'Japan used to work on a very cooperative system, to give workers certainty and stability.

It operated a seniority-based, lifetime employment system. Many workers stayed in one company throughout their work life, and their pay was based on how long they had spent in the company.

In return, the company looked after the workers, and down periods, they held on to them.

In the services sector, Japan kept protected jobs for Japanese workers who were not so productive...but it was not sustainable.

The Japanese are outsourcing, hiring more temporary workers who accept lower pay and few social benefits.

As a result, unemployment has risen, incomes of less skilled workers have fallen, and income inequality has increased.

It is one of the reasons that Japanese voters became fed up with the Liberal Democratic Party (LDP) and have just elected a new Democratic Party of Japan (DPJ) government.

Now, the new government has to grapple with the same difficult issues, but will not find any easy solutions either.

If the world's second-largest economy cannot protect its workers with a closed system, Singapore with a small, open economy has no hope to do so successfully. The only way for us is to push for constant transformation, to create new economic space for us to grow and prosper.'

Prime Minister Lee Hsien Loong, who visited Japan last week, on the challenges that governments face and the importance of economic restructuring.

This article was first published in The Straits Times.