Faculty Spotlight: Takeo Hoshi

Headshot of Takeo Hoshi

In conversation with Shorenstein APARC, Takeo Hoshi, Stanford professor and director of the Japan Program, discusses his intial draw to studying the Japanese economy, and its intersections with finance and public policy. Hoshi highlights some of his recent research and the Japan Program's upcoming activities, including a new student course focused on innovation-based economic growth in Silicon Valley and Japan.

What led you to study the Japanese economy?

I majored in social sciences as an undergrad at the University of Tokyo. I was especially intrigued by macroeconomics – the study of the aggregate economy (GDP growth, inflation, unemployment, etc.).  I came to the United States to pursue graduate studies at the Massachusetts Institute for Technology. In the 1980s, Japan’s economy was growing relatively fast and performing better than the United States and other advanced economies. Japan was boring for a macroeconomist. But soon after I got my doctorate in economics, Japan started to encounter some economic problems and became interesting, so this is what I started to investigate. I shifted my focus from theoretical work to empirical work, and began to look at the Japanese economy, especially its financial aspects.

Can you tell us more about your current research focus?

I have continued to do research on Japan’s financial system. I have just completed two papers on this subject. One examines financial regulatory changes in Japan after the global financial crisis, and the second studies the development of capital market regulations in Japan, again focusing on the period after the global financial crisis. I also have a research project on institutional foundations for innovation-based economic growth. I work with Kenji Kushida, also at Shorenstein APARC, and Richard Dasher, at the U.S.-Asia Technology Management Center, for this project. We study the economy seen in Silicon Valley, perhaps the best example of innovation-based economic growth, and examine what Japan needs to do to achieve similar growth. For example, here in Silicon Valley, venture capital plays a very important role in providing capital to startups. In Japan, the role and size of venture capital is much smaller. We’ve been researching to find out why this is. Good ideas always exist in a society, but depending on the condition of the economy and policies created, entrepreneurs may find barriers to getting them anywhere without access to capital. It’s about connecting capital to the right ideas at the right time.

What’s ahead for the Japan Program this year?

The Japan Program has several events coming up. In April, an event will focus on international terrorism and how Japan faces newer security threats such as the Islamic State. Given the recent killings of the Japanese hostages, the threat of international terrorism is evident to people in Japan. For U.S. citizens, it’s been apparent for awhile, but for Japanese citizens it is a more recent realization. The Japan Program also has an upcoming project that highlights the 70th anniversary of World War II, which is being commemorated this year. At the 50th and 60th anniversaries of the War, the prime minister of Japan gave a short statement reflecting on Japan’s past actions and reinforcing its pacifist vision for the future. The current leader Shinzo Abe will also do this. Colleagues from Shorenstein APARC and the Freeman Spogli Institute for International Studies have been asked to write a short statement that they would give if they were in the Prime Minister’s shoes. A broad cross section of faculty authors coming from different disciplines are participating and will provide diverse views. The collection of statements will be compiled into a report (in both English and Japanese).

This spring, you’re teaching a new course Innovation Based Economic Growth. What makes this course unique?

I’m very excited to be back teaching again. Since arriving at Stanford in 2011, I haven’t yet taught a course, so it’s a great opportunity. It’s a project-based course focused on innovation policy in Japan. Students will form groups and perform research on several policies aimed at encouraging innovations in Japanese businesses. Students will then analyze those policies once they are implemented. In the process, students will develop a framework for policy evaluation. And for some of those policies, we may be able to collaborate with a part of the Japanese government to implement a policy evaluation framework.

Tell us something we don’t know about you.

I am a devote San Diego Chargers fan. And, as a child, my dream job was to own a hardware store.