Although Japan spends far above the OECD average on research and development as a share of GDP, this money is not always put to good use. The Science Council of Japan estimates that Japan's R&D is only about half as efficient as Europe's and America's. Entrepreneurial start-ups account for only around 4 percent of firms in Japan, compared with 10 percent in Europe and over 14 percent in America, and Japan comes bottom in several rankings of entrepreneurship. Despite the might of its big exporters, Japan is also a laggard in globalization, with the lowest levels of foreign direct investment, imports and foreign workers in the OECD. With a domestic market that offers little scope for growth, Japan is missing out on opportunities overseas.
Source: The Economist, http://www.economist.com