TOKYO -- Japanese billionaire Hiroshi Mikitani decided two years ago that the employees at his company, Rakuten Inc., should work almost entirely in English.
The idea, he said, was a daring and drastic attempt to counter Japan's shrinking place in the world. "Japanese people think it's so difficult to speak English," Mikitani said. "But we need to break the shell."
With the move, which took effect at the beginning of last month, Mikitani turned his e-commerce company -- an Amazon competitor -- into a test case for corporate Japan's survival strategy.
As Japan's population declines, all but guaranteeing ever-decreasing domestic business, companies here are grappling with how they should interact with the world and whether they can do it successfully.
The country has both a dread of English and an understandable attachment to its own ornate business customs. Those idiosyncrasies made Japan a bewildering but envied powerhouse during its economic boom. They now make Japan a poor match, experts say, for global business.
Mikitani took a step few other companies here have dared because, he said, he thought it would help his company expand and thrive. He also wanted to prove a point -- that the Japanese, counter to the stereotype, could embrace the risks and embarrassment that come with learning a foreign language.
At the time of the 2010 announcement, only about 10 percent of Rakuten's 6,000 Japanese employees could function in English, according to a case study by the Harvard Business School. Rakuten operated in just two foreign countries -- it has since expanded into 10 more -- and most of its business came from Japan. Critics argued that Rakuten's employees, forced to hold meetings and write memos in English, would simply become less articulate, less efficient and far less happy.
At times, the two-year transition from Japanese to English -- dubbed by the company as "Englishization" -- has been as awkward as the term itself. Workers were told they would face demotions if they didn't reach target test scores, and a handful of employees quit, Mikitani said. Other workers, quoted without the use of their names in the 2011 Harvard case study, saw it as an "exercise in perpetual humiliation" or as a "layoff tool."
Rakuten's emphasis on English has "sparked a huge debate among companies that are trying to globalize," Accenture's Japan-based executive Chikatomo Hodo said in a December 2011 edition of the Nikkei Business magazine. "Many say, 'We want to do it, too, but it would be detrimental to the company's organization and management'" because English-averse senior management would bristle, Hodo said.
When Mikitani announced his plan, Honda's CEO, Takanobu Ito, said it was "stupid" for a company to use primarily English when its workforce was mostly Japanese.
But at least one other major Japanese company, Fast Retailing, which operates the Uniqlo clothing chain, is following Rakuten's path, though not as drastically. It has an English education program for employees, and in March it began to use English for meetings and emails with non-Japanese workers, a company spokesman said.
At Rakuten, workers scrambled to improve their language skills by the July 1 target date, after which all major internal documents and meetings were to be in English. About 75 percent of Rakuten's employees are based in Japan, the company says, and its foreign employees face the same language requirements.
The company initially said workers had to study on their own time, and it offered almost no guidance on how they should learn. It also provided no money for classes or books. Employees say they watched English movies and emptied shelves in the foreign-language sections of bookstores. They downloaded iPhone apps. They made flashcards.
Some groused. Others found humor in the situation, as a group of employees -- all members of Rakuten's five-person Englishization planning team -- recounted in a recent interview at company headquarters.
"I commute for one hour (daily), and I studied on the train," said Naoki Fujimoto, an employee who started out knowing little English.
"If you see people studying English on the train," said Wataru Taguchi, "it's usually a Rakuten employee."
By April 2011, though, Mikitani and other executives were worrying, said Kyle Yee, a Canadian who led the English-only switch. Test scores weren't rising as quickly as they had hoped, and executives became aware of worker dissatisfaction with the transition. The company began holding classes, mornings and nights, in a massive conference room. For some employees, that wasn't enough.
"There were some staff, they basically stopped eating lunch" so they could study then as well, Yee said.
'A huge issue'
Mikitani, Japan's third-richest man, lived in Connecticut as a boy and received an MBA from Harvard. He speaks English with fluency and charisma, as he showed in a recent speech that touched on the failures of Japan's English education system.
"Japanese study more than 3,000 hours of English," he said at the Foreign Correspondents' Club of Japan. "And when you study more than 3,000 hours of English and you cannot speak English, there is a huge issue. It's a huge waste of time."
English is required for all Japanese middle and high school students. But measured by scores on the Test of English as a Foreign Language Japan ranks 27th among 30 Asian countries in English proficiency, behind North Korea and Afghanistan, ahead of only Laos, Tajikistan and Cambodia. (Educational Testing Service, which administers the TOEFL, discourages such comparisons across countries, underscoring that its test is only accurate for individuals.)
The ineptitude has withstood decades of government attempts to overhaul the curriculum and cultivate better teachers. Several years ago, education authorities here decided to begin English classes in the fifth grade rather than seventh. Japan has also tried to shift the emphasis in lessons from memorization and grammar to conversation, said Haruna Yumioka, an international education chief at Japan's Education Ministry.
Minutes before the first companywide meeting after the July 1 deadline, several thousand employees filed in among rows of narrow folding chairs. They whispered "sumimasen" -- excuse me -- as others stood up to make way.
"Good morning," Mikitani said.
"Good morning," the room boomed.
In the two years since the announcement, employees' test scores had improved sharply, Mikitani said. About 80 percent of executive meetings were being conducted in English. It was enough that Mikitani declared the transition a success. He said his company was ready for the next step.
"From now on, the company standard language will be English," Mikitani said. "The only thing I would like to emphasize is, don't be shy."
The new English policy doesn't entirely outlaw Japanese. But English is required for all internal emails, meeting memos, internal presentations and formal meetings. It is also to be used in training sessions.
The company also has major expansion plans. It hopes to operate in 27 countries within a "few years," Mikitani said, up from the current 13, and it plans to drive overseas business from the current 10 percent of sales to 70 percent.
But the results, on the ground level, are harder to assess. One member of the creative and Web design department, Akihiro Miyata, 36, chosen by Rakuten's media staff for an interview, has an above-average test score. But that's good enough only to convey simple ideas, and during the interview, he occasionally shifted to Japanese to express himself more accurately. (Like many Tokyo employees, he still speaks Japanese during lunch, he added.)
Nobody has been demoted for falling short of English benchmarks, Yee said, but it could happen in the coming weeks as the company receives scores from last-ditch test-taking attempts.
Because of its English-only policy, executives say, Rakuten now attracts talent from around the world; one in three hires is non-Japanese. Mikitani says employees in the Tokyo headquarters now communicate better with overseas subsidiaries. Tech developers benefit, too, because they can attend global conferences and perform Web research in English.
At the meeting, Mikitani congratulated his employees on their achievements. He also introduced a group of 34 foreign managers visiting from overseas.
"Stand up, wave," he asked those in the group.
"When you see these guys, say hello," Mikitani continued. "And discuss with them whatever you want to discuss. Because you can speak English now."