JPRS ID: 9191 JAPAN REPORT

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• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000200100022-4
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• Original Classification: U
• Document Page Count: 60
• Document Creation Date: November 1, 2016
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• Content Type: REPORTS

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JPRS L/9191 F
14 July 1980
~ Ja an Re ort
p p
CFOUO 17/80)
FB~$ FOREIGN BROADCAST INFORMATION SERVICE
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JPRS L/9191
14 July 1980
JAPAN REPORT
(~oUO i~/so)
_ CONTENTS
POLITICAL AND SOCIOLOGICAL -
Double Election Campaigna Take Off at Ft~ll Speed
(Various sourcea, 30 May, 2, 4 Jun 80) 1
Nationwide Election Campaign Examined
LDP's Last Moment Election
Double Elections Analyzed,
. by Chikashi Anabuki, Atsuehi Takeuchi
MILITARY ~
_ Financial Leaders' Defense Strategy in 80's Analyzed
(Yu Takaoks; SEKAI, Jun 80) 22
ECONOMIC .
~ Expert Analyzes Impact of Iranian Oil Cutoff to Japan
(Takao Tomitate Interview; ASAHI JANARU, 16 May 80) 35
Japan-Iran Petrochemical Project: Plot of Mitsui
Group Revealed ~
(SHURAN SHINCHO, 15 May 80) 45
- Business Attitudea Toward Investment in PRC -
(JIJI~ 14, 21 Jun 80) 50
_ . . ~
- a - ~ [III - ASIA - 111 FOUO]
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POLITICAL AND SOCIOLOGICAL
DOUBLE ELECTION CAMPAIGNS TAKE OFF AT FULL SPEED
Nationwide Election Campaign Examined
Tokyo NIHON KEI7AI SHIMBUN in Japan.ese 4 Jun 80 pp 10-11
[Text] Local Constituencies
Kanto Area .
'Tokyo (4 seats): House of Councillors Speaker and LDP nominee Yasui (inde-
pendent, incumbent), previous national consfituency candidate Miki (Komeito,
incumbent) and Party Committee Vice Chairman Ueda (JCP, incumbent) all have
stable bases of support and fiLm crganizations, and have held the advan-
tage from the beginning of the campaiga. They are pursued by ~ato (JSP,
newly up for election), who has adopted a perfect "docking" strategy with
a Lower house candidate, former Joint Staff Council chairman and protnising
newcomer ICurisu (DSP, new), and Ushinomiya (independent, new), who doesa't
apologize for his prominence; the mood is that of a free-for-all. Because
the nu~ber of votes needed to succeed is this double electiaa will be
higher, attention is focused on who will get the floating votes. It will
also be noted haw the voters react to the defense controversy beiag fought
out by the hawk and dove factions. ~
Kanagawa (2): This will be a fierce battle amoag five influential candi-
dates. At first Hatano (LDP, iacumbent), Takeda (JSP, incumbent) and
Komeito reco~endee Hironaga (DSP, aew) were being chased by Roizumi (JCP,
new) and Onishi (NLC, new), but the situation changed with the concurrent
elections. Hironaga, who casta the shadaw uf a Komeitu-DSP united front,
has been hurt samewhat, and Onishi expects to get more votes because of the
double election. It appears the same-day ballotiag will work to the ad-
vantage of Takeuchi and Koizumi, who rely on organization, and a sease of
crisis is growing in the Hatano camp. Hara (other, new) is also putting ug
a good fight.
Saitama (2): The frontrunner in this constituency is Nao (LDP, new), who
is well lmown throughout the prefecture and has a firm fouadation of LDP
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votes, Followi_ng him is Seya (JSP, incumbent), who is making the most of
his success in the last two elections and guarding his seat at all costs.
The middle-of-the-road candidate recrn~unended by Romeito, the DSP and the
SCL, Doki (independent, new), is an unknown quan.*_ity, but if the intellec-
tuals are stirred up rhere is no telling where the floating vote might end
up. Yajimi (JCP, new) is making a strong effort. Maki (other, new) is
from the National Federat'cn of Marxist Workers' Unions.
Chiba (2): The seats sha~lld ga to Inoue (LDP, new) and Akakira (JSP,
incumbent). The center of attention is how far~Maeda (JCP, new) will eat
into their lead and what effect the struggle at the top of the LDP will
- have. Inoue got a late start because of the str�uggle over party endorse-
ment so Aka.kiri was a step ahead at first. But the prospects are that
the conservative vote will increase greatly because of the concurrent -
elections in the lower house, so matters are developing to Inoue's ad- _
vantage. Nishi (other, new) and Ueda (independent, new) are not doing
well. -
Ibaragi (2): The organizations oi Oshima (LDP, incumbent) and Otsuka (JSP,
incumbent) are a step ahead. The LDP, seeking to monopolize the two seats,
put forward Moriyama (LDP, new) and is making every effort to build up the
mood for that, but the prefectural party organization has been badly shaken _
by the double election. These three candidates are followed by Sato (DSP,
new) and Eguchi (JCP, new).
Gumma (2): The front runner is M~ogami (L~P, incumbent), who is making in-
roads among the women and youth with his own grassroots campaign. Fukuda
(LDP, new) is close behind aad the LD P is eager to moaopolize the two seats,
but when the lower house was dissolved, the organization of Yamada (JSP,
new) became fully active, and he is pressing hard. Yoshimura (JCP, new)
is standing in for a candidate who switched to the House of Representa-
tives race, and he is slaw in becoming known.
Hokka.ido-Tohoku Area
Hokkaido (4): Will the LDP snatch back the two seats it lost last time by
having too many candidates, or will the opposition parties hang on to the
seats they now have? The leaders are Iwamoto (LDP, new), Tsushima (JSP, _
incumbent) and Ogasawara (JCP, incumbent), and they are being energetically -
pursued by Aizawa (Komeito;,incumbent), Taicagi (LDP, new) and Sakashita
(JSP, new). The lower house election is a blow to Aizawa, who was elected
by the middle-of-the-road coalition. The question for Takagi is how to
stop the fishermen from leaving the LDP over the issue of South Korean
fishing boats, and how to get votes away from Sakashita. The National Fed-
eration oF Marxist Workers' Us~ions is running Sakaki.
Aomori (1): Yamazaki (LDP, incumbent), who is seeking his third term, is
better known and has a stronger base tY~an Yamauchi (JSP, new) or Hori
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(JCP, new). He gained his seat in a special election to fill a vacar~cy,
and leads with the full support of the LD P. The JSP candidate in the
~ special election was expected to try again, but becauae the election day
was moved up aad the c~mpaign periods overlapped, Yamauchi was suddenll _
= put forward, and he has been hurt by the late start. Hori is not well
known, and will have a hard time.
Iwate (1): This is a JSP-Komeito-DSP cooperation constituency. The con-
servative camp, which hopes for a third term for Masuda (LDP, incumbent),
is filled with a sense of crisis, but the fact that the lower house elec-
tio~t is to be held at the same time has fortunately strengthened the
solidarity of the conservative forces in the prefecture; they are ahead in
= the farming and fishing villages. Takahashi (independent, new), who is
backed by the SCL as well as the JSP-Komeito-DSP grouping, is farily well
known in the cities, but the system of cooperation among the three parties
is not yet fully developed, and its growth has beea stalled by the break-
off ef the conservatives from the Senda Assvciation (the former governor's
~ support association) on which the coaliti,on had relied. Miyawaki (JCP,
new) is trying to get more votes than he did in the last election.
Miyagi (1): Endo (LDP, incumbent) is backed by the construction and the
co~erce and industry organizations, and has a decisive lead. 1'he double
election has mada it difficult for Takahashi (JSP, new) to get the support ~
of Komeito and the DSP; he faces a hard battle. Shimoishi (JCP, new)
trails Takahashi.
Akita (1): Both Sasaki (LDP, incumbent) and Sawada (JSP, former member)
are trying to broaden their support, with targets of 350,000 votes. The
Komeito has made the situation chaotic by deciding on "emotional support"
for Sawada. Although Sasaki got an early start and is ahead of Sawada at
this point, he ca~nnot be too op~imistic. Ito (JCP, new) has developed a '
minute campaign. ~
Yamagata (1): Yasoshi (LDP, incumbent) hrxs the strength of incvmbency
plus a record oF five terms as governor, and has wide-spread support
- throughout the prefecture. He is followed by Sato (independent, new), who
is backed by the JSP, the Komeito and the DB P 3ointly and who gained re-
nown as director of NHK's Yamagata station, but the dissolution of the
lower house raises the question of how much cooperation there will be
among the JSP, Komeito and the DSP. The new candidate backed by the JCP
- has swit_ched to the lower house race, so the upper house candidacy was
turned over to Wakabayashi (JCP, new). Thus the effect of the double elec- ,
tions has been great. All camps find it hard to predict the vote, and
tension runs high.
Fukushima (2): The LD~' has put forward Suzuki (LDP, incumbent), who is
_ looking for his third term, and ~ato (LDP, new), hoping to carry both avail-
able s~ats. There is apprehension, hawever, regarding competitd,on for the
conservative vote. 1'ti~ JSP has only nominated Yaoita (JSP, new) a veteran
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of 11 victori~:s in Lower house elections, to take one seat. Amid the fierce
struggle between the LDP and the JSP, Mogami (JCP, new) is tryi.ng for a
larger share of votes than in the last election.
Chubu Area
Aichi (3): There is a fierce battle with the candidates of the LDP, the
JSP, Komeito, the JCP and the DSP all equally good. Former Nagoya Univer-
sity President Takagi, who is backed by the Komeito, is widely known and
has become "the eye of the storm." 7ncreasing apprehension about that has
brought about an even more vigorous election campaign by Morishita (JSP,
incumbent). Oki (LDP, new) is doing well with the backing of plentiful
conservative votes, and Miharu (DSP, incumbent) has the firm support of
the labor unions. These four are being wildly chased by young Nishida
(JCP, new). Tani (other, new) is also putting up a good fight.
- Shizuoka (2): Will the IaP take both seats for the first time in 12 years?
Tozuka (LDP, incumbent) has made much of the strength of incumbency. The
chairman of the election strategy coamiittee, however, decided to run for a
lower house seat because of the double election, so little-known Fu,jita
(LDP, new) will have a problem catching up. Aoki (JSP, incumbent), on
the other hand, had been on the defensive but his position is improving as
support from labor solidifies. Yamada (JCP, new) and Shiina (other, new)
are~.also hoping to advance.
Yamanashi (1): Nakamura (LDP, incumbent) is in first place. There was
concern about the weakening of election strategy because of division in
the prefectural party organization, but his campaign was helped by the
~ double elections when a policy of "Nakamura for House of Councillors" was
set with the personal support groups of four former Diet members. Hara
(JSP, new) is going all out to catch up by winning over some conservatives
and the votes of Komeito and the DSP. Sakurai (JCP, new) plans to expand
party strength, but faces a hard struggle.
Niigata (2): The seats should be divided between the LDP and the JSP.
Hasegawa (T.DP, incumbent); who was elected to fill a vacancy in a special
election in May 1977, has been steadily gathering votes through a series
of small rallies, and may well be the top vote getter. Shitoma (JSP, in-
_ cumbent) is trying to improve over the last election by reaching the level
of 400,000 votes. Maruyama (JCP, new) is trying to expand support from a
base of organization votes, but is not quite strong enough.
Nagano (2): The point of interest is to what extent Kist;ima (JCP, new)
can prevail against the heavy barrier of Natsume (LDP, incumbent) and Oyama
(JSP, incumbent). Natsume and Oyama are experienced and well�knawn as the
mayors of Nagano and Ueda respectively, and they aim to go over the 400,000
vote line. But this is a classic case of a locked-up election, and 3:t will
be overshadowed by the lower housP sace. ~
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Gifu (1): Fujii (LDP, inctm?bent) is well known and has a strong organiza-
tion; he has made a fast start. The JSP made a public appeal for candi-
dates, and nominated Yagi (independent, new), but Yagi is far behind
Fujii. Sugihara (JCP, new) has campaigned with endurance. Yeda (DSP,
new) is the first DSP-recognized candidate in the Gifu constituency.
Toyama (1): Yoshida (LDP, incumbent) has a decisive advantage. '~'he voting
rate is expected to go up because of the double election; this will
strengthen his position in a sense, but it will also increase the anti-
LDP vote, so he is trying to keep optimism in check. Takeda (JSP, new)
only decided to join the race in April, and has been hurt by his late
start. ~te is putting his full effort into becoming known in the urban
areas. Tanbo (JCP, new), whose se~~ling point is ihis youth, has also de-
veloped a spirited campaign.
Ishikawa (1): Yasuda (LDP, incumbent) has a record of two past terms and
is exceptionally well known; he is far ahead, but trying to aboid excessive
optimYSm. Kobo (JSP, new) has been hurt by a late start and poor recog-
nition.. He is at the stage of making himself kno~m ;in orgaaizations,
particularly labor groups under the umbrella of the prefectural trade
union council. The campaign of Kawakami (JCP, new) is closely connected
with the JCP candidates in the lower house races in the first and second
- districts,
Fukui (1): Tsuji (JSP, former), who is trying to make a comeback, and
Kumagae (LDP, incvmbent), v~ho is trying for his fourth straight term, are
running neck and neck; the battle has become a"~IIP-JSP shawdawn."
Kumagae has a broad base of support in the prefecture and has a slight
lead at this point, but he feels the hot breath of Tsuji, who tt~ popular
among the women and young voters and who is attacking such things as the
agedness of the Kvmagae camp; and it will not be possible to predict the
- outcome until the final stage. Yoshida (JCP, new) is also putting up a
good fight.
Chugoku Area
~ Okamoto (2): The two seats are designated for Kato (LDP, incumbent) and
Terada (JSP, inctanbent). Oda (JCP, new), who was defeated in the last
lvwer house race, is waging l~is first prefecture-wide campaign.
~
Hiroshima (2): Nagano (LDP, incumbent) is in the lead. Konishi (DSP,
new), who is backed by a Kameito-DSP barter arrangement for cooperation
in upper and lawer house races, is in third place behind Hamamoto (JSP,
incumbent), but Hamamoto was careful to tighten up his camp, and Konishi
is far behind. Moriwaki (JCP, new) hopes for a large increase in the num-
ber of votes he receives.
Tottori (1): Ishiwa (LDP, incumbent) was governor for four terms, dnd his
record is well re~mbered throughout the prefecture. Arami (JSP, new)
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has a record of over 24 years as a prefectur3l legislator and is well
known in the western part of the constituency--the key question is how
_ many votes he can get in the east. Hota (JCP, new) will try to get more
votes.
Shimane (1): This is a stable battle foi Kamei (LDP,~incumbent), who tras
' firm ~ontrol of the prefecture's conservatives. Ishibashi (JSP, new) is
becoming knawn through his spirited activity, and he is striving for the
votes of the DSP and Komeito, who have not put up their awn candidates.
Katsumbe (JCP, new) is backed by the strength of his party, which did
succeed in the last lower house el~ction, and he hopes for a large in-
crease in vot~s.
Yamaguchi (1): This is a battle of newcomers between Eshima. (LDP, new)
and Hamanishi (JSP, new), but Eshima is ahead in that this is a conserva-
tive country. Ito (JCP, new) is waging his own campaign.
Osaka (3): Even before his official announcement, Shiragi (Komeito, in-
cumbent) was energetically holding meetings and making addresses. He is
well known and has a firm organization vote.; he leads the race. Nakayaraa
(LDP, incumbent) has been going through every part of the city, and is in
a stable position with a firm hold on the conservative vote. Hashimoto
(JCP, incumbent) i~ planning to succeed on the basis of party strength.
Nakamura (independent, new) is hoping to pull down one of the three in-
- cumbents. Last time he ran as the NLC candidate and was narrawly de-
feated, but this time he has the support of the DSP and is actively cam-
paigning together with the two parties' candidates for the lawer house.
He is making full use of his fame as a broadcast ce lebrity. Makiuchi (JSP,
new) was defeated last time because of inadequate preparation, but with the
floating vote in addition to the labor vote, he may shaw a considerable im-
provement. Yamamoto (other, new) is making a good effort.
Kyoto (2): Ueda (LDP, incumbent) and Kamiya (JCP, incumb~t) both have
firm bases of support and there is talk of "LDP and JCP designated seats."
But depending on what happens with the Komeito and DSP votes, which are
waiting for a unir_.ed candidate, Sugiyama (JSP, new) may move up. The JSP
has asked Komeito for its support, and the DSP has decided to vote autq~z-
~I omously.
Hyogo (3): Nakar.ishi (LDP, incumbent) has gathered broad support, and
seems to be the top vote-gEtter. Yahara (Komeito, incumbent), is also in
a stable position. The third seat ia the object of a JSP-JCP confronta- ~
tion between Motooka (JSP, new), a major newcomer backed by the prefectural
council of trade unions, and Yasutake (JCP, new). Nukiyama (DSP, new) has
almost caught up from her late start and has challenged Yasutake in a
"women's war." Yamada (other, new) of the National Federation of Marxist
Workers' Unions is trying to increase party strength.
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Shiga (1): Aiochizuki (LDP, incumbent), who is seeking his second term, is
running against Yama.da (independent, new), who is backed by a JSP-Kpmeito-
DSP coalition, and the first female JCP candidate, Ririyama (JCP, new).
The value of the Shiga formula of the coalition of the JSP, Komeito, the
DSP and labor orgaaizatioas, which is experienced in gubernatorial and
mayoral elections, may be considered on a national level.
Nara (1): Aratani (LDP, incumbent~, the nation's first candidate for a
seventh term, has led from the beginning of the campaign with the support
of a broad raage of organizations including the prefecture's association of
mayors. Sasada (JSP, new) is challenging for the fifth time and is con- _
centrating on a strategy of pairing with lower house candidates. Kitaao
(JCP, new) is also campai~ing with lower house candidates, and is looking
for reform and floating votes, including those of other women. _
Wakayama (1): Tn addition to his advantage as the incumbent, Maeda (LDP,
inctmmbent) has an even, conservative base in both urban and rural areas.
Teramoto (JSP, new) was late in getting party backing, and is just becam- ~
ing known in the nor*.hern part of the prefecture. To what extent will '
Kuroki (JCP, new), whose party produced winners ia botTi the first and
second districts in the last geaeral election, be able to catch up?
Mie (1): Saito (LDP, incumbent) is well knawn, aad from the start he has
spared no effort in strengthening his bases; he has a good lead. No JSP-
Komeito-DSP united candidate has materialized, and Takagi (JSP, new), who
is running on his oowa, got a late start; he thus must face a hard battle.
Matsuwa~a (JCP, new) is trying to increase support votes.
Shikoku Area
Kagawa (1): ia addition to Takashi Hirai (LDP, incumbent), who is seeking
his third term, there are three newcomers in this race. Of these, Iaozaki
(independent, new) may press Hirai hard. Hirai's sister-in-law, Sachiko
Hirai (independent, new), hurt his effort by entering the race aad expos-
ing internal dissension, but Iaozaki was also hurt by the absence of a JSP-
Komeito-DSP united front. Cashio (JCP, new) is tryi~g to become better
known by pushing his youth. He is 30.
Tokushima (1): Wtien Kuj ime decxded not to run for a third term, this be-
came a head-to-head fight between Naito (LDP, new), who united the coa-
servatives behind him, aad Maeda (independent, aew), who has the campaign
cooperation of the JSP, Komeito aad the DSP. Because of the double elec-
tion, both camps have shifted emphasis to the House of Representatives
campaign, suppc~rt activity has broken down somewhat. Neither Naito nor
Maeda is an incumbent, and botk have problems of recogaitioa, but with
the strength of conservatives' paradise, Naito has a lead. Takehara (JCP,
new), is trying to expand his party's forces.
Ehime (1): All three candidates are new. Ttiis is a conservatives para-
dise in which the IDP has monopoli.zed the seat for the last eight elections.
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Recause no foriler LDP Diet members entered the race, �or prefectural legis-
lator Nakagawa (LDP, new) decided he would run. He has the support of 3 74 -
groups including construction and election circles, and he has made three
l,ecture tours in the prpfecture to make himself known at the grassroots
~ level. Local trade unions council chairman Saeki (JSP, new) is making his
second challenge. He is campaigning for the support of the 40,000 members
of the hundred unions in the local council. Motooka. (JCP, new) ia dili-
gently attending small rallies and lecture meetings. The JSP-Komeito-
DSP coalition is not coum~itted.
Kochi (1): The key to victory for Tanigawa (LDP, new) will be how well he
can patch up the splits in the party which resulted from the six-way con-
test for officia 1 backing. He has tried to dig up conservative votes by
making a single set az the upper house and lower house elections. The
question for Ban (independent, new) is to what extent can he get the JSP,
Komeito and the DSP in step behind him. He is catching up with Tanigawa -
to make it a two-way race. Wada (JCP, new) is making a good effort to ex-
pand his support base.
Kyushu Area
Fukuoka (3): Kuwana (Komeito, incumbent) and Koyanagi (JSP, incumbent)
got off to a strong, strong start;.and are almost sure of victory. Behind
them, Kurauchi (LD P, new) and Motomura (LDP, new) are locked in a fierce
battle; the outcome cannot be predicted. They are followed by Arima (JCP,
new), a last-minute replacement for Ozawa, who switched to the lower house
race. Arima is ahead, however, on the point of recognition. Masaki (other,
ciew) is also making a good fight.
Oita (1): The race is formally between Goto (LDP, incumbent) and Hori (JCP,
new) but Goto is actually out by himself. Hori decided to enter the race at
a later date, to fill the shoes of a candidate who switched to the lower
house race.
Saga (1): Fukuoka. (LDP, incumbent) has the support of over 90 groups--in-
cluding the agricultural policy council which is Saga's largest organization,
the fishermen's league, the medical association and so on--and is fuily or-
ganized. His goal is to go from the 276,000 votes he received last time
- up to 300,000 votes. Because of missteps in deciding on a candidate,
Numata (JSP, new) got a very late staxt, but even so, support is beginning
to swell in connection with the lower house elections. Hirabg~ehi (JCP,
new) hopes to recover from his poor showing in the lower house e lections
last year.
Nagasaki (1): Hatsumura (LDP, incumbent) is in a strong position as a local
man with a good reputation and as an energetic campaigner. At first he had
aimed for 400,000 votes, but tre simultaneous elections are expected to in- ~
crease voter participation, and that figure has been revised to 450,000.
Tatta (JSP, former) is developing support centered on the unions which be-
long to the prefectural labor council, but he may be affected by problems
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that arose within the party organization in connection with his candidacy.
Furuki (JCP, new) has adopted a"fishnet" campaign stra~egy, energetically -
visiting plants and neighborhood associations.
Niya~aki (1): Kamijo (LDP, incumbent) has a strong advantage in that his =
constituency is highly conservative to start with, and he has received the
support of the prefectural league of agricultural.cooperatives (member�
ship 150,000). Kiyomizu (JSP, new) and Kodama (JCP, new) are far behind,
and Kamijo will soon be out of reac~r. Not haviag obtained the cooperation -
of Komeito or the DSP, Kiyomizu is sure to have a diff icult struggle.
Kodama replaces a candidate. who switched to the lower house election, and
is far from the wiuner's circle.
Kumamoto (2) : The IaP took both seats in the last election. Sonoda (LDP,
~ incumbent) is making the most of his prestige as Director General of the
National Land Agency. Tashiro (LDP, incumbent) has gained a foothold with
the various agricultural and public welfare groups. For the first time the
prefectural agricultural policy fedEration, a"vote-gathering machine,"
~ has decided to endorse both incumbents, but there may be some adverse ef-
fect from internal disputes the LDP's prefectural organization has e~per-
ienced since last fall. Uogae (JSP, new) is gathering the labor vote and
- trying to create discord within the LDP. Awata (JCP, new) is trying to _
build party strength.
Kagoshi.ma (2): While the IDP wants to take both seats with Inoue (LDP,
incumbent} and Kawahara (LDP, new), the JSP and Kubota (JSP, incumbent)
plans to hold one seat at all costs. The LDP had divided the constituency
into two areas following the lines of the lower house districts, but with
the double elections this division.is no longer accepted. Kubota has de- �
veloped a strateg,y of liaison with the lvwer house candidates. Siace be-
coming a candidate in the last general election, Kameda (JCP, new) has fol-
lowed an independent policy of making himself knawn.
Qkinawa (1): This is a reform-conservative race between (Kiokubu) (other,
incumbent), who was nominated by a reform united front conference composed
of the JSP, the JCP, the Okinawa socialist populists, and the labor unions,
and who is supported separately by the Kameito, and on tihe conservative
side, Ohama (independent, new), who is nominated by the LDP and supported
by the NLC. (Kiokubu) has been elecCed twice previously and is well kaown.
But the reform united front conference is in disarray because of the problem
of the concept of the ~uthority of the JSP-Kameito coalition, and remedying
that will be a key point. Ohama is well knawn in a limited area, but he is
makin g himself recognized throughout the prefecture, and is catching up with
the he lp of Okinawa's cons~rvative boom.
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National Constituency _
LDP (14 seats at risk)
='he LDP has 23 candidates, and wants to secure at least 18 to 20 seats.
Since it has more celebrite candidates than the other parties, the in-
creas~d turnout of voters due to the double elections is thought to be an
advantage. Individual candidaCes have gone through the full,cvcle, making
use of candidates in House of Representatives and the House of Councillors
_ loca 1 constituencies. The top rank of those elec ted will probably include
inct:mbents like Hatoyama, who has the sup~ort of groups of liquor merchants
and tobacco growers and of Budc~hist memorial associations, Okada, who is
backed by military pensioners, Nagata, who has almost all the post office
votes, Miyata, who is recommended by Toyota automobile distributors, and
. Saito of the cosmetics industry. Newcomers expecting to be in the top
rank are Murakma~ of Seicho no Ie and Tazawa of Shoko Sei~Cai. Construc-
tion's Sakano (incumbent) and Inoue (new) share the same base, but are
still in a strong position. Iand re�ormer Okabe (new) has lost some voters
to former Vice Minister of Agriculture and Forestry Okawara (new), but -
both have a firm hold on a number of votes. Transportation's Kajiwara
(new) is also in good shape, as is Matsuura (new), who has the support of
education and firefighting circles, governors and old hands at the Ministry `
of Home Affairs. The campaign of Eto (incumbent), who is competing with
Kajiwara for transportation votes, may be affected by his hospitalization
after he collapsed during a speech. The Hitachi Grou's Yama,to (incumbent)
is ma,king the most of the recognition factor. Ma.rushige (incumbent) who
was expected to finish in the first rank of those elected, is still showing
the effect of the unpleasantness in the Japan Med ica 1 Association presi-
dential election; reconciliation with Association President Takemi will
be the key factor. Yama guchi (incumbent) had a s low start, but now Kyus hu
Electric Power Co. has gotten involved and her momentum is building.
Itagaki (new) of the bereaved familiea association faces a hard fight be-
cause of the cand'idacy of Otani (independent, incumbent). Senda (incumbent)
will also have a hard fight without aelf-defense force votes. ~
Sekiguchi (new) of ttie Dental Association has attracted part of the Medical
Association's anti-Ma.rushige vote, and has since relaxed a bit. Social wel-
fare proponent and former Diet member Tanaka (new) and the nursing feder-
~ ation's Teranuma do adequate vote bases, and are anxiously trying to catch
up. Salvationist Nagatoma (new) is a dark horse.
JSP (10 seats at risk)
The party has endorsed 10 candidatea, and all were expected to be elected.
However, the labor organizations on which the JSP relies have put their
energy into the lower house elections, and the individual candidates are
sparing no efforts. Of these, Noda (incumbent) and Wada (incumbent) of
the prefectural and municipal workers' union, Katayama (incumbent) whose
base is the telecommunications workers' union, Fukuma (incumbent) of the
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federation of machine workers' unions, and Matsuki (incumbent) of Burakumin
liberation have developed vigorous campaigns. Akune (incumbent) of the .
private labor unions organization hopes to overcome the composite house-
holds and ia making himself known in H~kka.ido and the Tohoku area. Kasuya
(incumbent), to whom the Japan Teachers' Union has given eastern Japan, is
the only woman among the JSP's national constituency candidatea, but there
may be some effect from the decision of the Tokyo Federation of Metro~al-
itan Workers' Unions, which is JCP-oriented, in a united gathering of
unions. Yasunaga (incumbent), whose base is the western area of the Japan
TeacherQ' Union, is compelled to fight against eacroachment from JCP
sources. Meguro (incumbent) of the railway locomotive engineers' union is
concerned about the weakening c,f his organization. Suzuki (new) has been
an independent candidate of the monopoly corporation workers' union for
12 years but she may not be able to make up for her law degree of
recognition.
Komeito (9 seats at risk)
The absolute goal is election of all nine candidates, but there is growing
concern that "it will be difficult with increased voter turnout for the
double elections" ;Kameito Election Strategy Headquarters). Of the nine,
Osaka-based Mineyama (incumbent), Shikc~ku-based Ninomiya (incumbent),
Shioide (incumbent) whose strength is in the Chugoku region, and Suzuki ~
(incumbent) of Kanagawa and Saitama all have good records and are in stable
positions. Fujiwara of Hokkaido and the Tohoku area is making advances,
but not enough. Aichi prefecture, the base for. Ota (incumbent) has put
much of its effort into the camp$ign for the local conatituency candidate.
Okawa (new) who has made every effort in Tokyo and Tsurnoka (new) whose
base is Chiba and Ibaragi have made some inroads, but Nakano (new) in
Kyushu is not well enough known.
JCP.'(~ seats at risk)
The party consider~ it necessary to win all six seats. Komaki (incumbent)
of the Osaka area and Yamanaka (incumbent), whose base is Kanagawa, Chiba
and Aichi, are relativeiy strong. Tachigi (incumbent) has an active
campaign in Hokkaido and the Tohoku area. Watanabe (incumbent) is putting
every effort into a broad area covering the Ch~ugoku, Shikoku and Kyushu
areas. Naito (incumbent), who has Tokyo and the three Kanto area pre-
fectures may or may not get the votea he expects in Tokyo. Kondo (former),
who wants to make a comeback in Kyoto .and Hyogo, still isn't moving faet
enough.
DSP (3 seats at risk) ~
The party aims to have all four candidates elected, and is depending on its
organizational ability to make inroads in the various areas. Tabuchi (ia-
cuinbent) and Karatani (incumbent) ~r,re in stable positions, being backed by
the federstion of automobile workEY~s' unions and the federation of textile
, � ~
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v.. va L llil[LLJ u.~u varL1
workers' union~; respectively. The organization of the electric power work-
ers' unions federation has become fully active in behalf of Mukai (incum-
bent) a major force. Ito (new) got a late start and is hurt by not being
well known, but he is backed by such organizations as the shipbuilding and
engineering unions, the seamen's union and the railway workera' union, and
he is making every effort to firm up votes. ~
Others
The eye of the storm is Minobe (independent, new) who drew the first ballot
- position. The JSP and others are afraid that he will attract a large part
of the progressive floating vote, and thus deal a blaw to the opposition
parties and the celebrities. Hata (SLC, incumbent), who is making his
last stand, takes the view that the double election will increase voCer
turnout and oblige the other parties to uivide up their vote, and he is
campaigning vigorously. The Niinsei Club's Ichika.wa (independet~t, incum- `
bent), Aokima (independent, incumbent) and Columbia Toppu (independent,
incumbent) have a united front with such an idealistic campaign that they
are not putting up posters; Ichikawa in particular plans to finish in the
top rank of those elected. Tei Eikan (independent, new), who has the
recommendation of the LDP, is still far from sure of election, and Nakazawa
- (NLC, new) also got off to a late start. The United Progressive Liberals
Nakayama (other, new) and Aoki (independent, new) of the salarymen's
league are both unknown quantities. Kajino (other, new) of the Marxist
workers' federation has been campaigning together with nine candidates in
the local constituencies.
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= FOR OFFICIAL USE ONLY
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rvn vrr1.~,LeiL UJ~ ULVLY
LDP's Last Moment Election
Tokyo NIHON KLIZAI SHIMBUN in Japanese 2 Jun 80 p 2
[Text] Another "Critical Election" for the LDP
Will concurrent elections actually be to the advantage of the LDP? Those
who consider it the deciding factor in checking the decline of party
fortunes include not only the mainstream factions, but also anti-mainstream
people like Ichiro Nakagawa. What both these sides share, however, is the
premise that last fall's general election was the nadir and the number of
seats cannot go any lower. That is, for many LDP Diet members their in- -
dividual support groups serve as the foundation in the general elections,
and the strength of the charges of financial inf luence corruption which
buffet the LDP is seen as having no great effect on the election of "our
leader," except for those directly involved in the charges and candidates
from urban and suburban districts.
Such a view is persuasive to a certain extent. For example, in the last
general election the LDP received 400,000 more votes than in the election
before last, and the proportion of votes received was up 2.71 pointa. But
this was because of an increase in votes in the agricultural areas. This
is plainly expressed in the fact that in the general election before last
the LDP received over 70 percent of the vote in three locations, but in the
last general election this number increased five-fold to fifteen locations.
This probably resulted from activity by personal support organizations of
Diet members with a sense of crisis regarding increased taxes and the JRCC
incident,
The weak point of the LDP is that the increase of votes in the argicultural
areas is not tied to an increase in seats for the party as a whole. The
major factor in the decline of the LDP is the loss of basea in the ma.jor
cities and their suburbs; this is continuing unabated, and it has held down
any increase in party strength. While there was certainly an increase in
the proportion of votes received by the LDP in the last genera 1 e Zection
(44.59 percent), th~.s increase was not aCtained in 57 electoral districts,
over four-tenths of the 13,0 districta across the~country. The number of
, districts in which the LDP did not hold half the seats, including two empty
districts, rose from 55 (from 51 in the election before last). There is no
way for the LDP to increase its number of seats except by grawing stronger
in the urban and suburban districts. But t~ speak realiatically, a series
of unfortunate incidents has made criticism of the LDP sharper than ever in
these areas. And this time the proportion of votea received even in the
reliable agricultural areas is expected tQ drop back to the level of the
election before last.
One more agrument for placing hope in the concurrent electiona is that,
_ "the LDP produced 54 runners-up in the last general election, and there is
a chance that in this election, when the share of vDtes received is expected
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"to be up, many of the runners-up will be returned." Of caurse one reason
that the JCP had better-than-expected success in the last geaeral election
is that a large aumber of its runners-up in the election before last were
returned. Follawiug this line, it is reasonable that the LDP have hopes
For its runners-up.
But from a slightly different point of view, this argument cannot be given -
much credence. It is true that the LDP, with 54, had the Largest aumber of
runners-up, but this is almost the same number as the 55 members who were
' elected in the lawest rank and about half of these locations, 25, are
"cannibal districts" where both the lawest-ranked member elected and the
runner-up were LDP candidates. In 17 districts the lawest-raaked was JSP
and the runner-up was IaP so there is soffie chanr_e of increasiag the avmber
of seats, but overconfidence won't do beca.use there were also 20 districts
whsre the lowest-ranked was LDP and the runner-up was JSP. There are three
prerequisites for the runner-up to be e lected: (1) the strength of the ~
party as a whole u~ust increase; (2) undecided or synapathy votes must be
available; and (3) there must be skillful coordination among the candi- "
dates. In any case, this general election is not a very good environmeat
for the LDP.
From this point of view, it is not possible to state precisely calculated
figures for this election as so~ have done. There is a delicate balance
between the view that, "concurrent elections will be hard to read; there
is no great change from the election seven months ago and this one may
well end up about the same" (former Prime Minister Fukuda), sud the view
that, "there is a good chance the LDP will lose its majority" (NLG repre-
semrative Tagawa), but there is no change in the realiry that the LDP l~as
again been forced into another critical election to maintain a bare
majority.
COPYRIGHT: Nihon Reizai Shimbu~asha 1980
Double Elections A~alyzed
Tokyo SHUKAN ASAHI in Jaganese 30 May 80 pp 25-28
[Article by Chikashi Anabuki and Atsushi Takeuchi: "Bold Prediction of Re-
- sults of Confusing Double Elections"]
[Su~ary of comments by Kotaro Tawara: "Ohira-Tanaka Ma3,nstream and
Nakasone Faction Up--Miki and Fukuda Factions Dawn"]
[Textj Tawara thinks that basically there won't be a great chaage in the
number of seats. The makeup of the electorate has aot changed since the
last general elections ia October 1979, and the voters should '4~trite the
same names they wrote a few months earlier." There was a ssimilar case in
the Yoshida era when a general election was held in April 1953, right
after that in October 1952. The same trend appeared at that time:
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~ v~. ~ rv~.~ar+ uvv va\YL
' ultimately there was not much change in the strengths of the parties or
factions. _
It did happen, however, that individuals who suffered defeat in the 1952
election were restored in 1953 and that those who chanced to be elected in
the first failed in the second. Thus his interpretation is that, "many
were hurt by the drop in votes caused by the heavy rains last year; such
persons will be brought back." Those who were hurt were in the LDP, -
especially the Ohira, Tanaka and Nakasone factions and their hangers-on,
and in that sense it will be an element of growth for the mainstream
factions of the LDP. Of these, the factions with a good chance for growth
would be the Ohira faction, with many candidates who lost out last time,
and the Narcasone faction, which has the strength to enter new candidates.
The Miki and Fukuda facCions, by contrast, "unfortunately does not have too
many who lost out, but rather those who did well for themselves."
There is one other situation which must be considered serious for the
Fukuda faction. This faction has grawn as a right-wing entity within the
LDP, but the Afghanistan prablem and other tense domestic and foreign situ-
ations have been the occasion for agitation in concert with the opposition
parties, and this tends to draw opposition fram the faction's supporters.
In any case there is the diagnosis that a decline in the strength of the
Miki and Fukuda factions is inevitable: "The two factions may get 70 seaes
hetween them."
The JSP, which in many cases made the mistake of entering two candidates in
a district to defeat each other, won't lose that much this time. The JCP
is in the happy atate of 'Faaging a campaign by striking out in all direc- ~
tions;" and should be able to maintain its present number of seats. It is
Komeito and the DSP that will suffer.
Because the election is to be quick and decisive, each party has been mak-
ing attacks on the others that are ~ust short of slander. The Komeito,
which has prided itself on cleanliness, will hardly be helped by.what the
mass media have written about Secretary Yano's "Mahjong gambling incideat."
The DSP has poured all its talent::and money into the House of Councilors
electfon. The NLC and SCL can be expected to gain strength, but in absolute
terms they will still be few in number.
Chances for Otiira, Nakasone or Asukata Governments '
- If, after all the activity among the LDP factions and among the opposition
parties, there is no change in the totals of the government party and the
opposition parties, three possibilities can be considered for the government
after the electi~ons:
Case l--Ohira still wants to be designated prime minister. As for cooper-
ation among the opposition partiea, the most that can be expected is a
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Kameito-DSP united candidate for that position. The addition of the JSP's
Asukata will make it a three-way race. The Miki-Fukuda factions, which
have been well-behaved in the early stage of the campaign, may rebel and
put forward their awn candidate, but even if they did, he would not have
the strength of either the Komeito-DSP or the Socialist caadidate. It is
safe to say they would not go so far as co support the Komeito-DSP or JSP
candidates.
Ultimately it would be a contest between Ohira and Asukata, and if the
Mi.ki-Fukuda factions abstained, Ohira would remain in pawer with a rela-
tive majority.
Case 2--If the LDP does not take a majority of seats in the general elec-
" tion there will be calls for Ohira's withdrawal; Ohira himself, seeing that ,
two general elections didn't help him, will pass the baton to Nakasone. At
that time Nakasone will be faced with the problem of whether to call back
Miki and Fukuda, restore what looks like the ald LDP and become prime min-
ister, or td call in certain oppositioa parties on the assumption tha~ the
LDP is different from that in the O~ira era.
Case 3--The Miki and Fukuda factions, ia desperation, eatice the Komeito
and DSP to support the JSP's Asukata, or else conspire with the JSP to
support a Kameito-DSP united candidate. A JSP-K,ameito-DSP-Miki-Fukuda
grand coalition governmeat would thus come iato beiag.
Iijima predicts that the LDP and the JSP are going to lose seats. Not oaly
did the LDP lose seats ia the 1979 general electioa, but in the 130 elec-.-..
toral districts across the country, 53 LDP candidates were in the last
raak of those elected. For the JSP this nimmber was 39, which is unusually
large.
Looking at the example of the general electioas in 1952 and 1953, we see
that of the 70 runners-up in the first election who stood again in the
second, more than 75 percent--54 individuals--were elected. This shawe
the danger of being in the last rank e~c!those returned. ~
When the time between elections is short, the iacnmbents do not have time
to bui13 their strength, and the defeated still have the sympathy accorded
losers . This time the ti.miag is such that, '~ahile the winaers are breathing
a sigh of relief and neglecting to offer their thanks to local supporters,
the losers are making the rounds of supporters to apologize for the~r mis-
takes." And because those who are aot elected were not embroiled ia the ~
present struggle, it appears that ov~r 70 perceat of the runners-up who
stand for e2ection again will be elected.
Relative Strength of Miki-Fukuda and Komeito-DSP Is Rey to New Govervment
The LDP has 54 runaers-up, which is well-balanced with the last rank of
those elected. But "this is a surprisingly painful figure," aad it is
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conceivable that the number of recognized candidates elected will drop to
about 240.
The JSP has 27 runners-up, which is not balanced with the last rank of
those elected. Figuring in other negative factors like a misstep regard-
ing JSP-Komeito-DSP~cooperation, the JSP is likely to drop below 100 seats.
The Komeito has nine elected in the last rank and four runners-up, and the
DSP has 12 in the last rank and seven runners-up; both can expect a dif-
ficult struggle in that regard. Iijima. thinks the parties with bright
prospects are the JCP, with 12 in the last rank and 19 runners-upy and the
NLC, with 10 runners-up.
_ The keys to the new government will be the extent to which the Miki and
Fukuda factions maintain their strength, and whether the Komeito-DSP
forces can reach three digits and change places with the JSP, ~
He says that, "although Komeito supports the JSP naw, its attitude will
change if Kameito and the DSP get more seats than the JSP; it will begi.n
to think about cooperation with t~the conservatives then." It is con-
ceivable that in that event, if the Miki and Fukuda factions number fewer
than 70, Komeito and the DSP will j~~n hands with the LDP mainstream. If
there are 100 Komeito-DSP seats and 170 LDP mainstream seats, the total
would be a stable majority of 270.
Unless the Miki and Fukuda faction~ become considerably stronger, they ~
cannot reach the number one position even by joining with Komeito ar?d the
DSP. Rather, the Komeito and DSP forces will be able to choose stability
by jaining with the Ohira-Tanaka-Nakas~ne group.
A coalition government including Komeito, DSP, Miki, Fukuda and JSP forces
is hopeless: "Policy differences are too great between the JSP and the
Fukuda faction, not to mention the JSP and the Miki faction."
[Su~nary of comments by Toshiyuki Takabatake: "LDP Declines, Komeito and
JCP Benefit, JSP and DSP May Hold Present Strength"J -
With the growth of the middle class it becotnes difficult to accept a simple
classification into capitalists and workers. Organization of the voters
into interest groups goes forward and political parties multip~y. This is
a basic ~rinciple. But thinking on the present natianal elections is
based on the awareness that noae of the parties have definite platforms
and the independent vote has nawhere to go.
Neither the DSP nor Komeito is set up to obtain many independent votes
from outside its own basic organization. And both the NLC and the SCL,
despite the declarationa with which they started, keep the same old system.
Reflecting this situation, the independent vote in last year's general
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election went mostly to the LDP and the 3SP, with same going back to the
JCP.
But since then, the LDP has had half a year of bad press--the 40-day
resistance, the KDD incident, Hamada's gambling, and this dramatic split
in the party--and there is a chance it will drop t~ about 240 seats this
time.
Socialist Government Possible--For Six lrbnths
The short time before the election is said to be a disadvantage: "`~here
is no pre-campaign infiltration, aad the money doesn't circulate well."
The parties that will profit from the short period are the Komeito and the
JCP, which gather votes by cou~and. The Komeito gained strength in the
last election, but this is a time in which it has mou~entum as the axis of
the JSP-Komeito-DSP middle-of-the-road coalitioa. The JCP switched, in the
last election, from an emphasis on urban electoral di~tricts to the idea ~
of rapid progress by the party as a whole. These two parties should do un-
expectedly well.
It doesn't appear that the JSP of the DSP will lose too much strength. If
the JSP cooperates with the Komeito in districts where there is no IGomeito-
DSP cooperation, it is not entirely impossible that it caa borrow votes
from the Komeito. The JSP may well have a surprisingly easy time of it.
Iijima assu~es there is no possibility that the LDP will put forth a single
candidate for prime minister after the electioa, but even if it does back
a candidate it may not control a majority of the House of Represeatatives,
so selection of the pri.me minister by ballot is inevitable.
"In that case it is possible that Asukata, as the vnited candidate of the
_ JSP, Komeito and the DSP, may come in first with a relative majority of ~
about 200 votes." But could an Asukata government create a stable situ- "
ation? There is ao chance of that: "it would stagger along for about half
a year and there would be another general election. This process would
keep repeating itself."
Synthesis of Remarks by Tawara, Iijima aad Takabatake: "First Double
Election to Benefit Commuaists and Celebrity Caadidatea"J
This is the first.time that balloting for lawer and upper house electians
has been carried out at one time. This will probably work most to the ad-
vantage of the JCP. Tawara points out that, "by backing just the two can-
didates in each electoral district, the JCP is waging the most efficient
campaign, because the LDP and the JSP-Komeito-DSP candidates are fighting
against each other."
Similar~~y, Takabatake says: "a multiplier effect can be expected."
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. _
Iijima's view is that there may be cases like in the last election where
the JCP took seats in "unexpected places" such as Wakayama (two districts),
Shimane and Nara.
In Tawara's view, though, the JCP had 440,000 party members at the 15th ~
Party Congress this Februa.ry and 3,530,000 readers of AKAHATA, but in
April there were calls to restore AKAHATA to the level of the Party
Congress; the base isn't a11 that firm." He predicts the districts taken
this time will include four in Hokkaido, and the.t there won't be many of
them.
All three agree that, "it is the candidates of the JSP, Komeito and the
DSP that will have a really hard time," but Tawara feels that, "~hhe JSP
won't be effec~ted that much; it's Komeito and the DSP that will ~~ose out."
It is Takabatake's analysis, however, that "if the JCP takes an unusual
number of votes in the agricultural villages, which it had abandoned from
the beginning, it will be thrown tnto competition with the JSP." Tawara
agrees: "it is possible that even if they increase their votes the JCP
will not gain seats; in competition with the JSP they will defeat each
other."
Iijima's view of the LDP is that, "There may well be candidates who sought
the upper house but have switched to run for the lower house," but Tawara
says curtly that, "there is no telling (what effects the double election
will bring) until the results are in."
What effect will there be for the independent celebrity candidates that
characterize the upper house election? As the party politicians struggle
fiercely for leadership in the double election and unification against the
enemy, the influence of the celebrities will naturally be very slight.
Takabatake: "Of course, there is the possibility that such persons will
be weak. But as the voting rate goes up in the paired elections and there
. are only unknown party candidates in the national constituency, the chance
of the independent celebrity candidates rising to the top is good."
Ii3ima: "(Chinatsu) (Nakayama) could be elected."
Tawara: "And if (Chinateu) wh~i not (Yukio) Aojima? Both of them may be
elected."
It will be a different matter if, as in the previous election, heavy rain-
fall literally dampens enthusiasm for the election, but if the voltage
rema.ins high, the chances of the ce lebrities to win approval will not be
bad.
Then there is the view that this election will be the occasion for the
political world to enter a period of confusion. The process for
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reorganization is dissolution and general elections. Tawara: "Ia the
first half of the 1980's there will be five national elections (two for
the upper house, three for the lawer house) including the two ~is time."
Takabatake: "With the state of stalemate since~the 1970's, the shares of
votes received have only gone up or down a few percent so there have oaly
been st~.all changes in numbers of seats held. This has taken the steam out
of the electorate."
Takabatake again: "It would be best for a new wind to blaw through
politics, but what worries me most is what sort of wind will blaw through
Japan's Diet politics in a time of perpetual Italian-style coafusion, when
governments only last six months and (party) coali~ions are formed for
their own sake without any new ideas."
And again: "Alrhough I have hope, in that the chance has come for the
political world to change, I have no vision at all as to the direction in
which it will change."
Thus attention is turned toward the dangerous pitfalls hidden in the politi-
cal parties' game of choosing up sides.
COPYRIGHT: Asahi Shimbunsha 1980
9601 -
CSO: 4I05
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- MILITARY
FINANCIAL LEADERS' DEFENSE STRATEGY IN 80`S ANALYZED
Tokyo SEKAI in Japanese Jun 80 pp 118-128
[Article by Yu Takaoka, Journalist: "Financial Leaders' Defense Strategy
in the Decade of the Eighties"]
- [Text] With the advent of the 1980's, defense debates are beginning to
heat up in financial circles. On 7 February at the 18th financial seminar
in Kyoto, Hosai Hiuga, chairman, Kansai Economic Federation [Kansai Keizai
Rengokai], cited a need to study the conscription system and double the
- ratio of defense spending against the gross national product to 1.9 per-
cent, while Shigeo Nagano, chairman of the Japan Chamber of Commerce and
Industry [Nihon Shoko Kaigisho], pr~posed before its Slst general conven-
tion on 19 March, a lifting of the ban on ai-ms exports. On 7 April, Tada-
_ shi Sesaki, chairman of the Board of Trustees, Japan Committee for Econo-
mic Development [Keizai Doyukai], espoused during a press conference an
"independent stance for defense." Then, the next day on the 8th, Toshio
_ Doko, chairman, Japan Federation of Employers Associations [Keidranren],
likewise spoke on the defense problem to newsmen. While Chairman Doko
spoke in a somewhat critical tone compared to the pos itive statements by .
the otlier thhree, they summed up the views of all the financial leadera in
the Kanto and Kansai regions.
Are these recent defense debatea in financial circles simply an emotional ~
outburst inspired by the Soviet invasion of Afghanistan last year and, or
are they based on a strategic point of view to ride out the crises and ~
turbulence of the 1980's? For an understanding of this point, it would
be necessary to retrace the postwar defense debates in financial Gircles.
i
Three Currents .
The defense debates in financial circles until the end of the 1970's can
be classified broadly into three phases. The first phase is from the end ~
of the Korean Conflict to the mid-1960's. During this period, special
military procurements served to revive Japan's arms production, and then
came the first defense program (1958-1960), followed by the second defense
program (1962-1966), leading to gradual expansion of the arms industry.
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As is already known, the Japan-U.S. Security Treaty and the Peace Treaty _
was coticluded in September 1951 and became effective April 1952. Around
that ti.me in March, GHQ (General Headquarters, Allied Forces) granted per-
mission for Japan to engage in arms production and in August that year
the Security Agency, now the Defense Agency, came into being.
It was around this time that Ichiro Ishikawa, chairman, Japan Federation
of Employers Associations, cited before the Federation's llth general con-
vention, "the need for Japan to maintain a defense force" and called for
the revival of arms production.
As a result of the famed Ikeda-Robertson parley of October 1953, a joint
declaration was made to the effect that "an agreement of views had been
reached on the need for Japan to bolster her defense power in order to
alleviate the U.S. burden for Japan's defense." -
In other words, the financial circles and the government, in joint harmony,
moved taward rearmament and renewed arms production. Kogoro Uemura, then
vice chairman of the Japan Federation of Employers Associations, discussed
the significance of the arms industry to Japan's economy in the "Keidanren -
Geppo" [Keidanren Monthly], [February 1955 edition] as follows: -
' "As for the defense industry, it is needless to say that after a decision
is reached on its level, domestic arms production will become necessary.
'I'here are skeptical views regarding ~he need for a defense industry, but
defense power without an industrial base would pose a danger like a house _
standing on sand. Moreover, it must be argued that, from the standpoint
of in dustrial production, the establishment of a defense industry will tie-
in c losely to the advancement of technological level of industries in
gene ral as the highest level of technology such as in aircraft and elec-
tronic weapons is demanded in defense nowadays."
In short, it was a rebuttal against arguments opposing the arms industry,
emphasizing the importance of strengthening the foundation of the defense
indus try from the point of technological development. That represented
the views of financial circles at the time.
And prior to the decision on tl~e second defense program, the Japan Federa- _
tion of Employers Associations and Japan Arms Industry Association ~ointly
prepared and submitted to the then Ikeda Cabinet, their "desires on the
- long-term, comprehensive contract formula for arms."
It s tressed that "in order ~o introduce, without contradiction, the pro- _
duct ion of the defense-related sector having relatively little flexibility
on demands into a production process operating under a long-term, compre-
hens ive management program, a procurement based on long-term, planned
- system would be a basic requirement." The reasons given were: (1) The .
requisition system under a fiscal year contract basis would disturb the
private demand sector, (2) as a high level of technology is needed in
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designs, matecials and processing in defense production, there would be a
need to estab?~ish permanent exclusive facilities for such purposes, (3)
arms production will require outstanding technicians and highly-skille d
workers; under the old system, such technicians would have to be trans -
ferred, and (4) a long-term, comprehensive contract formula would allow
a cost reduction and quality improvement and insure an ample supply of
parts.
In response to such desire5 of financial circles, the long-term, compre -
hensive contract formula Por arms was instituted beginning with the se c ond
defense program, and arms production came to be viewed as part of the
restructure of Japan's industrial production. �
In parallel with this, arms exports came to be the subject of controversy.
For example, in July 1956, the Arms Production Council (an advisory org an
to the Minister of International Trade and Industry) submitted a recommen-
dation to the minister on "measures to aid the weapons industry," citing
the "need to promote exports to Southeast Asia owing to decreased U.S.
military procurements." And in July 1959, the Defense ProductioZ Commit-
tee of Japan Federation of Employers Associations formed a"Market Mea-
sures Committee" with the aim of promoting arms exports systematically_
Later in August 1962, the "Defense Armament Domestic Production Counci 1
(Naka Funada, chairman), composed of representatives from the Lib eral-
Democratic Party, the Ministry of Finance, the Defense Agency and Japan
_ Federation of Employers Associations' Defense Production Committee, s ub -
mitted a"statement of opinions on arms exports" centered on foreign
exchange acquisition, arms cost reduction and defense industry develop -
wQnt to the then Prime Minister Ikeda.
In any event, defense debates in financial circles around this time p r i-
marily cancerned the renewal and advancement of arms production and the
notion that arms exports would help insure a stab le arms production.
~ But ~.~ith respect to arms exports, the government, later in April 1967,
adopted three principles on arms export ban, (1) The Communist bloc, (2)
countries like South Africa and Rhodesia which fell under the United
Nations ban, and (3) the ban on arms exports, in principle, to parties
to a dispute, and decided to halt all arms exports.
The second phase was around the time of the "1970 Security Treaty." Fr om
the second half of the 1960's, lively debates surfaced concerning the s o-
called 1970's problems, the period when the 10-year Japan-U.S. Security
Treaty was scheduled to terminate, and student movements grew in inten-
sity. Meanwhile, in Vietnams there were mounting indications of U.S.
defeat, and the withdrawal o'= U.S. Forces from Asia came to be conside r ed
inevitable. Amid such situation, 3efense debates in financial circles
became increasingly lively.
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Firing the initial salvo was the Japan Employezs Federation [Japan ~edexa-
tion of Employers Associations; Takeshi Sakuxada, ;epxesentative executive
director]. At the Federation's general convention in October 196~, novel-
ist Yukio Mishima [deceased] delivered a special lecture titled "My Theory
_ on Independent Defense," while Representative Sakurada touch..~, on the stu-
dent movement and tried to provoke the employers on the defense question
by adding, "although. defense, public security and educational iasues are
national affairs, the political approach taward them raises a suspicion.
I~ industrialists can come up with a positive suggestion, that would be
the only way to cope." At the 22nd general convention in April 1969, .
~ Representative Sakurada spoke more positively and stressed the need for
greater independent defense capability, saying, "the govemment has neglec-
ted to inform the people of the harsh international, military situation.
How much capability has Japan to maintain peace?"
In step with the Japan Employers Federation, the Japan Federation of
Employers Associations; the financial circles' headquarters, convened
its 3dth regular general convention in May the same year where Chairman
Uemura stated, "With the advancement of peace in Vietnam and the pullout
of British forces from Southeast Asia, the issues of peace and safety of
Southeast Asia have become crucial, and the question of security of Japan
itself has loomed. Our country has an obligation to contribute toward
peace in the Far East under a collective security system through continued ~
adherence to the security structure and gradual strengthening of an inde-
pendent defense capability."
Prior to this, Kazutaka Kikawada, chairman of Che Board of Trustees, Japan
Committee for Economic Dev~elopment, at its regular general meeting in
April, addressed the issue of defending overseas trade routes from the
standpoint of protection of resources supply, saying, "For Japan which
lacks resources and is dependent on the whole world for resources and
markets, the safety and stability of overseas trade routes is vital in
that they determine the fate of Japan's economy. Thus, Japan, as an
Asian-Pacif3c nation, should fully consider the future of Southeast Asia ~
with Japan-U.S. relations as the axis." That signalled the beginning of .
the theory of defense of Malacca Straits, occupying a key position in oil .
transport between the Middle East and Japan.
Takeshi Sakurada, representative of Japan Federation of Employers Asso~ia-
tions, speaking at a high-level management seminar in Fuji-Yoshida City _
~ in August the same year, stressed the need to strengthen the independent . :
defense capability, saying, "Japan is a tialf-nation in terms of defense,
public security and education." In other words, he ~eant that the defense
capability was not up to par as a nation and was wholly deficient. He
continued, "there is a need to efficiently strengEhen the defense capa-
bility to the extent it does not have an adverse effect o~ economic
growth." Concretely, he called for increased defense spending, up to 1.5
percent of the GNP. At the special general convention of the Federation
in October that year, Sakurada went further and stated, "If Japan is to
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- seriously consider independent de�ense, there would be the question of
whether Articl,~ 9 of the Constitution should be left as is. k'or any
future collective defense conce~t, that is likely to become a menance."
Thus defense arguments in fina:icial circles escalated to the point af
open advoc_acy of a constitutional amendment.
Along with heated defense debates, arguments in favor of arms exports re~
surfaced. At its general convention in May 1969, the Japan Arms Industry
Association (Kenzo Ohkubo, chairman, and president, Mitsubishi Electric),
- an organization of influential arms manufacturers, decided on an opera-
tional policy to (1) prumote and bolster the arms industry, and (2) rea-
lize arms e~cports to Southeast Asia. Further, following the general
meeting of the Japan Arms Industry Association in May 1971, Keizo Tamaoki,
vice president of Toshiba, newly installed as its chairman, revealed in a
press interview his intentions to "request the government for flexibility
in the application of the three principles on the arms export ban," there- -
by giving an insight to the tenacity of arms manufacturers for arms exports.
Amid such hawkish remarks by financial circles over defense, the Japan
Federation of Employers Associations' Defense Production Committee [Kogoro
Uemura, chairman] came up in August 1970 with a report, "Our views on the
defense capability issue for next term." The views held that "regarding
the question of security, there is a need to consider not only military
defense capability, but to include, from an overall standpoint, politics,
economy, diplomacy and public welfare, and to pursue them based on national
concensus, international understanding and trust," and called on the govern-
ment for domestic arms production, greater research and development and for -
the creation of a new "national security council" to replace the old
"befense Council." .
It was then a period of transition from the third defense program [1967-
1971J to the fourth defense program [1972-1976]. These views not only '
covered desires for the fourth defense program but also touched on how '
Japan's security structure should be; in short, they were the first of
financial circles' argument for a comprehensive security. -
Be that as it may, the focus of defense debates in the second phase was on
strengthening independent defense, including the subject of amending Arti-
cle 9 of the Constitution. Moreover, it must not be overlooked that two
domestic and external conditions detrimental to the proponents of the sys- ,
tem :vere escalating the independent defense arguments. ;
~
~
One was the fear that the "nuclear umbrella" over Asia may not fully func- ,
tion because of the defeat of U.S. forces in Vietnam, simultaneously
creating a crack in the Japan-U.S. security structure. It cannot be denied ~
that the "1970 Security Treaty" intensified such fears of business circles.
The second point was the fear of collapse of the LDP-dominated government.
At the high-level management seminar [1969J where the theory about Japan
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, being half-nation originated, the concensus was that "if things remain as
now, the possibiiity of the current conservative party being unable to
singlehandedly assume the rein of government cannot be dismiased. Should
the political climate become unstable, it would mean the aaiti-structural _
movement in the areas of politics, economy, society and culture." In
other words, to beef up the weak conservative structure that earned the
term half-nation, it was concluded that a greater independent defense was
of utmost necessity.
Broadly speaking, the 'third phase came after the first oil shock of 1973.
In January 1975, before departing for the first summit conference at
(Lanbuie) outside Paris, Prime Minister Miki sought out the opinions of
influential financial leaders. Bunichiro Tabe, president, Mitaubishi -
Corporation, championed the arms export theory, saying, "Aside from genuine
- arms, ob~ects close to_being arms and having a competitive capability
should be exported." And in January 1976, Shigeo Nagano, ch~irman, Japan
Chamber of Commerce and Industry, a press conference called for a relaxa-
tion of arms export control, stating, "To enhance the country's economy,
things that others wieh to pr~rchase should be sold to them."
The background for the renewed interest in the arms export argument by -
financial leaders was: (1) entry into a recessiona.ry phase due~to the
oil shock, (2) stepped up arms sales to Mideast nations by the East and
West as a strategy toward the Middle Fast following the oil shock, and '
(3) resumption of arms exports by West Germany in 1975 af ter 30 years.
Arms exports to Mideast countries intensified, with world trade in arms
reaching 18 billion dollars [58 billion dollars over a 10-year period from
1964 to 1973], the bulk destined for the Middle East. Therefore, it was
- not unusual for financial circles to be concerned about Japan being left
behind.
However, the financia~ circles' scheme for arms exports ultimately led to
further tightening of the three principles on the esport ban.
In February 1976, the government, on pressue from the opposition forces,
was forced to adopt more stringent, three new principles: (1) non-
_ recognition of exports to banned destinations designated by the old,
three principles, (2) restriction of exports to areas other than those
cited, and (3) treatment of arms manufacturing machinery as weapons.
From the financial circles' point of view, it ca.me as a surprise, like a
snake crawling out after the thicket was poked. To this, Mitsubishi
Corporation President Tabe, who ignited the matter, said in a press con- ~
ference in July 1977, "To say that Japan should not become involved in
arms export as it is a peaceful nation ie a childish argument." He thus
made a scathing comm~ent and espoused the arms export argument, saying, ~
"By making the esport portion, cheaper and.better quality goods can be
produced by mass production, and if an arms costdown can be effected,
the people will be able to save on taxes, accordingly." .
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Further, in F~:bruary 1978, the Japan Chamber of Commerce and Industry
(Shigeo Nagano, chairman] passed a resolution on "desires with respect to
the recession in the shipbuilding industry" which included a request for
an actual relaxation of arms export controls. Initiated by Mr Nagano as
chairman of the Shipbuilding Rationalization Council, it called for arms
export relaxation centered on vessels as a means to help the shipbuilding
industry surmount the long reces;;ion which had resulted in a 35 percent
reduction of facilities. -
_ In such a way, the arms export argument in the third phase urged the govern-
ment to relax the three principles on the export ban, a ma~or characteris-
tic being that its aim was densely colored as an anti-recession measure.
Arms Export and Increased Independent Defense Capability
_ When viewed in this manner, it may be said that the debates up until now
have been based on the two pillars of independent defense and arms exports.
The latest fourth defense program also has as axis the financial circles'
debates over arms exports and greater independent defense capability. -
Hiuga's comments which evoked much repercussion as being in support of the
conscription system also stressed, "Our own defense efforts must be stren-
gthened." Chairman Sasaki, Board of Trustees, Japan Committee for Economic
Development, likewise pointed to the need for "one's own power.�t Mr Nagano
is trying to realize the principle of arms exports in his own ways. Could
it be that the current disputes are simply a revival of the old defense
arguments? My impression is that compared to the days of the 1970 Security
Treaty, the debates have been lively but the content is moderate because
an open advocacy of conetitutional amendment as noted in the past Sakurada
statement 1.s yet to come from the financial circles.
� However, it can be conclusively stated that recent defense debates in
financial circles are not based on casual emotions or a rehash of old
debates. The fact that they are positioned as a vital pillar in the stra-
tegy of survival in the 1980's cannot be ignored.
Compared to 10 years ago in the days of the 1970 Security Treaty, there
have been enormous changes, both externally and internally. -
The first has to do with the decline of U.S. influence and power in global
politics. In the daqs of the 1970 Security Treaty, the inferiority of U.S.
- forces in Vietnam was undeniable, but the downfall of Saigon was not on
the agenda. Now, the United States has lost Vietnam and has even turned
Iran against her. Meanwhile, the Soviet Union has expanded its sphere of
influence as symbolized by the invasion of Afghanistan. And as for U.S.-
Soviet military balance, the United States has lost its former superiority
while Soviet military strength has increased.
Against this background, this year's U.S. report on defense stresses the
need for joint defensive efforts of the U.S., Western Europe and Japan to
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cope with the Soviet military build-up. The same report also touches for -
_ the first zime on the concrete concept of the SWING strategy [strategy on
emergency deployment units]. Under the SWING strategy, U.S.�military
forces in the Western Pacific would be rushed in to defend, for example,
the Persian Gulf and the Indian Ocean. The aim of the recent U.S. request
to Japan to bolster its defense capability is to have Japan fill in the .
vacuum created in the Western Pacific.
Thus, there has been a growing sense of fear in financial circles that
Japan can no longer sit idly under a heteronomous nuclear umbrella.
Second, there is the issue of free ride under the Security Treaty against -
a background of declining U.S. economic power. This argument maintains
that Japan-U.S. friction is created because Japan has the United States
shouldering the military costs and that the amount saved is beiag used
exclusively for economic growth and strengthening its competiCive capabili-
ty.
The United States submitted a report titled, "A Restudy of Structural
Characteristics of America and Japan," authored by Klein, a University of ~
Pennsylvania professor and considered a brain in the Carter administra- ,
tion, to the Japan-U.S. financial leaders' conference of June 1978. The
report states that "defense constitutes one of the great burdens for the
United States. It is no accident that Germany and Japan, while maintain- ~
ing a nominal defense burden in comparison with us, has emerged as strong
trading nations." The report further states that "if Japan increases her
share of the pecuniary costs for the defense of the Pacific, it would
serve to lessen America's defense spendings and thus cut back on the
federal budgetary expenditures."
As can be seen later, recent arguments on Japan-U.S. economic friction
are invariably tied in with Japan`s law defense costs, and Japan-U.S.
economic relations can no longer be addressed without touching on the
defense problem.
That which clearly demonstrated the waning of the U.S. position in inter- �
national economy was the dollar devaluation and yen appreciation during ~
the Nixon shock of 15 August 1971. Around that time, there was an English
language report, a required reading among ranking economic bureaucrats
of Kasumigaseki. Compiled by Mr Peterson [in charge of international �
economic affairs], an assistant to then President Nixon, the report frank-
ly stated, "15 August 1971 ushers in a new period of postwar iat~rnational ~
economy, and the United States alone does not have the power to manage
international economy," and "a new international economic syatem should
be characterized by joint assumption of leadership and responsibility."
Now 10 years later, the United States is pressing Japan to share in defense
costs. This year, th~e Japan-U.S. financial leaders' conference will be
held in Tokyo in June. But at a joint management committee meeting held
ea~lier in San Franciaco from the end of February to early March, U.S.
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Pacific Forces Commander Long lectured to a group of Japan-U.S. financial
leaders on defense and asked for Japan's cooperation after saying, "It is
well that Japan is now able to debate on defense issues." A decision was
reached to formally discuss for the first time the "problem of security"
in the June meeting of Japan-U.S. financial leaders. While Japan has no
~ intention to restrict the talks to economic security problems on food and
energy, financial circles feel that a discussion of the defense problem
by the United States will be unavoidable.
Third, there is the issue of securing adequate oil resources of the Middle
East. As U.S. President Carter indicated in his State of the Union address
this year, the revolution in Iran and the Soviet invasion of Afghanistan
have "threatened the supply of oil from the Mideast." U.S. Secretary of
Defense Brown, on 6 March, touched on the oil issue at a speech before
the Diplomatic Council and talked in strong terms as follows: ~
"Oil is the blood of modern industrial society. The Middle East region
accounts for b0 percent of the world's oil imports. By country, the
United States imports approximately 13 percent of oil consumed from this
region, West Germany, 45 percent, and France and Japan, 75 percent. The ~
loss of this oil would deal a mortal blow to the West's economy. If the
oil supply From the Persian Gulf comes to a complete halt, our allies
will suffer irreparable damage. If the Soviet Union should dominate this
region, many leading and developing countries will be forced to become
the Soviet's economically subservient countries.
Arms Export Argument Relative to Security of Resources
Although a resources nationalism in developing countries was already evi-
dent around the time of the 1970 Security Treaty, even financial circles
had not foreseen this until the first oil shock of 1973 and the second
oil crisis sparked by Iran's revolution in 1979.
Thus, defense arguments then dealing with the security of resources merely
addressed the issue of security of sea lanes. It was because of this that
- the defense of Malacca Straits once became a topic of conversation. How-
ever, with the oil producing countries beginning to desert the Western
_ camp, the nature of resources security arguments obviously had to change.
What must be done is to lessen the excessive dependence on oil from the
middle East and shift the relative weight of dependence for energy resour-
ces to the Pacific region. Recently, financial circles, in con~unction
with the government, have been looking toward the establishment of a
Pacific economic sphere. And with Japan-U.S. relations as the axis, they
are urgently approaching Pacific-rimmed nations such as Canada, Australia,
New Zealand, Mexico and China. The aim i~ to secure the resources centered
on energy. Financial circles, therefore, have shown a great interest, not
only in defending the sea lanes linking Japan with the Middle East, but
also securing the diverse resources transport routes in the Pacific region.
In this sense, they watched with interest the outcome of the anti-submarine
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operations during the recent Rimpac exercises [Pan-Pacific ~oint maneu-
vers]. They could not remain aloof of the outcome because, for Japan's
Maritime Self-Defense Force, it was their first participation in a full
scale exercise with other countries such as the United States, Canada,
Australia and New Zealand. A financial person commented, "Through that
realistic exercise, it was proved that modern warfare is indeed an elec-
tronic warfare."
Another point has to do with assurance of oil supply through ar~s exports
to the Middle East. The recent arms exports argument as exemplified by
Mr Nagano takes ug the subject as a direct material for negotiations to
secure the oil supply. The recent trip of French President Gis card D` '
Estaing, who pursues an independent foreign policy line, to the Middle
East partly to sell arms has spurred the arms exports relaxation argument
in Japan.
The fourth major transformation is the trend of the opposition forcea, as
noted in the concept of government coalition by Socialist, Komeito and
Social Democratic parties, their swing to the right and the Co~tmist
- Party's isolation. In the past, financial circles strongly tended to _
believe that the 1970 Security Treaty would lead to the collapse of the
LDP dominated gove mment or a crisis for the capitalist structure. The
reason was that conservative middle-of-the-road parties were still im-
mature and unable to replace the LDP. But the agreement reached last
year end on the concept of a coalition government by Socialist, Komeito
and Social-Democratic parties have served to free the financial circles
from a sense of crisis. The coalition concept of (1) expulsion of the
Commnunist Party and (2) recognition of the Japan-U.S. Security Treaty
as its basic line means, for financial circles, a realization of "revi-
talization of opposition parties" cherished since the 1950's, and the
birth of conservative, middle-of-the-road forces which can fill in for
the LDP. Therefore, it becomes unnecessary to be overly concerned
about the collapse of a LDP-dominated government jeopardizing the capi-
talist structure. And relief from anxiety over criticis~ by the oppo-
sition parties--due to their swing to the right--has given impetus to
defense debates of financial circles. It can be said that a change in
the political situation allowing for establishment of a special com~i.ttee
on security in the Lower House was the background which lead financial
circiles to pick the ~ecurity issue as the primary theme for the 1980's.
Against such a background of enormous changes during the past 10 years,
what kind of strategy do financial circles have in mind for the 1980's?
In short, they hope for establishment of an Asian-Pacific military power
and are stealthily looking toward a constitutional amendment.
Under the Asian-Pacific military power concept, participation will be
limited to the Asian-Pacific region [the United States, Canada, Austra-
lia, New 2ealand, Mexico, ASEAN countries, China and South Rorea], pri-
marily the so-called survival bloc with resources and markets, and any
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political voi~~e in that region would have the backing of some military
strength.
Needless to say, behind the recent arguments for bolstering defense is
the United States' fervent requests for such. But rather than taking
them passively, we can consider them from a slightly more active point
of view.
. For example, in a speech before the Japan-U.S.-Europe Co~i.ttee held in
London last March, ex-Foreign Minister Kiichi Miyazawa spoke on the crea-
tion of a new Western alliance. He explained Japan's position of pur-
suing its awn national interests, saying, "Up until now, the United
States was in a position to determine the national interests of the
allies, but that is no longer the case. Surely, there are national
interests among the allies which can co-exist, and the United States
should recognize that." The text of his speech is reportedly highly
sought after by influential figures in the United States and other coun--
tries.
From "Major Economic Power" to "Major Political Power"
Meanwhile, in financial circles, Minoru Yatnada, president of Daikin Kogyo,
an arms manufacturer, in an article titled "The Free ~conomic Structure
and Politics" in "Keidanren Geppo" [Keidanren Monthly], asked, "Why do
economic organizations take up the security problem? The basic thinking
_ can be attributed to a sense of fear of the liberal structure which holds
that unless Japan, as a member of the free nations' b loc, seriously
undertakes the adjustment of the security system and performs its share
uf the role and responsibility to establish world peace and new order,
� Japan will be unable to sustain a free and stable way of living.:' In
such a way, views that ,Iapan should positively share in the defense bur-
den commensurate to the extent.~as a major economic power have come to
assume the form of a most important commitment by the financial circles
in facing the 1980's.
The construction of a second Panama Canal, promoted jointly with the
United States by influential financial leaders such as Mr Nagano, in
reality, characterizes an integral part of Japan-U.S. mi litary coopera-
tion in the Pacific region. That is, the existing Panama Canal cannot
accommodate large aircraft carriers, but the new one would provide a
free access. In short, the second Panama Canal will assume a military,
strategic importance when, under the SWING strategy, it becomes neces-
sary to move large carriers from the Western Pacific to the Pacific.
Japan`s financial circles, in pushing for construction of the new canal,
have fully taken this into consideration.
As have been noted, Ikawada, chairman of Board of mrustees, Japan Committee
for Economic Development, advocated the "Asian-Pacific Nations Theory" at '
the end of the 1960's, while Sakurada, representative executive director
Japan Employers Federation, urged an "escape from a half-nation status."
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In those days, they were mereiy regarded as a p~Ce~atox}?, but today, after
10 years, the fact that financial circles are attempting to proceed, con-
sciously and meticulously, on the path toward an Asian-Pacific military
power combining both the above cannot be overlooked.
Meamthile, the subject of constitutional amendment has not yet been openly
advocated by financial circles, but is under active discussion within the
group. The important point is that the discussion goes beyond the revi-
sion of Article 9 of the Constitution in order to bolster independent de-
fense and takes a broader view of the revision. The intent is to restrict ~
the rights of the people now protected by the Constitution, while increas-
ing their duties. The plan is to reorganize, at minimum, the democratic
order guaranteed by the Constitution for the past 30 postwar years.
Last January, the Japan Committee for Economic Development released its
"Views for 1980" titled, "The 1980's: Seeking New Responses in Face of
Turbulence." The report advocated the formation of a concensus on security,
pontending, "The establishment of a comprehensive security policy is.ur-
gently required. With respect to the defense problem, an integral part, ~
efforts also should be made to stir up debates widely as a national topic
of the 1980's to reach a concensus." It also requested of politics that
(1) leadership of the prime minister be strengthened, and (2) small
election district system be instituted. Behind such requests toward
politics lies an intent to effect a constitutional amendment, an extremely
- dangerous move, Pspecially in~view of the recent swing to the right by
opposition parties and the proposed emergency legislation.
~ Even if the recent defense debates in financial circles were never intended
to create a major military power, they signify a move taward becoming an
_ Asian-Pacific military power as a ma~or political power befitting the
title of a major economic power. Viewing the arguments for arms exports
or increased defense spending as being founded on economic animal impulse
is bound to lead to the mistake of looking at a tree but not the woods. ~
As for whether auch a strategy by financial circles for the 1980's can .
succeed, there is no assurance of its success.
This is because, above all, there is doub t as to whether the gunboat diplo-
macy type concept of bolstering military capability to secure resources
can be effective. Recent arguments on increased defense capability lack ~
an understanding of the historic current where even the U.S. military pre-
sence could not stem the revolution ln Iran.
Next, as can be seen, for example, from the mi.xed reaction within the
financial circles to Hiuga's statement in support of a conscription system, ~
there may be an agreement on the need for defense debates. but it does not
mean a unity of views on more positive matters. An indication of this ~
is the cxiticral statement by Chairman Doko of Japan F'ed.~sation Employers
Associations, throwing cold water on the recent defense debates.
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Moreover, with respect to increased defense spending, a thick wall exists
because of financial diffi culties caused by a number of red-ink national
- debentures. In short, that is because the inner system itself cont3ins
countless contradictions and lacks the crisis management ability to insure
that the survival strategy for the 1980's function according to program,
juat as the opposition camp experiences a great fissure and lacks the
attributes of a reformist force.
[In quoting the.remarks of business leaders, references were made to news
reports of those times. Yu Takaoka, journalist. ]
COPYRIGHT: Iwanami Shoten 1980
9097
CSO: 4105
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ECONOM[C
EXPERT ANALYZES II~ACT OF IRANIAN OIL CUTOFF TO JAPAN
Tokyo ASAHI JANARU in Japanese 16 May 80 pp 91-96
[Interview with Takao Tomitate, chief of the R~search Division, Japan
Energy/Economic Reaearch Institute, by ASAHI JANARU writer Akihiro Takase:
"Iranian Oil Cutoff to Japan: What Is in the Future?")
[Text] [Question] About a half month after the halt in Iranian cn~de oil
loading for Japan and the ~Jnited Kingdom, Iran's nationalized petroleum
company toughened its attitude: "Unleas Japan and 8ngland accept the new .
price of $35 a barrel in their long-term crude oil contracta, the pos-
sibility of contract abrogationa cannot be discounted."
We feel that a cutoff of deliveries or an abrogation fo contract, if
effected over a long period of time, will have serious consequences for
Japan, which depends on Iran for over 10 percent of its total crude
imports. In the fact of increasing tensions in the Iranian situation9
there are concerns being expresaed se to the adequacy of Japan's petroleum
supplies.
[Tomitate) As a etarter, we must define the problem areas and put them in
proper perspective relative to the bit picture, so that the overall situation
can be accurately underatood.
- The first point is that the 530,000 barrela of DD crude (crude oil under
direct delivery contracts between the nationalized ~ranian oil corporation
and Japanese co~mmercial houses and oil comapnies) which had been imported
from Iran daily have been cut to zero. This bringa up two points: the
_ duration factor--haw long this cutoff will last--and, in the event that
imports are resumned at some future date,.what shape the new deals will
assume. We believe that these are the two problem factors.
The second point involved the potential of obtaining additional supplies
of oil from oil-producing countries other than Iran to fill the gap
left by Iran, in the event the Japanese-Iranian negotiations break down.
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Although these are the two main points in the supply problem, if future
developmenta cfiuse Iran to prolong its cutoff or to reatmae exports but in
- inaufficient volume, point three as described below would arise.
Base Price Increasea Begin; Aimed at June Conference
[Continuation of answer] In that event, to what extent can the advanced
nations, particularly the International Energy Alliance (IEA) and our
allies, assist Ja~pan? Can the IEA's "petroleum emergency cooperatiom
system" be effectively activated? Haw will the United States, which is
responsible for the Iran problem, give direcr assistance to Japan? These
are the questions.
Point four has pertinence to the domeatic structure. In a crisis, how
will the 95-day reserve which is said to be stockpiled by government and
civil sectors be tapped and distributed? In the context of the activation
of the IEA's oil emergency relief ineasures referred to above, various
administrative steps and guidance, such as oil consumption controls and
rati~n stamp measures, will naturally be implemented. The problems that they
will present cannot be ignored.
Point five has to do with how Japan's oil requirements will be affected in
the future; this is the other side of the coin to the point brought up in
the preceding paragraph. On this connection, a fact ~ohich cannot be
overlooked is that since the Tokyo s~unmit last year, the IEA has been
revising oil import allocations to Che various countries on a much
stricter basis. Japan muat consider how to cope in the event import target -
quotas are lowered either on a short- or long-term basis.
[Question] This pertains to your point one, having to do with duration ~
of oil cutoff by Iran. Toward the end of April, Iran toughened its stance
from a loading stoppage to the voiding of long- term contracts.
[Answer] Until then, Japan's position was that the official price of $35 .
a barrel was absolutely unacceptable; Japan had assumed that Iran's dis-
satisfaction with this stand might lead to a loading stoppage, but that it
would be no more than a temporary disruption of commercial negotiations, not
a voidance of contract. Cutting off imports as a political sanction was noC
a move advantageous to Japan; it was better to have Iran stop logdings
becauae the economics-based negotiations had broken dawn. In the latter
case, satiefactory terms could be agreed to in 2 or 3 months and importe
could be reaumed. The Foreign Ministry and the Miniatry of International
Trade and Induatry [MITI] had deemed that thia was the best atrategy for
Japan, and for that reason had put it into effect. But wh.en Iran moved to
void existing contracts, it turned out to be a miscalcular.iona and the
ministries concerned are now feverishly cons~dering ways of coping with
that threat. -
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We th ink that Iran had been saving this contract abrogation move as a tool
or a weapon to be used at the righ t time in a changing aituation. We base
thia concluaion on the fact that changes such as the following were becominf~
inevitable: consumere, including Japan, were going to have to get additional
suppliea from Kuwait and other aources; while Iran was going to have to
increase exporta to Eastern European countries, its rate of production
was dr opping; if new price levels are to be eatablished at the regul8r
OPEC meeting in June, Iran would have to renegotiate contracts anyhow.
In the light of those circumstancea, the move to void contracts need not "
be viewed as a shattering development.
On the other hand, we cannot minimize its effect on Japan. Of the greatest
concern to OPE~ is the extent of increase in the price level of crude
that w ill be established at the meeting to be held in June. World
attention is centered on what aort of campromise can be effected through
the moderating efforta of Saudi Arabia. It is important to note that
Iran's move ie acting as a catalyst in a reversal the dawnward trend
in sp4t market prices, although not as aharp as last year's.
[Question] What is the outlook f or obtaining additional supplies as referred
to in your aecond point--fr_om sources other than Iran?
[AnswerJ Japan has succeeded in contracting for additional DD crude from
Kuwait and Abu Dhabi and supplementary aupplies from Indonesia. The problem
is the purchase price, which in a1Z instances is at the official rate but
with a few additional dollars as a premium. In the case of Kuwait, for
example, the price including the premium has been upped to $35.50 a barrel,
which ia considerably higher than the previous price.
OPEC is concerned with the sya tem of multiple pricing--i.e., the official
price, the official price with premi~mms added, and the spot market
price. The average o~ th use becomes OPEC's real income. Should spot pricea
soar, as they did last year, an increasing n~anber of producing counCries
would dwup large volumes on the spot market; should Che spot market slump,
as has been the trend tliis year, producer nations would turn to adding
maximum premiuma; and if those steps prove to be too difficult, the
offic isl prices will be raised. Iran's recent demand for a price increase
gives real impetus to the frenzied behind-the-scences activity to increase
groas revenue.
For example, the lateat quote on Kuwait's crude, which is of lawer grade
than the Saudis', is $35.50 including premium, bringing the overall
average to over $30. This foretells the probability that $30 will be the
basis for price discussions, and loath to have the meeting come to a close
withou t a unif ied agreement on a price acale, as happened at the Caracas
meeting, the Saudis will have to fall in line af ter recommending raising _
the price fran $26 to about $28.30.
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- Strategy Encompassing Both Japan and Europe
[Question] The prevailing talk wiChin Japan nowadays seems to be centered
on the quantitative aspect and expresses optimism that additional procure-
ment of crude from Kuwait and Abu Dhabi will supplant the flow of crude
from Iran. It is my opinion~ that our requirements starting this a~tumn
will make it impossible to ignore th~ Iran problem in the price factor.
[Answer) In view of ~the consensus that there will be a deepening of the
economic recession, the price problem will probably have a major impact
on Japan's economy.
Supplementary amounts of DD cru3e from Kuwait, A~u Dhabi, and other s~ources
are 140,000 barrels a day, which equates to about a c~uarter or a thir.�d
of the 530,000 barrels that Iran stopped supplying. Although additi~onal -
quantities have been contracted for, with Kuwait implemen ting a reduced _
producti~n policy, it is still problematicalwhether it w ill increase
- production to supply Japan. Abu Dhabi's capability for upping its
production is very limited, so not much additional supply can be hoped for
from that source. In any event, whatever supplementary amounts are made
available to us will hav e to come out of amounts which had been going
- to the majors through spot markets and resold to the world, which means
that the majors, who handle about half of the deliveries to Japan, would
have to cut their deliveries to Japan. So if we think that our total
import figures will be increased by the suppLements, we are fooling our-
selves.
Furthermore, although Saudi Arabia and others say that DD crude will be
increased, such increases are b onusea tied in with domestic petrochemical
and refinery construction projects, and therefore they are not supplie,a
:,~hich are immediately forthcoming. The aituation with Mexico is similar:
tied in with various projects conditional on assistance from .7apan, it is
said that additional deiiveries of 100,000 barrels starting this fall and
- 300,000 barrels next year and the year after will be made. But these do
not replace the gap left by Iran's stoppage now. Neither can we anticipate
- that China's increase in produc tion will enhance its export capacity this =
year.
- Viewing the situation realistically from the standpoint of the oil-producing
_ countries, which are currently implementing a program of reducing Che gluts
in preparation for a broad price increase in the fall, we cannot expect
produc tion hikes to satisfy increased needs, Although some quarters are
demanding that the United States up its Alaskan crude production to supply
Jpan, there are reaons which prevent this from being an easy solution.
First, obtaining export permits for domestically produced crude from ~he
United States is an exceedingly c omplex undertaking. A c ircuitous solution
would be to have the Ilnited States increase its Alaskan production, en-
abling it to reduce its need for OPEC crude. The catch is that Alaskan
crude is of the heavy variety and, moreover,can be piped only bo the
West Coast. Glutting the West Coast, which has a high requirement for
light grade oil, with heavy grade oil could create a repeat of last year's
gasoline panic.
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[Questionj All of this seems to indicate that Japan is dependent on
Iranian crude, and the cru:; of the matter becomea the timing of the
resumption of crude deliveries to Japan. �
[Answer] In thinking about the timing of a resumptian of crude oil
deliveries from Iran to Japan, there are several basic factora which have
to be considered. One which has pertinence onl_y to petroletmm revolves
around news of price negotiations being conducted in aecrecy between
Iran's nationalized oil corporation (NIOC) and the U.K.'s British
Petrole~ (BP) and Shell. The outcome of those negotiations holds one
important answer to future developments. -
As you know, Iran useci to export about 300,000 barrels per day to
Europe, most of it handled througri BP and Shell. BP and Shell have _
long histories of relations with Iran. In the recent crisis, although
they are clasaed among the majors, they wasted no time in ruehing into
DD crude purchases. Withi this situation in mind, there are those who say
that the covert price negotiations being conducted between NIOC and BP or
Shell are deeply related to ~fian's claim that it doesn't n~ind voiding the
long-term crude oil contracts with Japan.
If that is so, it is possible that Iran ia playing Europe and Japan
against each other in order to obtain the most advantageous terms. It
is also possible that BP and Shell haven't reached a point of agreement
as yet but are in the process of presenting terms which might lead to
agreements. "
Oil Shortage During Autumn Period of Need Feared
[Continuation of answer] If the flow of crude from Iran to West Europe
is one facEor, another factor is the recently much-discussed Iranian
exports to Eastern Europe. It is certain that the additional production
- rate of Soviet crude has recently been falling rapidly, and it ia estimated
that sooner or later, its ability to export to Eastern Europe will be
curtailed. So ifi may be that Eastern Europe will be pres~ed to increase
- its imports from Africa and the Middle East--i.e., f rom Libya and Iraq.
The Iran problem came up in this atmoaphere, so not only Eastern Europe
but the USSR wants to seize the opportunity to make Iranian crude oil ~
- purchases a pretext to get a foothold in Iran.
In that event, trade for the most part will be conducted not ininternational
hard currencies such as dollars but on a barter basis including weapons.
The East European countires shortage of dollar holdings will be no draw-
hack in such an arrangement, and since trading will be in goods, the
official price could still be maintained at $35. However, we do not think
that there will be much of an increase in exports to Eastern Europe under
those condi'tions.
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The remaining Factor is that as long as Iran continues its threat to block
the Straits of Hormuz and burn down the entire Peraian Gulf area if the
- United Statea eacalates political and moral eanctiona into some type of
military action beyond the level of the recent attempt to free the
_ hos tagea, it is impossible to make any estimate as to when petroleum
shipments to Japan will be resumed, Aasuming that the United Statea
heeds the urginga of West Europe and Japan to exercise restraint againat
, res orting to military action, we have a feeling that contracts in aome
form or ehip loadinga will be reactivated in July--after the OPEC meeting--
at the earliest and if late, by aUout September, in time to meet the period
of heavy demand for oil,
Of c ourae, we must be forewarned that even if matters proceed smoothly,
exp orts to Japan will be lower, since the USSR and Eastern Europe wi11 have
take n a bite out of the total. We estimate that it may drop to the
neighborhood of 400,000 barrels. A safe guess would be that insofar as
the flow of crude is concerned, the aupplemental volumes fran KuwaiC, -
Abu Dhabi, and Indoneaia will just about make up for the decrease fran
Iran.
[Question] Would it be correct to assume that the flow from Iran to West ,
Europe through BP and Shell pipelines will continue at about the sa~e
rate as before?
[Answer] I believe that pipe connections will function as before. Out-
- ward ly, the United Kingdom gives the appearance of being the most faithful
poli tical ally of the United States and has announced some of the stiffest
economic sanctiona against Iran. However, the multi,zational BP and Shell,
which are in the forefront of the majors, have mountains and oceans of
_ expe rience, and by treading rather softly in the Iran tangle they have
managed to keep several fingers in the pie. Of course, the British
Government is perfectly aware of these machinations, and maybe we can -
asaume that their official criticism is merely a coverup front. We say ~
this because if the atatua quo ia maintained, the majors involved will not
be able to service even their own chains under the terms of the old .
contracte. They are frantically trying to get their hands on Iran's
DD crude.
[Que s tionJ In our country, MITI and others are saying that, unlike the time
of the first oil crisis, there is now a 95-day atockpiled reaerve, so we are
safe for the time being. But looking forward to the autumn high demand ~
aeas on, are we really in good ahape?
[Answer] Iran's crude production is now at about 2.5 million barrela a
day, of which about 1.3 to 1.7 million barrels are being earmarked for
export. Production ia on a downward trend, and the export ceiling probably
_ will be around 1.3 million barrels, which will include some shipments
to the USSR and Eastern Europe. Since neither ICuwait nor Abu Dhabi plans
_ to increase production and Saudi Arabia may lower its production, I feel
that the situation will become fairly tight rhis autumn.
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Admittedly, Europe has stockpiled reserves of 112 days and Japan 95, but
' in the next aeveral months some inroada will have to be made into those.
If so, it will be impoasible to meet the autumn season with full reaerves, '
which from established patterns ia a necesaity. Unlesa uncertainty as to
future st~bility, which hae been the mood ever aince the Iran revolution,
brings on an economic recession resulting in an unexpectedly high curtail- -
ment in wintertime conaumption increasea, there will be a temporary
jump in requirements again this fall, creating a critical oil situation.
Some Firms Feel Pincc From 3-Month Cutoff
[QuestionJ Is there something backstage or some brfgh t calculation which
permits MITI and othera to act optimiatic?
[Answer] From figures alone, it is true that the private aector has
88 days of reservea atockpiled and the official aector 7 days. The
raCe of consumption this year has been almoat flat--if there has been an
increase, it certainly is not over 1 percent. The loss of Iranian importa �
accounts for a 10-percent drop in overall importa; assuming that the
stoppage lasts for 6 montha, the deficiency would amount to 365 days
divided by 2, or 180 days, and 10 percent of the would only be 18 days. ~
So based on sicnp 1e arithmetic, it would aeem that the 95-day atockpile ~
need be reduced by only 18 days.
Realistically, however, several things have to be taken into conaideration.
In breaking down the private sector's 88-day aupply, considerable.variations
show up in the holdi.ngs by the several oi1 companies involved; there are _
some which have above average holdings while othera have below average.
In general, the belaw average stockpilers were those who were more
dependent on Iran's crude and had been forced to buy higher priced DD crude.
Restating the case, the firms which have the least reaervea are the ones '
which are taking the brunt of decreased supplies and will be the ones whose
stockpiles will be depleted the soonest. For them, the pinch would be
felt with a delivery atoppage of only 3 months, not the 6 months being
talked about.
In such a situation, what will the government do? It says that th,e
nation's reserves atockpiled in tankers will not be touched, and that
intraprivate sector deals will have to be made. Whether such deals can
be made is a big queation. When the government assures the populace to rest ~
easy because there are ample reserves stockpiled, it should be able to
clearly guarantee that.there will arrangementa for mutual assistance in
the private sector and that national reserves will be made available -
but will be repleni.shed during the course of subsequent yeara. There ~
is some hazinesa in the government's thinking in this context which makes -
for another problem area.
The second point to be conaidered involves the aituation i~ whit.h the
stoppage from Iran continues over a long period, or in the unfortunate
_ event that the Iran crisis eacalates into a conflict. We would have to
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implement rationing and other emergency measurea in a crisis control
posture. In rhat aituation, we would seek asaistance by activaCing the
~ IEA's emergency cooperation syatem. But this has never been tried yet.
It is a system which was founded immediately following the first oil crisis,
when the majora had ample crude eupplies and transportation and ahipping
facilities presented no problems; the IEA was built on the assumption that
those would remain stable. When these factors are reduced, as in these
couple of years, the question ariaea as to whether cooperation and the
system can function smoothly as planned. Even the government is beginning
to aee a danger in depending on plana which rely on that system.
Thirdly, as a domestic measure, more atringent consumption controls and
a restxucturing of the stockpile distribution syetem to bring reserves
into the rationing eyetem are being considered. Whether they can be ,
accompliahed remains a question. With regard to involking stricter .
consumption restrictions, legielation was drawn up during the first oil
criais to the extent of guidance, but no definitive percentage figures
applicable to the various areas of consumption have as yet been established.
As for rationing, coupona have been printed, but there has been nothing
concrete in the way of organization, personnel, or budget involved in
the implementation, nor has a concept been fo~uulated. Under such
circwnstances, we will have to prepare ourselves for a considerable
- period of confusion and chaos from the time of implementation until the
program gets on track.
[Quearion] With the House of Councilors election coming up in June, it
, is probably safe to assume that not only the I.iberal Democratic Party,
~ the party in power, but the government and involved bureaus in MITI will
avoid mentioning such controversial aubjecte as rationing and consumption
restrictions. But is Iran's posture--that it would not necessarily stop
short of voiding contracta--in the scenario of estimates of the government ~
organs concerned and of the oil induatry?
[Anawer] As I mentioned earlier, Iran's refusal to load ships when the
commercial negotations broke down on 21 April was undoubtedly in the
acenario of estimates before the fact. However, I think Japanese estimates
of developments had been along the following line: currently, there ie
a 95-day reserve s tockpiled; if tough commercial negoCiations last even
- 3 months, rhat would eat up only 9 days' worth of reserves; during that
time, the hoatage question will have been resolved and the presidential _
elecrion process in the United States will have shaped up. In reality,
however, there was the unsucceasful attempt to free the hostages by ~
Carter, which was followed by the unexpectedly tough threat by Iran to
void contracts. Thus there have been double and triple miacalculations.
If that happen, the one thing which ahould be avoided by probably can~t
be is psychological panic among the populace. The reason for the outward
calm in both government and induatry over the Iran problem is not because the
crisis control system ia operating normally but because psychological
panic hasn't taken over yet. ~2
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Price Increase Accelerates Slump and Inflation
[Queation] This is somewhat off the track, but it is difficult to under-
atand why in euch critical timea, oil-related sCock prices haven't
ceased but:are holding at relatively high price levels.
[Answer] That is an oddity. ~,Je can only say that stock pricea are not
truly reflecting the uneasinesa being felt. Although I'm not an expert
on the stock market, it seems probably that institutional experta are -
investing at opportune momenta for the short term, forcing pricea up to
artificial highs. Admittedly, with their highly valued large inventories,
the oil campanies are making considerable prof its right now. R~nors of
succeasful teat drills on the Japan-Korea continental shelf signaled an
opportunity to buy Nisseki [Nippon Oil Company, Ltd]. But if the situation
develops in the manner deacribed above, some companiea should be in the -
red by aut~nnn.
In any event, the extraordinarily high quotes on energy reaource securitiea,
causing investxnents to be made on an opportunistic basis, is not related
to the objective outlook on the international aituation; fram the standpoint -
of overall distribution of econanic resourcea to the populace, the picture
is bleak.
[Question] If the Iranian hostage problem were to drag on and the United
States were to resort to military force, we would imagine that the conflict
- would not be confined to Iran but would expand to all of the various
countries on the Arabian [Persian] Gulf. If, unfortunately, that ahould
occur, what would become of the oil situation in Japan?
[Anawer] Should the United States threaten to embroil the Gulf countrie$
into a conflict, its allies would naturally turn away from it, so unless
there is some completely unf oreseeable event, we do not see the matter
developing to that extent. However, even without auch as eacalation, it
is possible that the confusions within Iran will be multiplied, and if
those develop into a civil war, it could result in a government which is
anti-U.S., anCi-West Europe, and pro-USSR. Should that come about, there
would be a great upheaval in the world's crude aupply structu.re, and this
would no longer be a matter of how Japan alone would fare.
[Question] Conversely, ass~ming that matters do not worsen and oil importa
are resumed in 3 or 4 months, as estimated by the government, wouldn't
Japan's economy still be deeply affected by price, if not by quantity? .
[Answer] Assuming that no unexpected untoward incident takes place, we
would like to think that the problem�will find a point of resolution
by fall. Even so, there will have been one or two price increase steps
which will tend to deepen Japan's slump and simultaneously escalate
inf2ation. It is imperative, therefore, that we be concerned not only with
assurances of quantitative considerations but also with reactions to higher
prices. There is also the problem of broade~,ed differential within the
!~3
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_
oil industry; we must not overlook the probability that even among the _
majors, Shell, BP, and Gulf will be among Chose who will be subjected
to a gradual pinch, while Caltex, Mobil, and Esao will be comparatively
_ unaffected.
COPYRIGHT: Asahi Shimbunaha 1980
83 58
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ECONOMIC
JAPAN-IRAN PETROCHEMICAL PROJECT: PLOT OF MITSUI GROUP REVEAI,ED
~ Tokyo SHUKAN SHINCHO in,Japanese 15 May 80 pp 140-143
[Text] Mitsui ~ Co., Ltd.'s Iran Petrochemical Plant
Pro~ect--"a key operation for the future of the firm"--
has been elevated to the status of a"national pro~ect."
Presently, amid the continued confusion of the Iranian
Revolution, construction has been suspended. Now the
Iranian side is threatening to "void the contract unless
there is some show of earnestness." But Mitsui appears
unperturbed. It is rumored that should the plan be
scrapped, Mitsui will be able to extricate itself from
- a quagmire situation which has an uncertain economic
future, and the attendant loss will be covered by
export insurance. Dissolution of the contractual
agreement [with Iran] would suit Mitsui 3ust fine.
"Despite Iran's declaration to void the contract, we have no thought of
suspending'the Iran Petrochemical Pro~ect," says Mitsui's executive director,
Masami Ishii. "There are nearly 1 trillion yen in Japanese assets in Iran.
What do you think would be the outcome if Japanese-Iranian economic rela-
tions were.severed altogether? Japan would lose all that. That would be ~
catastrophic. In order to avoid such an outcome, our firm is negotiating
with Iran. We are upholding the Japanese national interest."
However, at its inception, this Iran Petrochemical Pro~ect was not a -
patriotic undertaking. The pro3ect got its start in 1968 when Mitsui's
then president, Sueyuki Wakasugi (now deceased), was flying over Iran's
Ahwaz Region and surveyed the burning flames of the gasfield below. He
commented: "What a waste. Isn't there some way to utilize this?" .
Thus the petrochemical project was launched from a purely "entrepreneurial
standpoint."
But the rumor among the major commercial f irme is that this pro~ect had
problems even from an "entrepreneurial standpoint." "Those who did the
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feasibility atudy within Miteui after Mr. Wakasugi saw the [Ahwaz] flames
opposed the pro~ect, but their opposition was ignored and unilateral
decision from the top sealed the isaue."
- The total projected cost was over 200 billion yen. As an overseas pra~ect,
its scope was "medium range." But the plan went wrong. The petroleum
crisis of 1968 caused the total construction cost to mushroom to 550 ~
billion~yen, and the "flaming gas field" pro~ect became an operation upon ~
which the fortunes of the company depended.
Perhaps we should say that Mitsui's secret plot to repackage the "gas field
flame" plan into a"naCional project' began to take shape about this time.
In 1976, in order to get 550 billion yen in total constraction cost financing,~.
Mitsui worked on then Minister of International Trade and Industry Toshio
Kawamoto. Minister Kawamoto visited Iran, and a financial loan from Export
Bank was arranged. In 1977, Hideaki Yamashita, the former MITI vice minister,
was ushered in.
Then in November 1978, Chikara Wada was appointed ambassador to Iran. It is
said tbat Mitsui influenced this appointment as well. Ambassador Wada was
named as a cooperative representative to the Petrochemical Plant Project.
Next came the Iranian crisis. It is well known that since then, the Iranian
political situation under the leadershkp of Khomeyni has been extremely
unstable; but Mitsui Group with its partner--a nation holding a live bomb
in its hands--was successful in obtaining a seal of approval for its Petro-
chemical Plant Pro~ect. It became a"national pro~ect."
A certain executive of a large trading house commented as follows: "Last
fall, a delegation headed by MITI deliberative off icer [ahingi-kan] Naohiro
Amaya went fo Iran to determine whether or not Mitsui's plan ought to be
made a national pro~ect. It received assurances from the then Iranian
premier, Bazargan, that "in the event of pro~ect completion, oil supply to
- Japan will be guaranteed." The delegation came home delighted. In the
- meantime, Ambassador Wada had reported that Bazargan and Khomeyni were two
sides of the same coin. Thus the Japanese Government decided to adopt
Mitsui's pro3ect as a national endeavor. It is commonly aseumed that the
former MITI vice minister, Yamashita, had an active hand in bringing the
matter to fruition."
Mitsui worked hard to make its Iran Petrochemical P1ant Pro~ect into a
national pro~ect. But now, the Iranian side is talking of "voiding the
contract." Mitsui President Yatazu states, "There is talk of voiding the
contract all the time. Nothing can be affirmed without reciprocal discuss
sions. After all, the other side is 10,000 kilometers away." Thus ICDC
President Yamashita (a riitsui & Co. Ltd. executive) flew to Tehran in haste.
"The other side will understand, once we have our talk. This pro3ect is like
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a large ship operation. The other side had experieaced an unfortunate -
incident (revolution), and the project had to b e temporarily suapended. It
will take time to start it back up and carry it forward."
Mitsui Will Not Go Bankrupt
- According to the accounting records, the total construction coat thug far
has been 730 billion yen. Of this amount, the Japanese capital output was
430 billion yen--20 billion in direct government financing, and 170 billion
yen in the form of a loan to the Iranian Finance Ministry by the Export
Bank. Of the remaining 240 billion yen, Mitsui's contribution has been about
half. The rest was shouldered by various Mitsui Group enterprises. Even if
Iran "voids the contract" on plant constructlon, the arrangement is that
90 percent of the capital investment is recoverable by export insurance.
But economic ~ournalist Yasunobu Misato says that the reality is somewhat
different from the accounting book figures. "Though direct governmental
financing was recorded as 20 billion yen, the actual expenditure was 28
billion yen. Mitsui, meanwhile, has poured in 150 billion yen, only 90
. billion of which is recoverable through insurance. -
"Thus Mitsui's loss would be 6~ billion yen. But the book price for
securities which can be liquidated is 182.1 billion yen. T'herefore Mitsui
would not go bankrupt." Consequently, the consensus among the aforementio:ed
major trading house executives is that "Mitsui's real concern is to hold the
loss at about the current level."
"If the Iranian side is serious about 'voidin~ the contract,' then Mitsui can
get to.the export insurance money, and it wia.l be quite relieved. Not even
the Jews would haadle the Iranians. Tiiey are a double- and triple-f aced
lot. European countries that have had dealings with Iran for 100 years--
especially France and Germany--refuse to enter into ~oint ventures with her.
Moreover, the Petrochemical Plant Pro~ect itself is stagnating because of
the stopping of the water utilization project which is essential to the
resumption of construction; the US firm in charge of supplying the necessary
gas to the LPG plant (the easy part of the pro~ect) had been ouated f rom
Iran.
"MITI says that the LPG value is three times what it used to be. Z'hus, once
the operation gets under way, there will be a profit. But the situation is
not quite so simple. There will be obstacles, accidents; events within
Iran axe unpredictable. There is a question whether 50 percent capacity
operatia~ ~gowari sogyo] can be managed. Loss is a certainty; and in short,
the outlook is very bleak. Mitsui, too, may be enthusiastfc in talking
about it but will ~robably be slow to act. It would like to get out of the
whole affair i� it can~.
If th~.s~ partne~ship with Iran is prolonged, monetary liability will continue
to pile up. At best, they will be sub~ect to frequent requests f.or more
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money. Rather than face that future, Mitsui would prefer to get its hands
on the export insurance money and leave the Iranian desert behind.
- If Iran would "void the contract," that wotxld suit Mitsui perfectly.
Fruitless To Put Hopes on Khomeyni
There might be a second or third surprise raid attempt by Carter to rescue _
the hostages. And if economic sanctions by the Western states are intensi- -
fied, the domestic situation in Iran will become even more chaotic. Then,
stable construction operation will become impossible.
But can Mitsui really get out of this predicament?
One construction firm executive connected with the pro~ect commented, "Iran
says that in the event the contract with Japan is voided, the operation,
which is 85 percent complete, will be awarded to Hungary. But this would
be lmpossible. That project is based on a minutely detailed Japanese
_ design, and East European technology is not capable of taking the project
over."
In essence, the Iranian declar3tion "to void the contract if..." is a bluff
designed to gain the upper hand. And since the bluffer is an oil producing
nation, the Japanese Government is striving not to offend, even though it
is fu11y aware that the declaration is a bluff.
The Finance Ministry administrators that had initially opposed this national
project are saying: "If the contract is voided and we pull oux, then the '
issue becomes the export insurance. The accumulated sum is a little over
100 billion yen, which would not be nearly enough. The deficient amount
must be transferred from the gen~ral amcounts. Also, allocating export
insurance money mean~ that the other side (the partner country) would be
treated as a bankrupt, and it signif ies near ceseation of economic trans-
actions and severance of state ties. But should we really sign off Iranian
oil altogether?"
After all, the reason Japan approved the 20 billion yen direct investment
and made the Petrochemical Plant Project a national project was because we
wanted the oil. But the then Premier Bazargan, who promised "oil supply,"
has been ousted....
"The oil supply question is currently in the 'pending' file," says a MITI
administrator.
"But the Petrochemical Plant Project is the lifeline of the Japanese-
Iranian relationship. In the long run, the pro~ect is the way to secure
our c~il supply.
- But now that, too, is an empty prayer...to Khomeyni. A comment by an
executive of a certain ma~or trading house's petroleum division:
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"Since the Iranian political situation is becoming increasingly unatable,
the logic of countersupply--the Petrochemical Plant Pro~ect in exchange for
oil--becomes less convincing. For example, the March 1979 Iranian crude oil
export/DD contract allocated to Japan showed that Mitsubishi Shoki (Mitsu-
bishi Corporation) was to receive the largest ahare and Mitaui was in the
second position. In this past January's contract, Mitaui's aecondary
position was supplanted by C. Itoh and Co., Ltd. It the Petrochemical Plant
Project is of such high value, such events should never have occured."
Thus it is not improbable that Mitsui is anxioue to pull out of Iran. -
Entrepreneurial Responsibility Questioned
A certain perroleum economist points out, "In actuality, the oil question
and this pro~ect ase essentially unrealted.
"In short, when the price hike was refused, the supply was cut off. Just
because the construction project is resumed, there is no guarantee that the
oil supply will resume. Moreover, Japan's dependence on Iranian oil is a
mere 10 percent [of the total Japanese import of oil]. MITI states that the
situation is grave, but Japan's petroleum consumption decreased by approx-
imately 10 percent last year compared to 1973 figures. And if we make up
our mind to do it, we can curtail the consumption rate even further.
Besides,. we have been buying over half of Iran's petroleum export. We have
been Iran's foremost customer, and so we are really in a position of strength.
As for the Petrochemical Plant Pro~ect, Iran will be in difficulty without
help from Japan, and there is no need to be fainthearted before Iranian
bluffs and ttzreats. 'lhe Japanese Government ought to abandon that pro~ect.
That way, the loss can be minimized. Mitsui is hopeful for a word from
the government to 'acrap the pro~ect; never mind a aeverence of ties."'
Indeed, there doesn'~ seem to be any further need to placate the likes of
Khomeyni. Yet, severence of relations would be playing iato Mitsui's
hands....Besides, the Japanese Government is incapable of taking such an
independent diplomatic line....It is enevitable that there will be public
criticism regarding wasting a government investment of 2.8 billion yen and
not getting a drop of petzoleum for the effort.
So the government has adopted a wait-and-see policy, and the Iran Petro-
chemical Plant Pro~ect has become bogged down. Yet Mitsui will not go
_ bankrupt. As a national project, governmental assistance is assured, in
case the worst comes true. Mitsui & Co., Ltd. plotted to reshape a private
enterprise into a national pro,ject and succeeded. Where then fs the entre-
preneurial responsibi~ity of a private business?
COPYRIGHT: Shinchosha 1980
11460
CSO: 4105 ~9
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ECONOMIC
BUSINESS ATTITUDES TOWARD INVESTMENT IN PRC ~
Tokyo JIJI t.n Engl ish 14, 21 Jun 80
[I'art I, 14 Jun, 1355 GMT]
[Text] Tokyo (JIJI press)--Following is the text of a survey report on
"Japanese Business Attitudes Toward Investment in China" recently re-
leased in English by the long-term credit Bank of Japan (to be carried
in two installments):
(Begin text)
1. Purpose of the Survey
At the invitation of the Chinese Academy of Social Sciences, the long-term
credit Bank of Japan sent.a delegation to China in August last year to
- lecture and exchange views on the processes and mechanisms of economic
growth in postwar Japan. During the visit, the Chinese side expressed an
interest in sending a tearm to Japan and as a result we hosted a reciprocal
visit by a Chinese study mission in December. This mission, led by
Xue Baoding of the academy's Institute of Industrial Economics and composed
of inembers of Che Academy of Social Sciences and~the China International _
Trust and Investment Corporation, examined the state of Japan's medium
and small enterprises and exchanged views with officia~s of government
organizations and businessmen.
Since Jing Shuping, director of the properties~division of the International -
Trust and Investment Corporation was accompanying the mission as an adviser,
we invited him to lecture our client companies in Tokyo and Osaka on China's .
joint venture law. Those attending the lectures also met and exchanged ~ ~ _
views with Jing and other members of the mission.
~The Chinese also indicated that they would like to hear from a still broader
cross section of Japanese businessmen whose opinions would be of assistance
when establishing future Sino-Japanese ~oint ventures through the offices ~
of the China International Trust and Investment Corporation. In response
to their request, this survey was conducted, principally among the long-term
credit bank's clients.
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The survey was not limited to the p.ablems of China's ~oint venture law.
A wide range of issues was covered, among them an assessment of investing
in China vis-a-vis investing elsewhere overseas and the views of firms
on China as a prospective customer or joint venture partner.
Unlike the foreign investment laws of other socialist countries (for example,
East Eurape or Vietnam) or many developing countries, China's 3oint venture
law does not impose a cej.ling on the share of equity participation by
foreign companies. The ~oint venture laws of East European countries as a
rule set a ceiling on foreign equity participation, and as a sine-qua-non
stipulate that more than half of all shares must be held by the host country.
While the Chinese joint venture law is supposed to have been drawn up on
the East European model, the absence of a limit on the percentage of
foreign equity participation is itself an indication of the importance
China attaches in its modernization policies to the introduction of foreign -
capital under the joint venture system.
Since the enactment of the joint venture law, there have been a number of
specific proposals for joint ventures, the majority originating from
Japanese businessee. But a number of problems which confront business and
~ government remain to be cleared up before any ~oint ventures can get under
way, and it is hoped that this survey may help resolve some of them.
II. Contents and Targets of th e Survey
1. Con tents
This survey can be divided into three sections:
A. Current overseas investment activities of the businesses suz-veyed and
their attitudes toward future foreign investment (for example, regions
invested in, percentage of equity participation, reasons for investment).
B. How China is viewed as a business partner (for example, previous
transactions, the possibility of future transactions).
C. The degree of interest in joint ventures in China and problems in
getting joint ventures started.
2. Date on Survey
Information in the survey is current as of January 31, 1980.
3. Survey Targets
- Copies of the queationnaire were mailed to 448 companies, principally
clients of the long-term credit bank, and responses were received from
2G0 r_ompanies, 235 of which gave responses which could be used in this
survey. The effective response rate was 53 perce:zt.
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' III. Collation of Survey Results
. ,
1. Promising Regions for Investment
A. The Asian region, excluding Ta3wan, the Republic of Korea and Hong Kong,
ranked as the most promising area for futur,e investmen t overseas (18 per-
cent), followed by China (17 percent) and North America (16.7 percenti).
China is thus viewed as an important country for investment. �
- B. Almost all industries, most notably wholesale, retail, chemicals and
machinery (except electrical), view China as a promising country for �
investment.
2. Present and Future Transactions With China
A. There is currently a considerable amount .-o~f business transacted with
_ China, mainly in export and import items. As many ~s 70 percent of th e
companies surveyed responded that they wished co continue transactions in
the future or open up business dealings. .
- B. Next to export and import trade, technical coopera tion is numerically
the second most important type of transaction conducted with China. This
trend is prevalent in almost all areas of manufacturing. The active nature
of technological exchanges becomes apparent in the number of technology
explanation meetings and the amount of technological advice proffered--what
mi~ht be termed steps preliminary to technical cooperation.
C. Trade is expected to continue as the ma~nstay of future transactions
with China (55 percent). However, possibilities for growth in processing
on a contractual bas3s and investment, relatively new fields, were each
mentioned in 10 percent of responses.
3. China's Economic Potential
A. Japanese industries generally give high marks to China's economic
~ potential, including the quality of its labor force. This is particularly
3 true for campanies which see China as a future target for investment,
B. It should be noted that when investin~ in developing countries Japanese
firms view graduation from junior high school, or its equivalent, as the
minimum educational standard required for factory workers.
C. As many as 44 percent of the firms view the qual3ty of the Chinese
labor force as equivalent to that of the Republic of Ko rea.
D. Some 40 percei~t of companies feel that China's economic potential is
such that the economy will take off earlier than expected (for example,
in 5-10 years' timel if the introduction of technology and capital from
_ abroad continues.
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4. Incentives for Investing in China
A. Although more than half of the responding firms hold the view that a
joint venture with China will dEpend on how the rest of the induF*~-
reacts, 27 percent (63 companies) expressed great interest.
B. The greatest incentive for investment in China is the s.ize of the market,
followed by the availability of cheap labor and raw materials. -
5. Obstacles to Investing in China
A, The problem of whether the present open economic policy will continue �
is given as the major obstacle to investment in China. Others are a rigid
bureaucracy, the absence of legal institutions, and the lack of infra-
structure.
B. The infrastructural item seen as most in need of impr~-~ement is
j electric power, followed by the internal transport network and port
facilities. -
C. Recently, nationalization has been a ma~or obstacle to investment over-
seas. The predominant view (37 percent) was that sudden nationalization
due to changes in economic policy is possible. However, 26 percent of
businesses took the view that compensation would be available in case of ~
nationalization provided there is explicit legal provision for such com-
pensation. A large numt~er of these companies view China as a target for
contract processing or investment.
[Part II, 21 Jun 80, 1302 GMT]
[Text] '~okyo (JIJI Press)--Following is the second and last part of the
text of a survey report on "Japanese business attitudes toward investment ~
in China" recently released in English by long-term credit Bank of Japan: _
6. Types of Joint Venture Desired
A. Assuming investment in China, the most popular region is the Shanghai
area, partly because:
1) it is an industrially advanced region.
2) there are related industries there.
3) it has good port facilities.
The second region is Beijing because;
1) it is the political and economic center.
2) iuformation is readily available.
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The third re~;ion is the Guangdong and Fujian area, for such reasor.s as:
- 1) the area has close links with Hong Kong and expatriate Chinese.
2) it is economically autonomous.
B. Respondents were asked to list the three industries they deemed most
suited, from an objective viewpoint, for investment in China. Those most
frequently mentioned were textiles, mining, agriculture, forestry and
, fisheries. Also frequently listed in first place were: foodstuffs, chemi- -
cals, steel, nonferrous metals, general and electrical machinery, trans-
portation equipment, construction and hotels.
C. The desired equity participatioti ratio fur investing in China is al-
most identical with that sought in other areas overseas: 42 percent
_ wanted a majority holding of S1 percent ox more. However, a tendency for
a lower share when investing in China could also be perceived.
D. Assuming investment in China:
1) Japan was seen as an export market for foodstuffs; timber, paper and
pulp; agricultural, fisheries and mining products; and the wholesaling .
and retailing, transportation and power industries.
2) Southeast Asia i~as seen as an export market for chemicals, ceramics
and other clay or stone products, metals, general and electrical machinery ~
and transportation equipment.
3) Europe and the United States were seen as export mari:et, for '-.extiles.
E. As3uming they began a~oint venture in China, 53 percent of the
respondents said that they would start with small plants which made one or
two related products. A high percentage of those companies which replied
- that they would build mass production plants from the start, were in the ~
textile and the ceramics and clay and stone products industries. Other
common responses were that companiea would start by improving existing
plants and their products, or that they would commence operations after
a trial period.
F. As for the timing of joint ventures in China, 18 companies responded
that joint ventures were already under study, and 15 declared their
interest in giving the matter immediate study. A further 20 companies
stated that they wanted to study the matter within the next year or two,
_ while 32 said three to five years. Including the 26 which responded that
they wanted to undertake ~oint ventures after 1985, 78 out of the 235
companies ~xpr.essed interest in participating in ~oint ventures with
China.
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7. Requests to the Japanese Government
The majority of companies (55 percent) hope the Japanese Government will
conclude a bilateral agreement for promotion and protection of invest-
ment. The next most common request (18 percent) is that overseas invest-
ment insurance be made to ap~,ly in the case of investment in China. The
third request is that lo~n~ be granted at favorable terms (13 percent).
IV. Some Proposals
From the results of the survey, it is clear that although many Japanese
compnaies are greatly interested in joint ventures in China, they are
also somewhat uncertain as to whether such ventures will succeed. Japanese
companies are already engaged in ~oint ventures in Southeast Asia and
indeed in ~ust about every country of the world.
There are also strong calls not only by the resource-rich countries of
the Middle East