Here is one reason which I feel contributes to the problem. Indians, especially in urban areas, are not just taught English, but taught all their subjects in English as well. The Japanese learn English like the Indians would learn Sanskrit or the Brits would learn Latin - just to clear an exam. No-one became fluent in Latin or Sanskrit just by cramming a few grammar rules and vocabulary for exams. While it may be difficult to change text books to English, at the very least, the government should explore incentives for Spoken English lessons.
To those who think it is not required, as someone who worked with a major Japanese investment bank in their Tokyo, New York and London offices, I can tell you the Japanese nervousness with English is costing them, especially in industries where speed of execution is key - just take a look the IT boat which Japan missed. Several other countries are making conscious efforts to improve their peoples' English, and the people themselves are flocking to specialist online trainers like iRikai (which, incidentally has Japanese roots), EnglishClub, Duolingo and so on. In Africa and LatAm, you have more cost effective versions like EduMe, but you get the drift.
With their spending power and access to networks, the Japanese have tremendous potential to pick and encourage some of these methods, but to me it just seems like they are content in a comfortable shell waving to the world as it whizzes by! I love Japan, and I hope they take steps to integrate before they become truly noncompetitive. English education is a step in that direction.
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