in the telecommunications industry, Kakaku.com in the e-tailing business, Astellas Pharma in the pharmaceutical industry, and SBI E*Trade Securities in the investment banking sector. She concludes the book by stressing that between 1998 and 2006, Japan experienced a strategic reversal that fundamentally changed the way Japan's business organizations operate and turned Japan's leading companies into focused, innovative competitors. She argues that this change is irreversible because of the Japanese main banking system, business groups, and government roles have run their course and other market forces such as competition and globalization will keep Japan on its toes.

‘Choose and Focus’ provides a sound review of Japanese postwar development and is a good background for those who have missed out on Japan's development over the last decade. After the collapse of the bubble economy in particular, Japan sank into recession that lasted more than a decade, and some economists and businessmen turned their attention away from Japan to focus on new economic powers, such as China and India. At the turn of the century, however, Japan began slowly picking up its lost fortune and experienced a series of corporate transformations. It is here that Schaede gives good examples and supporting evidence of what those changes are and how they tie into the greater scheme of Japanese society.

However, whether or not these changes will sustain and whether more of these changes will come remains to be seen. Even though there is a decline in cross-shareholdings, the main banks and their business groups and major assemblers and their suppliers may still influence the way business is conducted in Japan. Japanese firms may pay more attention to financial measures such as return on equity and profit margins, yet there are so many Japanese large companies that remain in low profitability, such as Hitachi, NEC, Fijitsu, Sony, and others. The shift in labor relations toward performance pay and promotion for regular employees is still a challenging task for many Japanese companies and it will take years before the meritocracy system can be implemented. The emergence of venture capital and the increase in venture capital investments have encouraged the growth of start-ups, but it is not enough to spur the takeoff of new industries, such as biotechnology. Furthermore, after the Koizumi administration, the socio-economic reforms slowed down, and even under the Aso and Hatoyama administrations the Koizumi reform was labeled as a wrong policy. Along with the Keynsian policy adopted after the Rehman Shock, stronger governmental guidence and coordination are officially required. The evidence of a New Japan that Schaede shows us in this book now seems to me a wishing list of what Japan should be.

Although it might be too early to conclude that the New Japan has come, this is a well-written and very interesting book and we would definitely agree with Schaede that some parts of the New Japan are emerging, and the ‘chose and focus’ startegy is the one of the most critical strategies for the Japanese corporations in the twenty-first century.