TO PROMOTE team spirit among their loyal, lifelong employees, Japanese bosses live in modest houses and take the metro to work. They also keep the pay gap between themselves and workers tiny by international standards (see chart). To them the news that SoftBank, a telecoms and internet firm, paid its former, Indian-born president, Nikesh Arora, ¥31.5 billion ($300m) in two years defies comprehension. Bosses at the biggest firms receive ¥100m ($1m) a year on average.

Corporate-governance experts are used to grappling with excessive executive pay. In Japan, they are pondering how big a problem rock-bottom compensation may be. The earnings of bosses at listed firms weigh in at roughly a tenth of what American executives get. Foreign bosses in Tokyo, such as Mr Arora, or Carlos Ghosn of Nissan, a car firm, come near the top of global league tables, but very highly-rewarded local executives are extremely rare.

Low compensation doubtless contributes to a cautious culture in which many firms prefer to sit on vast piles of cash—non-financial firms now hold more than ¥1 quadrillion ($9.5 trillion) of financial assets, including...Continue reading