Japan's Toilet Jokes Are On You, Innovation Is Flourishing

Toto, a firm better known for its high-tech commodes, is these days making money off semiconductor materials.

- Gearoid Reidy

Is Japanese manufacturing in the toilet? Absolutely not—though it might be the first place to look to understand how the country's firms are changing.

One of the most surprising stories in corporate Japan in recent months has been the emergence of semiconductor materials as a significant profit driver at the most unlikely of companies: Toto, better known as the maker of Washlet high-tech toilets.

While the firm has been making headlines since the Covid-19 pandemic as the popularity of its heated, water jet-equipped thrones grew overseas, a far smaller division that makes high-quality ceramics for the semiconductor industry has been growing to contribute more than 30 per cent of Toto's profit. The segment has an enviable margin of more than 40 per cent, compared with just 5 per cent in its mainstay sales of toilets in Japan. While the company has been involved in the semiconductor business for decades, the segment has only recently become a profit centre.

But it's not just Toto: The episode highlights an underappreciated facet of Japanese companies which, far from sliding into irrelevancy, have instead pivoted to new industries that are often far more lucrative.

There's a popular perception that Japanese innovation is dead, or superseded by innovation from China. It's not hard to see where that comes from: Many Japanese consumer brands are less visible than they used to be. Just as there was no Japanese iPhone, there is no Japanese version of ChatGPT or DeepSeek grabbing news headlines.