JPRS ID: 9443 JAPAN REPORT

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• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000300060024-6
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• Document Page Count: 44
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• Content Type: REPORTS

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JPRS L/9443
- 15 December 1980
Jc~ an Re ort
p p
CFOUO 34/80) _
- FBOS FOREIGN ~ROADCAST INFORMATION SERVICE
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JPRS L;'944~
15 December 1980
JAPAN REPORT
(FOUO 34/g0)
CONTENTS
POI,ITICAL AND S~IOLOGICAI,
_ Three Guideposts for 1981
(Hokaji Mino; BUSINESS JAPAN, Nov 80) 1
Foreign Minister Ito Hosts 'Sc~ur Zuncheon~
(Minoru Hirano; THE DAILY YCJI~URS, 23 Nov 80) 7
Current Status, ~,iture Plan of Air Self Defense Force
. (Kensuke Ebata; CONMILIT, Nov 80) .............o.....oo...... 9
MILITARY
Status of Defense Industry Updated
_ (Kazuo Tomiyama; SEKAI, t~ug 80) 12
ECONOMIC
After ITC Ruling: U.S.-~apan Auto Dispute Analyzed
(Soji Teramura; MAINICHI DAI~Y NE'W5, 21-23 Nav 80) 26
Rough Going for U.S.-Japan NTT Negotiations
- (Hokaji Mino; BUSINFSS JAPAN, Nnv 80) 32
Keidan�ren Favors Aircraft Production Crnmni.ttee
(JIJI, 20 Nov 80) 36
New Foreign Exchange La,w Viswed
(Editorial; THE J~PAN TINlF'~S, 20 Nov 80) ...........o......... 38
SCIENCE AND TECHNOLOGY
; Coal Direct Ia.quefaction project Moving Ahead
_ (IJIKKAN KOGYO S~~IIN, 20 Oct 80) ...o.oaoooo..�oo�ooo������� ~0
- a - [III - ASIA - 111 FOUO]
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- POLITICAL AND 30CIOLOGICAI,
~
THREE GUID~:POSTS FOR 1981
Tokyo BUSINESS JAPAN in English Nov 80 pp 26-28
[Article by Hokaji Mino, Visiting Scholar, Harvard University; Former Editor-in-
Chief, Business JAPAI~ii~
- ~Text~ - -
W[TH only the month of December remaining, [he
year 1980 is about to come to an end. [n this first
year in what is certain to be a decade of uncertainty, there
have been various conflicting developments in Japan. Now,
what sort of year will 1981 turn out to be? This month's
Special Report deais with the expected developments in the
political, government and business fields in 1981. -
In the golitical area, power-consolidating moves are
expected in anticipation of Prime 1linister Zenko Suzuki's
departure from office; in the bureaucratic world, only slight
- signs of change have appeared in the pyramid�shaped
_ seniority structure, and attention will be focused for the
time being on shifts among high-level personnel in the
- ~tinistry of Finance, the elite among the elites. And in the
economic arena a sudden denomination of the yen is likely
~ to be carried out.
' The foUo~ing is a report on each of the thrce fore~oing
fields.
Political Undercurrents and Nascent Movements
in 1981. continuing nascent moves are expected in
- political circles centering on che speculative activides - ~
whether good or bad - of the so-called "new leaders." With
= the double parliamentary elections in early 1980 providing
the opportunity, young politician's began to talk abouc a
generation change in leadership. New leaders in their fifties
and sixties, such as i{iichi Miyazawa, Shintaro Abe, voboru
Takeshita, ~tichio V~'atanabe and Ichiro Nakagawa, came
inco the limelight. But with the establishment of the Suzuki
administration, led by 69-year-old Zenko Suzuki, talk
of a younger generation taking over the leadership rapidly
withered.
Dcbate and activity over the issue, however, have not '
altogether disappeared. They have instead submerged -
silently and deeply - and are steadily building in strength.
What is most heartening to the new leaders is the support
being provided by the mass communications media. For
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some reason, Japanese - journ~a ufic ciicles fend to gve
unstinting praise ta any politician who is young. Especially,
whenever there is con[inuing political confusion and in-
stability, they unfailinsly criticize the "cuntrai by elders"
' and call for a"rejuvenation of the ~ olitical world" and a -
"reform of poGtics."
The fact that there is no talk now of yielding the -

~ leadership to a younger man is entirely due to the absence '
for the time being of political confusion and uncertainty
following the L'eberal Democratic Party's (LDP) winning of
_ a stable majority in the recent double elections of the lower
and upper houses of the Diet. But the Suzuki administra-
tion could very well commit a blunder. Even if it does not,
moves will be started in anticipation of Suzuki's leav+:ng
office when his term as LDP president expirts in the
autumn of 1982. Such a development will the greatest
concern of conservative politicians in 1981.
As for Suzuki himself, he definitely has Miyazawa in
- mind as his successor. He appointed Miyazawa to the post
oC Chief Cabinet Secretary because he wanted him to gain
experience as the "Obanto," or general manager, of the
government in coordinating affairs between the govern-
ment and the opposition parties, and to establish a record
as heir to the leadership of the Suzuki (former Ohira)
faction.
In view of this, it is expected thst Foreign Minister
Masayoshi Ito and Miyazawa w~11 next ywr and thereafter
battle to consolidate th~ir positions as heir candidates t~
_ the LDP presidency. So far, howevez, there has never been
an instance of leaders from the same faction (in this case,
Ohira, Suzuki and Miyazawa) occu~.,ying the post of prime
minister three times in a row. And Miyazawa, of course, has -
a big handicap which accounts for his continuing lack of
influence. ~
This situation, naturally, provides Abe with a prime
opportunity. Eventually, he will surely seek to giin the
leadership of the Fukuda faction. In that event, it is -
doubtful whether the whole Fukuda faction will unite
behind him, and the opposition of the elders can, of course,
be expected.
The Fukuda faction is a complex gathering together of
various groups, including the forma Kishi faction, the
Shuzan-kai members of the former Sato faction and the -
followers of Takeo Fukuda himself. It is greatly different
from the Tanaka faction known as the "Tanaka Corps."
~ Thus, the year 1981 w~71 be one of trial for Abe who will
have to round up tl~e Fukuda faction by 4ontrolling the
various intrafactional groups and seek to make the faction, -
which has managed to return to the mainstream, the axis of
the conurvative structure.
- The so-called new leaders mentioned as candidates for
the next LDP presidency - Takeshita, Watanabe and
Vakagawa - are currently running at an equally sluggish
pace. Takeshita has a poweriul rival within the Tanaka
~ faction in Ganri Yamashita, who is steadily distinguishing
_ himself, while Watanabe and Nakagawa are mutually
holding each other back. Li}:e Nakagawa. Watanabe is also
trying desperately to form his own faction. By utilizing his
position as Finance Minister to the full, he will be kept _
bury next year consolidating his foothold.
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~ ic~hio Komoio and Yasuhiro ~7akasone aie now m t e~
shadow of these new leaders. Are they out of the :unning
altogether? In this writer's opinion, no; t~:.; chance of one
~ of them becoming the next prime minister is extremely
' good. Tl:e biggest reason is that the ]apanese traditionally
reject mere "rejuvenation." Also, historically, unfavorable -
' events have taken place around thbse who became prime
, minister on the basis of "youth" or "freshness."
. For instance, from the time of the rebellion of army
officers on February 26, 1936 up t~ the outbreak of the -
; Pacific War in Dectmber 1941, there were seven prime
ministers whose average age was 59 at the time they formed
their .cabinet. The youngest at 54 was Fumimaro Konoye
~ followed by Hideki Tojo (5~) and Koki Hirota (58).
What happened to Japan under these "young" prime
' ministers? As is well known, the military rode roughshod
_ over parliamentary goverr.~nent and Iapan followed the
road to destruction. Even in recent yrars, when Kakuei
Tanaka became prime minister. the youngest in the poscwar
pericd and the second youngest in the history ~f the
- present Showa Era (1926 feverish land speculation
swept the nation which also suffered from spiraling prices
and money politics. Let it be pointed out that unlike
athletes, politicians need not necessarily be young.
= In that respect, the chances of Komoto, who is the same
age as Suzuki, are good. Compared to Komoto, however, ~
~ Nakasone is sull young - not much different from the ~
aforememioned young (eaders - and one of the most
influential men along with Miki, Tanaka, and Fukuda. If he
can manage to recover his credibility next year, that is, to
get rid of his "weathercock" image, he is the man who
harbors the greatest possibiliry of becaming the next LDP ~ _
~ president.
Developments in Bureaucratic Circles
Around this time of the year, young people aspiring to
become high-level government officials in the future ar~
being hired. The job market for t}efs year's spring college
graduates is a seller's market, a condition that has not been
seen in recent years. Bulletin boards in ~niversity placement
offices carry long lists of job offers. Whether a seller's or -
buyer's market, however, the door to jobs in the central
government leading to high-fevel bureaucratic positions in
the future is as hard as ever to enter. First of all, one has to
pass the higher civD service examination for public servants.
_ ~text, one's school grades must be outstanding. And, with .
rare exceptions, one must have graduated from the political
department of the College of Law of Tokyo University.
Graduates of Kyoto, Osaka and prefectural state univer-
sities as well as of famous private universities, such as
Waseda and Keio, also enter the ministries, but the
mainstream of upper grade bureaucrats are overwhelming
from Tokyo Universitiy's College of l.~w.
This trend remained unchanged during this fall. Another
trend that continues is that outstanding graduates of Tokyo
University's College of Law either stay on as assistants or
' seek economic�related bureaucratic jobs with the ~linistry
of Finance (bfOF) or the ~linistry of [nternational Trade
, and Industry (M1TI). The department in charge of hiring
~
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young, aspiritig bureaucrats is [he ;~finisfei s
Secretariat. in .
the case of MOF, it is the Secretarial Section and the
Sc~cretariat's Documents Section; in the cau of HITI, the
Secretariat's General .~f~airs Section and its Secretarial ~
5ection.
Irt the bureaucratic world, it takes a long time before
one comes to occupy an important post after entering a
ministry at the age of or '_3. [t is only after about 30
years that one becomes a bureau director. But this position
is held briefly, for only about two years. And even if one is
fortunare enough to rise to the highest government position
of vice�minister, having been selected from among col�
leagues who encered the ministry at che same time, the job
can be held for only about two years. This is because others
are eagerly waiting to t'ill the position. lf the vice�minister
� should cling to his office, he will be severely criticized
which will not be to his interest in the future.
Z'hose who are judged not to be of vice-minister caliber
are encouraged to resign after serving as section chief or
bureau director and placed in jobs in private companies
which deal with the ministry concerned. This method of
- getting rid of officials is called "weeding." Since high-grade
gc~vernment officials lead what might be caUed a long -
"underground life" and a short ''above ground life," they
are often compared to the cicada.
For a government ofti.;ial, it is not the work but the post
that cuunts. It is not that there is ~ post because of the
wock but that there is a post which carries with it work. By _
looking at one's predecessors, one knows exactly whac the _
subsequent posts will be. Urilike the smaller private sector
E"ums, there is no possibility of being promoted over the
heads of others.
A somewhat new trend, however, has emerged in the
1980s. Atinoru ~agaoka, former Vice-Minister ot Finance,
stated this spring that, although there is no retirement age
for government officials, he wished to see a system
established under which vice�ministers and bureau directors
could work at the ministry until the age of 60. lt was not
_ that he wanted to ignore the seniority system and adopt a
selection rystem based on abiliry, but he was in favor of
extending the life of top officials after they had "surfaced."
Not wishing to be misunderstood - that is, to have rEen
personally motiwated - he quickly left the rnirustry at che
age of 56, expreuing the desire to teach at some university.
Since the fall of this year, he has been a guest professor at
Josai University in Saitama Prefecture where he ts lecturing
on the science of finance.
The Ministry of Foreig~ Affairs is exceptional among
Japan's central ministcies in that it has not a single
vice-minister or bureau director over 60 years of age. This is
why Nagaoka's remazk swck the ministries and agencies _
like a tsunami, a tidal wave. Younger officials reacted
_ sharply: "li's fine foc vice-ministers and bureau directors,
but what about those waiting to be promoted?" And,
"Extending the retirement age goes against the proposed
administrative reforms." ~
It is only at such times that officials seem to raise their
voice concerning administrative ceform. -
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The Nagaoka concept, howevei, did not mean that a
rysteru stwuld be eatablished whereby everyone could wory
up to th~ age of 60; Nagp cka's hope was that people with
_ the drtve and ability could remain at the ministry as long as
posaible. Such a system would lead to improvements in
administrative urvice and serve the interests of the people.
Moreover, it would destroy the pyramid�shaped seniority
struct~re and perhaps make ~ it possible to ir?troduce the
'Western-sryle principle of giving prime consideration to
ability. It was definitely a brave proposal.
There is nothing wrong with the proposal itself. But .
- when it comes to the possibility of its realization, most
people think it is unlikely. The attitude of MITI officials is
_ tt~at it is entirety out of the question. According to them, st
would be becter to carry out changes; ihey claim that short .
periods of service, as up to now, by vice-ministers and
ourrau d'uectors produce greater vitality in the bureaueratic
organization. This would seem to indicate that MITI
officials still have no ttouble in finding lush jobs after
leaving the ministry. In fact, among the young applicants
wishing to enter MITI, some are said to declare irankly
_ during the job interview that they war?t to join the ministry
because it has more post�retirement job connections than
. other ministries.
In any event, whethec the Nagaoka concept materializes
or not will depend on the Ministry of Finance's personnel
appointments following the end of the regular Diet session
in July 1981. All the ministries and agencies are watching
developments with tremendous interest and concern.
t
Denomination Moves in 1981
About a decade has already elapsed since the Finance
Ministry started studying the problem of denomination.
The government is believed secretly to be timing its
implementat~on for around 1981, and it most likely wil] be
announced without advance nutice. [f news of its imple-
mentation should leak beforehand, the announcement will
probably be postponed because it will create unnecessary
� eonfusion and friction in the Japanese economy.
' Talk of denomination, like the Olympic Games, arises
every four years and then fades away. However, at the time
of the Moscow Olympics, there was no mention of it;
instead, there was a loud chorus of voices calling for fiscal
reconstruction. As a result of the Finance Ministry's
manipulation of public opinion, the peaple's concern is
now concentrated on the issue of a choice between
measures for government fiscal reconstruction and tax
increases. It has completely obscured the subject of
denomination, which provides a good opportunity for its
implementation.
The denomination which the government is aiming to
implement in 1981 will involve a change in the name of the
, currency from yen to, say "ryo" or "koku," both names of
otd monetary units. At the same time, the new curcency
_ will be given a purchasing power 100 or I50 times greater
than the present yen, which will mean that 1 koku will have
the same purchasir.g power as I,000 yen. Furthermore, the
Finance Ministry is planning to issue th~ new currency
gradually and issue new and old currencies simultaneously
i
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over a lengthy period. The two currencies will be ir~ - -
circulatian together. A precedent is the denomination
carricd out by France in 1960. Other c~ur~tries that
fdlowed this pattecn are West Garmany (1954), China
(1955) and the Soviet Union (19b1). _
Amor.g all the currencies of the major coi~ntries, only
the yen and the [talian lira are of t}uee dipts in their rate of
exchange with the U.S. dollar. On this paint, they deviate -
widely from the international norm with respect to
currency. For this reason, there is considerable inter-
national interest as to which country - Japan or Italy -
wul be the frst to denominate. ~
The yen, the basic currency unit of Japan, was decided
as a result of the promulgation of the new currency
ordinance enacted in 1871. One yen was held to have a
- value equivalent to 1,500 mg of pure gold. But in 1879, the -
, Currency Law was promut~ated and the yen's value was
halved to the equivalent ot 750 mg of pure gold. Japan
adopted the gald scandard in 1871, but the United States
had already established a gold and silver standard in 1792,
and the United Kingdom a gold standard in 1816. _
The adoption af the gold standards of the United States
and the United Kingdom only four years aftar the success _
of the revolution leading to the ~teiji Re[ormation was a
farsighted, wise decision of the Meiji government. It was -
� evidence of Japan's serious effort to become part of the _
internationa! economy. Counting from 1871, the year 1981
marks the I lOth year, and today, one yen, once valued at '
I,500 mg of pure gold, is virtually worthless, an aluminum
coin used mainly in making change in supermarkets.
- Responsible for the decline in value, of course, is inflation.
Today, Japan's and West Germany's anti�inflationary
measures are among the most sucessful in the world, but
' inflation has not disappeared altogether. Every year prices
rise so many percent and there are many factors tha? will
push them up even turther hereafter. According to the
denomination advocates led by lichiro Hatoyama, Former
' vice-minister of finance and present member of the House �
of Councillors, unless denomination is implemented now,
the situation will get out of hand an the future. They even
flatly daclare that denomination should precede m~~asures
for fiscal reconstruction.
- rllthough not influenced by die denomination advoca-
tes, the possibility of den~mination being implemented in
- 1981 is being quietty taiked about in political, tinancial and
government cuctes. In undertaking anything new, a certain
amount of confusion and friction is inevitable. Vothing can
be achieved if such developments are feared. (t seems to be
the judgment of government leaders that the objective
situation is ripening insofar as being able to suppress
confusion and friction to the minimum.
And, above all, looking at the precedents of various
other countries, it is a fact that denomination is easier to
carry ouc when there is absolutety no calk about it
beforehand. p
COPYRIGHT: Nihon Kogyo Shimbun 1980
CSO: 4120
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, POLITICAI, AND SOCIOLOGICAL
- F.OREIGN MINISTER ITO HASTS ~SOUR LUNCHEON'
Tokyo TAE D~4ILY YOM[URI in English 23 Nov 80 p 3
[Behtnd the Scenes column by Minoru Airano; "Sour Luncheon"~
~Text~
~ Foreign Minister Ito hosted a luncheon ~ gp~n Ito said it was a politidan's ~ob
!or the ambassadors of the nine member not to let an economic problem gro~yy into
countrles oi the European Communittes a political fsaue, one ambassador expres-
(EC) on November 17 prior to his forth- ~d obiec~tons. He was Lhe nmbassador o1
coming European visit on December 7. a eoantry where an election fa aeheduled
Aiter the luncheon, one ranking Fbreign ior aext year.
Mlnistry o~cial briefed the reporters as 9onred bq the bitter experience at the
iollows: lnncheon, Ito decided to inatruct the Ja-
� Ito told the ambassadora that his vialt
to L~uope would be very useful for Japan p~~ envoys to the countrie~ which he
particnlarly in the face of the change in ~ scheduled to vfsit to tell them Lhat he
the V3 leadersbip. Wanta to dlscuss such polldcal topiq as
� Ito aad the aanbassadors shand the Po~cles to~vard the Soviet Union and the
vie~v that eontacts between Japan and Middle East situation.
the EC countrlea should be further ac- T~ ~de probkm between Japan and
tivated not only in the economic but aiso the EC is notY~ing new. When Toshiwo
. in the political fleld. ~n president oi the Fedention
� Among the topics discussed was the oi F,conomic Organizationa (Keidanren),
statement issued by Ito earlier in thr. t�ured E�r�pe in the autuwa o! 19?8, he
day concerning Japan's basic policy on ~ard complaints everywhere he weast. In
tra.de relations wlth tha Common Market. the satae year, a top EC ol8cial came to
The ambassadnrs hi8hly appreciated the Japan to lodge a protest about the trade
statement, describtng it a~s a"good start" ~tta~ but then foreign minister Ki-
' for the Japan-EC dialog. ichi Mlyazawa turned down the protest
If we accept Lhis explana~ion at face saying that the EC was not making enough
value, we get the lmpression that Lhe eflorts to sell thelr goods to Japan.
luncheon was held in a very friendlq A ranking Fbreign Ministry o~cial re-
atmosphere, but the fact was a far cry iuted the EC's censure by saying that the
irom that. Ito, an honest man. was heard unllke the US on which it depends
oomplaining as folloavs: for security, need not worry about retalia-
� It was bad to hold a luncheon after the ~on irom Japan and so can better scape-
statement was Lssued. The nlne ambas- 8oat Japan and that unemployment in
aadors talked only about economic pro- ~~e EC countdes is due to their poIIcy
blems between Japan and the EC and failures and not exports from Japaa but
made no mentlon of political issues. they blaau Japan in consideration of
� Trade relationa with the EC diser irom domestic politics.
conntry to oountry but even the envoys Tbe statement by Ito ln which he sald
oi coantriea whoae trade balance with Ja- that the EC shouid endeavot to conec~
pan ia in the black criticized Japanese ex- the trade imbalance between Japan and
the EC countries hammered out such posf-
tion taken bp Japan in an unprecedented-
~
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ly outspoken language. It is said that the 2ollow Eurol~e's aetion. By ~~B the com-
outspokenness comes irom a ~udgment by mitment Lhat dapan would do neither
the Japanese Government that Japau more nor lesa than Europe, Japan ducked
should be frank in dealing w-ith Europe W~~g~n's pressure. Continuatlon of
as well because the US International Tmde t~ pou~y na111 become even more lmpor-
Commission (TTC) ruled that the declins ~t aiter the bixth oi the Reagan ad-
o! the US automobile industry waa not ~~~~on. At such a t3me, it 1s unwel-
caused by the increase in Japan's auto- ~ Takyo that Japan-EC relations
moblle expotts to the US. ahould retur~n to wha' they once avere-
To Ito, however, it can be a cause oi e~~omic relations nn1Y.
worry that the European ~riticism of Ja- ~ fear lncrea;,ed when it was reported
pan , has flared up agaln before his ~t that F'rpnch President Giscard d'F.staing
to Europe. He dces nrt desire to be ea- ~ piai:ninB W hol~i a second Guadeloupe
posed to complalnts about econoneic pro- ~~t of the U~, Brits?in, F'rance and
blems on his tour as Doko was. But he ~e3t ~~any, again withnut Japan, after
must cement the ties between Japan and the birth of the Fteagan administration.
the EC before the birth oi the F~eagan T~ Foreign MlnistrY lost no time in
administratlon in the US. When the Jaga- ~~c~g an inquiry with Paris and was
nese Government was asked by the Carter ~ld that ther~ was no such schedule. It -
administration to act togethcr ln taking ~ y.~3, hawever, t6at Ito, vn hearing that,
economic sanctions against Iran and the ~~t it was premature for Japan to
Soviet Union, Japan replied that it would be og g~~ and he looked uneasY. ' _
COPYRIGHT: The Daily Xomiuri 1980
CSO: lt120 -
_ $
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' CURRENT STATUS, FUTETRE PIAN OF AIR SELF DEFENSE FOBCE
Tokyo CONMILIT in English Nov 80, pp 22-24
~Art~~cle by Rensuke Ebata~
~Text~
On 14th July 1980, the fust J~IcDonnell ~ Due to t~e co~titution and the policy
Douglas F-15] F.qgle ~vas haaded o~er to at the current Jap~nae Government, the
the Jipane~e Air Self Defense Force rde oi tLe JSDF is a atricUy one of de-
(JASDF~ at St. Louis~ Il~issouri, USA. The tea~e. T6e Air defease of Japaa is cartied
- kncekdow?n ~ersion of the F-1 SJ had out by the thne defenae forces, the JASDF. _
already arrived at t6e Nitsubishi Heavy the Jap~mxe Ground Self Defease Force
- lndustria Komaki Factory. Rapmihara, (3GSDF) and the Jap~aae ~uitime Selt
Gifu-Pntectun~ neu N~oya la~t liuch. Defen~e Force (JMSDF~. 1'be JASDF u
The aircraft ~vas to make a maiden f}isht nspon~bla for the o~eraD air defensa~
in Seytember~ 1980. while the JGSDF aod tLe JMSDF have the
! Introduein~ the F-15 ~~~ty tor point a,ir defense. such aa
, field ~ir defeme and tleet/convoy air
~ Twenty4hree F-1 Ss ~ad boea ordered defenu. 1'be F-1 S is the fourth generation
; in the t 978 defense budget and snother of JASDF's intercepteis following the
77 F-I Ss ue to be purchased dwring the F~86F, the F-] 04J and the F~EJ. Tlee
Japaneae Sel! Defense Force (JSDF)': JASDF has maintained a two-interapter -
I?tiddle Defense )danagement Plan wWc6 p�hcy for a lon6 xime, that is linkin~ the -
runs from 1980 to 1984. A total of 88 F-86F/F,86D. the F,86/F-104J/F-4EJ. 'I~e
F-1 SJs (fyhter ~?enion) and 12 F-l SDJs ~ ten F-4E7s ue to be delirered to the
(two-aeater combat trainer version) hnre J~DF i� the F'mancial Year 198p and ~rill
thus fa:m wc interapter ~wdrons of
reaived purchase authorization. The F-15J F~EJs. A total of 123 F-4EJ: have been
u a)apanese vernion o~ the F-15C and an71
have ~ data-linked syatem to connect By 1985~ four F-15 aquadrons will be
- r??ith the JASDF't Semi Automatic Air orgai:ized snd one F~EJ u~wdron, how-
, Defense Syrtem, BADGE, and ~vith t~e ~ be disb~nded due to attrition.
E-2C Hawkeye airborne ear2y warnins ~~~a Z3 F-1 Ss will be required
aircratt~ to be iatroduced from 1983, to fill the ~ap in order to m,intain a 10
' The McDonaell Dou~las F-15 E~i intercepter squadron kReL it is not artain -
is appareatly one of the most adnaeed ~vhether the production o[ the F-1 S
intercepter~ in the world and also oae oi ~~~n~ued or not after the hund-
the most expensive fightera. The JASDF ~~ft is produced. I[ it u five, F 15
u the second air fora which receives the squadmna and five F~tEJ sqwdrons will
, F-15a outside the USA. The first is the take over the rok of Japan': air defense
tu~eli Air Force. Jter 1985. AiraJt induaUies in Japan,
~ _
,
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. .
especially Mitsubishi Heavy IndusUiw on ~ ~
, coune, have data-link syafe~u with the
- the other hand, conrider that the �ast BADGE and the next BADGE (BADGE-X)
generation fighter~ the F X, can be develo~ aie detenu sy~ema and with the F-1 Ss and
eA by th�mseh+es, though some p~rts of tbe F~Eh. 77iia comMnatlon of the &2C
the aircraft auch ~ engincs or FCS (tue and the F�1 S will greatly incrau the a~r
- control rystem) wiU have to be imported. defenae c~p~bx'lity ot J~paa. The JASDF~
= however, ~till haa uveral probleuu to
E�2C ~nd B~doe-X ~he bnt I~ plans to increue ib defetue
The JASDF operates 28 radu aites, ~Psbility.
24 in the four main i:landt of l~pan md ~oject BADGE-X it the biggest project
four ia Okinaaa. These were constructed after the F-1 S. The current BADGE~
by the US Armed Forcea in J~pan ~fter dereloped by Hughes Aircraft Corpontion,
' the Second 6Vorid Wu and iunded over to ~~ed in 1968 and hu become
the JASDF followin` organization of the obwlete. A rtudy of the BADG&X ayttem
torce in 1953. The radu dtea have bean ~~~dy been ttuted and tbe coatr~etor
modlfiad and madernized dna thea md ~ b� c~n ~n ~ 981 or 1982. 3e~en1
coanected up with the BADGE air d~lee~e ~~~p +t'~ biddin~ for the project, _
network. ?he optimum aeuch ran~E oi j�~"y'~Oj 10m� Japane~e dectrodc com-
the radu inatalliona ia sbout 400 km w3th a ~0~~'~� n'~~p~j �i the
high iltitude tuget. In a low dtitude ndu :ita L bkfaa place. Old two-0imen-
area, e.g. under 300m~ the radu natlons ~O~ ryrt~~ ~~0
ody can cover up to 90 km. Even the 28 ~ npbcxd by domestically~da~eloped
radu ~ites cannot cov~er the whole coast ~DE~onal ndu. Seren F3D _
o[ Japsn with their ran~e. Seerenl 'hobs' (Fixed thtee~dlmensional) tadu rystetnII
wiU be formed aa shown ~n fiaure 3. ~~e been Insta~ed ind two li3D (l~[obile
T~1E ~LfGZS FOXL~O~ 1tIWdEDt MI11Cb OCCYI- three~menabnal) radu sy~ems have ban _
red on 3eptember 1976 happened bccause deployed to the northern and centnl
the fighter pe~trated J~pan'~ ~ir ipacx ~ ait toras. The thjrd M3D ~nU be
- throu~L one of the hotie~ in ib air defenae depbyed to the rrestern npon air force
radu-net~ork and ~?as thw abk to land ~ r~' T~~ ~Od~ed ~ena�� of the
at Nakodate AjrpoR, I~IIokkaido, witbaut ~D, F3D 3Cai. hsa been in~taUed ta
alertina the JASDF': intercep4en. ~0 ~~to ndsr dta. ?he F3D KaI
interceptera. ~ P~~' ~~~r~ ~tter~suppresaion, _
To fill these boks' in the radar ~cans~ ta~t bcation. bei~ht me~ura
the JASDF w~l iatroduce an airborne m~t in a dutter condition aad u eadly
euly waraing and control aircraft, t~e maintalned~ iaakint it one of tbe most
Grummaa E-2C Hawkeyt. Four &2G have adtiaced w~rty ~rarnin~ asdar syntem~ ir?
atready been conhacted !or purchue under ~~o~d today.
the 1979 deteAae budget and at kast ~e pl~a to impro~e tbe commmd and ~
another four w~11 be purchased in the ~~~p~on syatems is stadily pra
Middk Delerue Management Pl~n, undet ~'~e Defense Micro-w~re Com� _
- the 1982 defen~e budae4. The eiaht U2(~ munication Net~t~rk connecU mott of the
wDl form two squadrona and they will bt ~r btxs aad dtia ia Japan. A centnl
dep3oyed In northern basea~ tuch u Chitose ~~d sYstem to conneat all tbe unib
Air Bue (Hokkaido) and I~tww~ Atr Basa ~ t~ J3DF ~ beiug planned to improro
(Aomorl prefcctun). Two euly w~min~ ~e C czp~bitity. survivabIlity +u~d etilo-
p~trol poinb will be plsad withfn an enry. 'ILe antral syatem 's planned to be
8-hour patrol day. 'The atimrtad ~ctirity L~ted at tbe hwdqvarte� of the JSDF in
- rate u 7596 in pau time. Ropponff, Tolryo.
The first two airesaft w~71 be delivered 1aPan'~ weathet reconnaissance cap~bil-
by the end o! 1982 and the ei~hth &2C i~Y ~~~Proved with the introduction
will be delivered by 1985. ThE JASDF of a new Meathet aatellite data nceiving _
hopw to ha~e 28 ~2Ca to urvice the system ie the neu future. The ay:tem will
aven AEW patrol p~b, but thie w~l be recelve dau from the US ?Yro~ weather
doubtinl. The E-2Cs ot the JASDF ~viD~ of ~atellite.
10
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, ~
Ch~inO Rola of the JASOF i~ ~F~~ ~ere nemoved ~nce tfie ftand~rd-
izatloo ot the F~4EJ so u'not to create a _
The domestically developed fishter ~~~ui f~f ~~-by
Mibubishi F-1 expan~ the rok oi the To ~ tl?e ta~ote~cepbr puadroa
' JA3DF from punly air-defeme to toW level nd to increase tbe p~onnd ~uppott
detense work. The F-1 is desisn~ted ~s s c~pab~ity~ the ur~ce life axten~ioa
'Support Fighter', which meana ~ctualty pro~ram of the F~EJ is bein~ rtudted.
a`Fishter Bomber'~ although the capability '~e ~j~ i~ ~lmost the same ~a the
' of the F-l cannot be compared with the ~+~tt SWeture Integratioa
Fr4L Phanfom, the Tornodo~ the F-i l l Project (AS~). The ASIP will be ~tarted
or even with the 1algtra?. The main role of ftom the financtial ywr 1981. 'fhe improva
the F-1 ~ surfaa to ihip attack ~ith the ment of the F-4EJ'~ capab7ity s an
ASM-1 B anti-ship missile developed in iatercepter h ~bo planned. The key item of
Japan. T6e ASM-1 is said to have greater this modernization is to pve a luok-
cap~bilitia than the Martel or the dowu capab~Ity to the FCS of tba F~EJ.
Komto~e A~Ms. The second role of The moditied F~EJ will fire the Ltest
the IASDF ia to provide siriupport to the model of the Sp~ew and the Sldtturirder
JGSDF units. The F-1 could be a supple- AAI~L. ADd-7F and AII1I-9L "
menbry interapter with IR-AA14~ The JNSDF curready has ~only one
altbou~h ita apabitity is limited. The pro- reconnaiaana squadron, the SOI~t~ at
duction Qf the newr FCS which coatroL Hyakur3 Air Baae, Ibarap Prefecture nar
the ASM-1 B is scbedukd to commena Tokyo. whtch conaLts of fourteen RF-4Ea.
next yar. All of the RF-4F,~ were impcrted from
The budget to organiu thra F-1 YcDonaeD DougLs instead of bein`
_ sqwdrons hss been ~utLorized. TMO of msde under }icxna in Japan. The number -
them hare alrcady deployed at IiQisa~va of RF~Es is spparenily small ssnd mon
~ . Air Ba~e while the third ~qwdron n beins re~onnaiaeaa aiecraftS sre needed. 1Ue
orpnized at Tauiki Air Bue. Fukvolca production of the FJRF~ at McDonnell
- Prefecture, thi: yeu. The deployment of Dou~1u 6as aheady cxased and the line
two ET
2s, (Electronic Wartare ~eraion: of ut the 1[itmbishi Hwvy Ind~utries
the T
2 advanced supenonlc jet traiaa) 1Ca6amihara Fadory wDl be closed this
wit~h each F-1 ~uadron in the future wn7! yar. T'he ~dectioa of a new reconnaissnace
increa'e the capabflity of the units. Orer- aircraft ~vill be a very difCcult problems if -
, atioml teats :how that the ASW-1 i~ a the pLn to :trenathen the reconnais~nace
~cex~ful aati-ship mias~e and so pra- forcx i~ acapted, Two csndidata ue
ductiun wlll ~art in 1981. bein~ con~daed~ tbe RF-4E and the
_ A total oi 80 F-1 a w~l be produoed to RF-15. If the former ia ulecte~, Mitaublahi
form thae thra aqwdrons. It how- Haa~ryr Indurtries wiU Mave to keep their
ever~ very clear that 80 F-ls annot fulfill produdfon line open for a few yean~ ~vhile
the ~ouadJsea ettsck role ot the JASDF, if the latta ic chosen, ffie JASDF aill `
The F~EI could be a very powerful have to waii for :averal yean until the
wrtace sttack aircnft~ attho~h tbe USAF ~nd 1[cDonaeU Dougl~ develop
air-refueling syatem and U:e bombiag We ncwnnaissana version of the F-1 S. �
COPYRIGHT: QOHI~iCLIT flong Kong 1980
CSO: 4120
, 11
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STATUS UF DEFENSE INDUSTRY UPDATED
Tokyo SERAI in Japanese Aug 80 pp 92-102
[Article by Kazuo Tomiyama, Prof essor of Industrial Theory, Kanto Gakuin Uni-
versityJ
[Text] AssessmenC of Military Expansion: How Wi1Z a Drastic In~rease in Defense
Spending Impact on the Defense Industry?
I. Introduction
= One of the points at issue in the recent defense debate is the question o.f the -
- limit on defense spending. The rate of Japan's defense spending to the gross
national product [GNP] was 2 percent in 1951 and 1952, but it declined to 1 per-
cent from 1953 to 1966, and to less than 1 percent after 1967. There are some who
argue that these sratistics indicate a long-term decline in the rate of defen~e
spending. However, during the 14 years from 1967 to 1980, there was no notice-
able fluctuation.
It is by no means easy to determine a proper framework for defense spending.
~ecause the concept of GNP has inherently no direct relation to defense, it would
be rather unproductive to attempt any abstract discussion on the limits of defense
spending on the mere dimension of a certtsin ratio to the GNP.
We have repeatedly discussed this problem and have stressed the seriousness of
raising the present rate, which is under 1 percent of the GNP. (See "Japan's
Defense Industry" by Kazuo Tomiyama, TOYO KEIZAI SHIMPOSHA, 1979. Furthermore, the
scope of military spending differs between Japan and the NATO countries. If we
calculate according to the NATO formula, Japan's rate would be 0.5-0.6 percent
higher, or about 1.5 percent of the GNP.) However, there is a deep-rooted demand
for a drastic ~.ncrease in Japan's military spending. Admittedly, the ratio of
its defense spen.ding to the GNP is low. Among the nations whoae per capita GNP _
is over 3,000 dollars, Japan, Iceland and Luxembourg spend less than 1 percent
for defense. Austria, Finland, New Zealand and Switzerland spend between 1-2
- percent. Australia, Canada, France, Kuwait, Norway, Belgium, Denmark, West
Germany, the Netherlands, Sweden and tha Arab Emirates spend between 2-5 percent.
The United States, East Germany, Qatar and Great Britain spend between 5-10
percent of the GNP. While the per capita GNP of a number of Middle East and
East European nations is under 3,000 dollars, many of them have a high rate of
military spending. (The Soviet Union and Israel spend more than 10 percent,
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� while Bulgaria, Czechoslovakia, Libya, Hung$ry and Poland spend between 5-10
percent.)
' Such international comparisons form one of the bases for the argument that Japan's
ceiling should be raised. Therefore, we shall hypothesize an increase in Japan's
defense spending limit to the level of 2-5 percent, in line with that of the advanced
; Europ~an nations, and examiue it~ effa~ct on Japan's defense industry. Alr.~�~~a~
the scope of the impact will clearly not be confined to the defense ind:~stry, we
shall limit our comments to this par.~ticular aspect of the issue. We snall first
examine the potential range of defense industry production within the present =
framework of defense spending. We shall then examine the trial balance of a step- -
by-step ~uildup in defense industry production to 2.5 percent of the GNP, and
finally study the mass procurement of military equipment. The results will show
_ a major impact on (1) the conditions of defense industry production and enter- -
prises; (2) the nature of military equipment; (3) the methods of securing person-
nel; and (4) finances.
II. Potential at 1 Percent Rate of the GNP _
We shall first examine the defense pr~duction potential within the present frame-
work of defense spending, and the extent of possible expansion. In other words,
we ahall attempt to see how the 0.9 percent ceiling is being implemented, and the
extent of defense industry production possible under an additional 0.1 percent. _
Personnel costs make up the biggest item of expenditure among defense-related
costs. Expenditures for f ood provisions and other consumer goods are also con-
siderably high, resulting in the allocation of only about one-fourth of the total
defense budget to "frontal equipment." Admittedly, there has be~n a severe
fluctuation concerning this item (which those aff iliated with the defense industry
call "capital expenditures," but which is actually a sum total of military equip-
ment purchase costs) during the past 5 or 6 years, and for this reason there has ~
been a frequent demand that the defense industry raise and stabilize the rate of
capital expenditures. The absolute amount of capital expenditures during the
- present fiscal year is about S50 billion yen. However, in order to study the
- relationship between the Defense Agency's procurement volume and the supplying
contractors, it would be convenient to use the procurement statistics provided -
by the Central Procurement Off ice. A look at the figures for FY-79 shows 10,643
' proeurement items totaling 645.2 billion yen. The reason why capital expenditures
exceed this figure is because the procurement of military supplies, textile goods
and fuels is included.
These items are procured not onlq in Japan, but also from abroad (imported chiefly
from the United States). The ratio recently has been overwhelmingly in favor of
- domestic orders, with home-produced arms and equipment making up most of the pro-
curement items. Table 1 shows the recent status of procurement.
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Table 1- Trend of Central Procurement Offi:.e Orders (Unit: 1 million yen) ~
~A~ (g) (B) (A)x100 (C) (C) (A)x100 ~
(Imports
('Total) (Domestic) (Ratic~) incl. FMS) (Import Rati.o)
1975 372,567 355,453 95.4 11,114 4.6
1976 406,878 389,021 95.6 17,857 4.4 _
1977 454,660 426,862 93.9 27,798 6.1 ;
1978 637,685 529,602 83.1 108,803 16.9
1979 645,170 537,673 83.3 107,497 16.7
1980 933,857 822,871 88.1 1 10,986 11.9
(Estimate)
Until 1977, the rate of domestic procurement was far in excess of 90 percent. The
reason why imports reached the high level of 100 billion yen after 1978 is attri- -
buted to the induction of the F-15, P-3C and the E-2C. Included in imports
(108.1 billion yen) for FY-78 were FMS orders worth 98.1 billion yen, Included in

- the breakdown of large ordera in excess of 1 billion yen each were F-15 related
purchases from the U.S. Air Force Dept worth some 41 b illion yen, P-3C related pur-
chases from the U.S. Navy Dept worth approximately 23_5 billion yen, and missiZe- .
related orders also from the Navy Dept worth about 19_7 billion yen. These alone
totaled more than 8%+ billion yen. It was a similar s ituation in FY-79, with a
large order for E-2C related procurement worth 36.4 b illion yen. With the F-15 -
and the P-3C slated to be domestically produced under license, it is expected that,
despite the continuing import of related parts, the rate of importa will again -
decline. As a result, approximately 90 percent of the Defense Agency's procu?e-
ment will be supplied through domestic production, wh ich should be conBidered to
represent the scale of Japan's defense industry production.
Fortunately, ~he export of arms, which becomes an issue whenever the defense indus- -
try is discussed, is quite negligible in Japan's case , and the defense industry _
- specializes in supplying domestic demand.
Ari.other noteworthy point in the forega~ng table is the large increase in "total
procurement" which indicates a growth of exactly.2.5 times in this fiscal year
compared to FY-75. While a nominal growth is indicated, 2.5 times in only 5 years
is still quite remarkable. Of course, we should not ~orget that there is some-
times a delay of several year..~ between the points of procurement contract and
delivery, resulting in a different index from that of actual defense production.
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' Table 2- Trial Balance of Costs in Mid-Term Operations Estimate (Real)/
Defense-Related Expenditures (Un it: 100 million yen)
. . _ -
- _ _ . -
, (Year) (1979) (1980) (1981) (1982) (1983) (1984) (1980-84)
' GNP (10 billion 23,200 24,530 25,940 27,430 29,010 30,680
- yen)
Compared to pre- (6.3) (5.75) (5.75) (5.75) (5.75) (5.75)
vious year
~ (1) Raise rate to - 22,607 24,400 26,336 28,425 30,680 132,448
1~ of GNP in 1984
(7.93) (7.93) (7.93) (7.93) (7.93)
- (2) Retain pres- 20,945 22,149 23,423 24,770 26,193 27,700 124,235
ent rate to GNP
' at 0.9028~
(5.75) (5.75) (5.75) (5.75) (5.75)
(3) Set present - 24,350 25,940 27,430 29,010 30,680 137,590
rate at 1X of GNP
(17.12) (5.75) (5.75) (5.75) (5.75)
The "mid-term operations estimate," drafted in Ju~y of last year by the Defense
Agency, is merely data for the agency's internal use. Nonetheleas, industrial
' circles are strongly demanding its implementation and, since the United States is
urging Japan to "accomplish the goal as early as possible," it has received public
' attention as the de facto "5th defense buildup plan." (The "directive of April
1977 concerning the drafting of various defense plans" forms the basis for the
"mid-term operations estimate.")
, If the rate of capital expenditures is raised to 30 percent, and the ceiling for
defense spending to 1 percent of the GNP, in accordance with the demand and trial
balance by the defense production committee of the Japan Federation of Economic
Organizations (KEIDANREN), the defense industry would be capable of achieving the
~ high mid-term growtih of 10-15 percent. This is viewed as canf irming, in.terms of
~ content, the arms procurement figures indicated in the "mid-term operations esti-
mate."
Meanwhile, last May, the Defense Agency submitted "supplemental data" on the "mid-
' term operations estimate" to ~he national Diet (Lower House special committee on
' national security and the Cabinet committee). This "supplemental data".contains _
little that is new pertaining to the nature of arms and equipment, but the trial
balance of costs involved is worth noting. Regarding the economic growth rate,
the trial balance adopts a"basic concept for a 7-year plan for the new economic
society" (January 1977). Concerning defense spending, it hypothesizes 3 concepts
, (See Table 2) as f oll~aws: (1) the case of raising the limit to 1 percent of the
; GNP in FY-84; (2) the case of moving forward at r'~e present rate to the GNP
(0.9028 percent); and (3) the case of setting the ceiling at 1 percent of the GNP
from 1980. The procurement costs for frontal equipment total 2,700-2,800 billion
; yen. The breakdown includes: approximately 769-790 billion yen for the Ground
Self-Defense Force; approximately 1,080-1,120 billion yen for the Maritime Self-
Defense. Force; and approximately 860-890 billion yen for the Air ~elf-Defense
Force.
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Assuming that the relative size of defense spending moves ahead at the status
quo rate (See case 2), it is clear from these data that the pracurement of frontal
_ equipment might be achieved. The comparison between the cumulati.ve total of defense
costs (1980-84) and costs for frontal equipment, according to the "mid-term opera-
tions estimate," is as follows:
Case 1: 20.4-21.1 percent ~
Case 2: 21.7-22.5 percent '
Case 3: 19.6-20.4 percent
The "7-year plan for a new economic society" appears to have already faded. But if
the concept of a 5 p:.rcent level of growth in relation to the GNP, which was
envisaged in the plan, is not revised downward, the figures for procurement it
contains are well within the range of attainment, judging from the above compari-
sons. The intent of the industrial community to stabilize the rate of capital
expenditures at a high level is indeed related to this fact.
It is the trend of personnel costs which impacts negatively on the rate of capi-
tal expenditures. Moreover, it is not the regular payrolls but retirement pay-
ments, which constitute the chief threat. Many fluid elements are involved, and
the year-to-year fluctuations cannot be easily understood by outsiders.
- Nonetheless, it is actually possible to consider the following process with regard -
to personnel costs (especially general salaries). That is, in the real world,
the nominal GNP increases ahead of the real GNP as comQnodity prices increase. Of
course, wage� naturally increase also, but the recent trend indicates that the rate
of wage increases generally coincides with the rise of consumer pricea. Therefore,
there is very little change in real wages, but the share of wages (personnel
costs) in defenae spending is becoming relatively smaller. In order that wages
continue to maintain a certain rate, wages must increase in proportion to the
multiplied sum of the real growth rate by the commodity price rise rate (that is, _
the nominal GNP growth rate). Beginning with the FY-79 budget, the arms procure-
ment rate has risen upwards in contrast to the slowdown in the rise rate of per-
sonnel costs. A1so, regarding retirement payments which we sai.d involved numerous
fluid elements--aside from year-to-year changes--a decline in the long range wage
rate would probably result in a relative decline in the pension rate.
Under such considerations, it would be quite possible to procure arms contemplated
under the "mid-ter.m operations estimate, even within the present limit of defense
spending. As for the rumored speedup of�the attainment period (the shortening of
the 5-year plan to 4 years is said to be under consideration), it is not by any
means impossible to build a full array of equipment itself, since the ratio in the
aforementioned between the cumulative total defense spending (1980-83) and the _
volume of frontal equipment is 25.3-26.2 percent in case number 3, and 26.5-27.5
percent in case number 2.
It must be emphasized that, in absolute terms, Japan's present defense spending
is quite large.
III. Defense Spending on a Par with Europe
Next, we shall hypothesize raising Japan's defense spending to the level of Europe's
advanced industiial nations, and examine its effect on industry.
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What is at issue today is not the absolute amount of defense spending, but its
ratio to the GNP. Therefore, the point of issue is whether the costs are rela-
tively large in comparison to the scale of the economy. From the standpoint of
absolute amounts, Japan's defense spending is one of the world's largest. The
_ reason for this phenomenon is Japan's economic scale, which is roughly twice as
large as Europe's most advanced industrial nations. If Japan's rate of defense
spending to its GNP is raised to 2 percent, its scale would be fifth in the world
after the Soviet Union, the United States, China and West Germany. If the rate is
raised to 3 percent, Japan would be fourth and closely approach China, which is
third. If the rate is raised to 4 percent, Japan would follow closely on the heels
of the Soviet Union and th~e United States. Therefore, to argue for a drastic rise
in the rate to the GNP would mean to seek expenditures at a rate of defenee spend-
ing equal to West Germany and China.
However, while making an issue of the scale of defense spending, we are unable to
work with any specific situation in concrete terms. We shall therefore conduct our
study on the basis o� existing trial balances. In our treatment here, we have used
materials from our previous article in this magazine concerning the special issue
on "Japan's Def ense Industry," which was published in the magazine SHUKAN DIAMOND
of 22 March 80, particularly on "A Trial Balance: How Much Do We Need for Self-
Defense? Choices between 0.9-2.7 Percent of the GNP." Of course, we shall take
up in this article the subject of planned equipment which we rn.nitted in our pre-
vious article. This trial balance hypotiiesizes the "estimated Soviet strength in
an attack on Japan," and it poses the question, "What would happen if Japan were
to equip itself with arms equal in quality and quantity to the powerful Soviet
- armed forces?" Let us analyze its content.
- "First, the ground forces. Instead of increasing the ground
personnel, the cannons, antitank weapons and antiair missiles
for each division would~be doubled in strength, while the tanks
would be quadrupled to 266 units. In the case of armored
divisions, 325 tanks would be deployed. In other words, the
Ground Self-Defense Force's present deployment of some 800
tanks must be ~ncreased to 3,000-5,000 units.
"Moreover, if the Soviet's most advanced T-72 tanks are acti-
vated, the Japan-produced model 74 tank, the pride of the Self-
Defense Forces, would be no match for them. ~here would be no
alternatiive than to develop or import a new tank moc~el.
"Next, the air force. It ia necessary to equip the air force
with 504 air defense fighters, 144 support fighters and 30 AEW's
(Advance Early Warning planes), modernize the BADGE (Base Air
Defense Ground Environment) system and to bolster the air defense
' bases and defense capability. The air defense fighters men-
i tioned here consist of the new F-15 Eagle class, while the sup- .
port f ighters are of the home-produced F-1 class. Incidentally,
the present holdings of the Air Self-Defense Force include 335
_ defense fighters (98 F-4J's, 150 F-104J's and 87 outdated F-86F's)
and 27 F-1 support fighters. The manpower of th~ ASDF also
requires drastic improvement in quality and strength.
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"Next, the marltime force. Japan's naval forces consist of
3 small carriers equipped respectively with 12 V-STOL (ver-
tical takeoff and landing) planes, 27 missile carrying sub-
marines, 9 destroyers carrying antisub helicopters, 17 missile-
carrying destroyers, 53 destroyers, 30 defense escort ships and
40 high-speed patrol boats.
"The Air Self-Defense Force requires 80 P3C Orion antisub patrol
planes, 18 PS1 antisub flying boats, 220 antisub helicopters
.and V-STOL's for small carriers. The trial plan also calls for
the possible deployment of regular carriers of the 50,000-
60,000 'Midway' class (U.Se).
"Incidentally, present holdings include 14 submarines, 31
destroyers (various types), frigates (15 defense escort ships),
110 antisub patrol planes (including the outdated P2J's)
and 18 antisub patrol flying boats. The naval manpower needs
to be tripled and the air force capability must be modernized."
We have taken a good deal of space in introducing the trial balance of arms and
equipment. If we compare it with the "mid-term operations estimate." there is
clearly a wide gap, quantitatively and qualitatively. The costs involved in the
modernizing process would be enormous.
"How much will all this equipment for the defense system cost?
Assuming that the real annua"1 rate of ecoaomic growth is 5
percent, and if the present rate of 0.9 percent of the GNP
for defense spending is increased by 0.2 percent annually, it
is claimed that the estimated defense buildup could be achieved
within 9-10 years. According to thi$ calculation, 9 years later
in FY-88, Japan's GNP will riae to 366.1 trillion y.en, and its
defense spending will rise to 2.7 percent of the GNP (2.5
percent) or 9.15 trillian yen. In real terms, this is 4 timea
the FY-80 budget, 1.6 times West Germany's defense spending for
FY-79, and 1/3 of the FY-79 defense budget of the United States."
This ends the explanation carried in the m,agazine SHUKAN DIAMOND. We will sum-
marize it in Table 3 and add a few coma~ents.
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~
, Table 3- Comparisons of Defense 5pending
(At rate of 0.2y increase (At present level
annually) of spending) (At 1X of GNP)
' (Def ense (Def ense (Def ense
(GNP) costs) costs) coats) '
(trillion (Rate to (100,000 (Rate to (100,000 (Rate to (100,000
' (FY) yen GNP) (X) yen) GNP) (X) yen) GNP) (X) yen)
~ 55 248 0.9 22,300 0.9 22,300 0.90 22,300
56 260 1.1 28,600 0.9 23,400 0.92 23,900
57 273 1.3 35,500 0.9 24,600 0.94 25,100
58 287 1.5 43,000 0.9 25,800 0.95 27,300
59 30Y 1.7 51,200 0.9 27,100 0.97 29,200
60 316 1.9 60,000 0.9 28,400 0.99 31,300 .
61 332 2.1 66,400 0.9 29,900 1.00 33,200
62 349 2.3 80,200 0.9 31,400 1.00 34,900
63 366 2.5 91,500 0.9 32,900 1.00 36,600
2,732 1.75 478,700 0.9 245,800 0.97 263,800
(Note: Estimates by writer)
~ If we add the defense spending up to FY-88, when the aforementioned defense-related
equipment is considered te reach its full complement, it will total 47.87 trillion
; yen. The difference between the hypothetical situation, wherein the rate of
! defense spending to the GNP continues at the present level with little fluctuation,
, is as much as 23.29 trillion yen. Even the difference, if we hypothesize a mid-
- term increase to 1 percent of the GNP, will be 21.49 trilliox~ ~en. A main portion
' of this difference will be allocated to the procurement of weapons. Moreover, most
of it will be procured at home and the scale of Japan's defense industry will be
literally incomparably larger. What we have examined here is a mere trial balance.
Although it purports to raise the level of defense spending in relation to the
GNP step-by-step, until it reaches 2.5 percent in FY-88, the weighted averaged
rate to the GNP during the period 1980-88 would be 1.75 percent. In order to
' raise the rate to an equal level with Europe, it must be understood that there
will be instances when it will exceed the scale of the trial balance which we have
just examined. Be that as it may, in order to realize this trial balance,
Japan's productivity of frontal equipment must be considerably expanded.
~ Taking tanks as an example, the present rate of production is 60 units annually
: (it was 48 units until last year). According to the trial balance, 2,200-4,200
- units will be procured by 1988. This means an annual rate of 244-467 units, or _
, 5 to 10 times the production scale until last year. Moreover, the aim is to
procure new-model tanks (the successor to the model 74 tank is under development,
but it is expected to take another ~ years for completion). The same situation
applies to various types of aircraft, ships and missilea, and it is clear that all
main equipment will reach the level of several trillion yen in cumulative produc-
tion costs during the period.
, Naturally, the drastic expansion of defense spending will thus result in a sharp .
growth of the defense industry. However, it will not only bring quantitive
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growth of the defense industry, but will inevitably impact heavily on every sector
of the economy.
Of course, there will be economic merits resulting from the growth of the defense
industry. There is the effect on the ~eople's economy as a whole (although it is
often diff icult to measure) through its role in monopolizing one sector of demand.
Also, it often plays a large role towards the progress of scientific and industrial
- technology. Of course, it cannot alwaqs be said that military technology in
Japan's case is among the mo5t advanced technologies. Conversely, there are not
a few aspects which may be considered as demerits.
IV. Consequences of a Drastic Expansion of Defense Industry Production
(1) Transformation of Defense Industry Enterprises
The rapid expansion of defense industrq production has the potential of altering
the nature of industry and enterprises in many aspects. The scale of Japan's
- industrial production is quite large, while the size of its defense industrial ,
production could be said to be insig~ificant (the ratio is 0.2-0.3 percent).
Of course, this is from a macroscopic viewpoint, and in certain industries (air-
_ craft manufacturing, for example) defense industrq production still plays a large
role. A similar situation applies with regard to enterprises. The expansion of
the defense industry signifies the general expansion of industries and enterprises,
which depend heavily on defense industry production.
Using the management of farms as a corollary, we once remarked that the status of ,
Japan's defense industry was like a secondary side business. The reason is
because the share of defense industry production among the enterprise's total
sales is not very large. That situation has not changed today. Among the enter-
prises (contractors) which rank at the top in annual sales to the Defense Agency,
most have total sales worth between several hundred billion to several trillion
yen. (See Table 4.) Therefore, practically all of them are enterprises whoae
defense production remains at a share of several percent or less. A rapid expan-
sion of defense production will cause this situation to change, whereby certain
industries and enterprises will no longer be able to do without it. We can
point out a number of such examples in the European countries and the United
States. Regardless of how large the enterprises, the pnssibility arises of certain
industrial sectors and workshops becoming unable to ignore defenae production.
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Table 4-- Procurement Record of Top 20 Contractors
(Unit: 100 million yen)
(Ranking) (Contractor) (Amount) (Share)
Fiscal 77
1. Mitsubishi Heavy Industries 973.7 21.6
2. Kawasaki Heavy Industries 3y5.6 8.6 _
3. Ishikawajima Harima H Indust 364.5 8.1
4. Mitsubishi Electric Corp 349.0 7.7
5. Toshiba Corp 127.3 2.8
6. Sumitomo Heavy Machinery 116.7 2.6 -
7. Nippon Electric 105.2 2.3
8. Shin Meiwa Industry 88.8 2.0
9. Komatsu Ltd 83.8 1.9
10. Mitsui Shipbuilding 65.0 1.4
11. Hitachi Ltd 64.0 1.4
12, Nippon Oil 60.9 1.3 -
13. Fu~i Heavy Industries 56.6 1.~
14. Japan Steel Works 52.6 1.2
15. Shimadzu Seisakusho 50.8 1.1
16. Nissan Motor 44.8 1.0
17. Nippon Koki Kogyo 44.3 1.0 -
18. Oki Electric 43.6 1.0
19. Tokyo Keiki 35.9 0.8
20. Hitachi Shipbuilding 34.5 0.8
(Total, including others) 4,516.6 100.0 -
Fiscal 78
1. Mitsubishi Heavy Industries 1,529.6 24.0
~ 2. Ishikawajima Harima H Indust 538.4 8.4
' 3. Mitsubishi Electric Corp 523.2 8.2
4. Kawasaki Heavy Industries 403.0 6.3
5. Toshiba Cdrp 173.7 2.7
6. Hitachi Shipbuilding 144.6 2.3
7. Nippon Electric 116.9 1.8
_ 8. Shin Meiwa Industry 96.1 1.5
9. Komatsu Ltd 84.3 1.3
ld. Japan Steel Works 82.9 1.3
11. Hitachi Ltd b8.2 1.1
12. Tokyo Keiki 67.2 1.1
13. Shimadzu Seisakusho 63.6 1.0
14. Daikin Kogyo 60.0 0.9
15. Oki Electric 58.3 0.9
16. Fu~i Heavy Industries 55.2 0.9
17. Nippon Oil 53.8 0.8
18. Nissan Motor 52.8 0.8
19. Nippon Koki Kogyo 43.8 0.7
20. Maruzen Oil 31.6 0.5
(Total, including others) 6,376.9 100.0
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(Ranking) (Contractor) (Amount) (5hare)
Fiscal 79
l, Mitsub ishi Heavy Industries 969.3 15.0
2. Mitsub ishi Electric Corp 539.6 8�4
3, Kawasaki Heavy Industries 495.5
4, Ishikawajima Aarima H Indust 399.0 6.2 -
5, Toshiba Corp 181.9 2�8
6. Nippon Electric 166.4 2�6 _
7, Nippon Kokan 165. 8 2� 6
- 8, Mitsu i Shipbuild ing Z36�~ 2'1 ,
9, Komatsu Ltd 102.9 1.6 -
10. Nippon Oil 88.6 1.4
11. Oki Electric 85.6 1.3
12. Japan Steel Works 81.5 1.3
13. Fu3itsu 76.6 1.2
- 14. C. Itoh Aviation 73.0 1.1
15. Sumitomo Heavy Machinery 71.5 1.1 ;
16. Fuji Heavy Industries 67.1 1.0
17. Shin Meiwa Industrq 67�1 1'~
18. Hitachi Shipbuilding 67.0 1.0 ,
19. Fuj i Electric Machinery 58. 5 0. 9
2p, Nissan Motor 57.9 0.9
(Total, including others) 6,451.7 100.0
- Once such a change in makeup occurs, defense production becomes built in as an _
indispensable sector of the industry or enterprise, and it then becomes vital
to maintain it. When the annual defenae production gmounts to orders worth several
trillion yen, many of these industries or enterprises would no longer be able to
avoid such a change.
Let us take a look at several hypothetical examples of procurement figures for
main equipment. Since a single model 74 tank is worth some 300 million yen, an
order of 4,200 units would easily exceed 1 trillion yen, or top 100 billion yen
annually. The suppli~rs are Mitsubishi Heavy Industries for the chassis and Japan
Steel Works for the tank gun. As for aircraft, 1 unit of the F-1 is worth scme
11 billion yen, so 117 planes would cost approximately 130 billion yen (supplied
by Mitsubishi Heavy Industries). With the F-15 costing 8 billion yen per unit,
500 planes would cost approximately 4 trillion yen tthe airfraa~.e by Mitsubishi
Heavy Industries and the engine by Ishikawa3ima Harima). As for ships, they would
vary according to size. A submarine would be worth some 16 billion yen (inclu-
ding batteries), and a defense escort ship would cost about 13 billion yen. There-
fore, the procurement cost for submarines would come to about 200 billion yen, and
eimilarly about 200 billion yen for defense escort ships.
Assuming that the rate to the GNP is 2.5 percent at this point in time, the total
defense spending would be 6.2 trillion yen, and the procurement of arms would total
- some 4.5 trillion yen. Since at least 4 trillion yen could be considered to be
orders for the machine manufacturing inaustry in a broad sense, defense production
would become deeply rooted within the machine manufactu~ring industry; broaden the -
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industrial base, including the makers of related parts; result in a linkup with
the materials industries, such as the steel industry, the nonferrous metal indus-
try and the chemicdl industry; and structurslly envelop the defense industry as -
one of its sectors. In the end, it cannot but transform the nation's industrial
structure, alter the nature of its reproduction system and also impact on the
economic growth rate. It could be said that, when the rate to the GNP rises ab~ve
' a ceresin limit, its industrial significance assumes a different qualitative -
aspect.
_ (2) From Defensive Weapons to Aggressive Weapons
- When the procurement for equipment exceeds a certain level, the nature of the
equipment also undergoes an important change. The reason is, naturally, because
there is a limit to frontal equipment required for "purely defensive purposes,"
and an increase in the procurement volume increases the temptation to acquire
more aggressive equipment. We must not overlook the fact that, included in the
aforementioned trial balance were missile-carrying destroyers and regular aircraft
carriers. It is also well known that the function and nature of aircraft car-
riers can be completely altered by adding midair fueling systems. The trans-
- formation of procurement arms from a defensive role to an aggressive role inevita-
bly occurs with the increase in procurement spending above a certain level.
Another important Foint is, that the futility in stockpiling enormous amounts of
conventional weapons results in the danger of aspiring towards weapons more power-
- ful than conventional types. There is a deep-rooted opinion abroad that, even-
tually, Japan will also arm itself witk~ nuclear weapons. Recently, in Japan, also
there have been advocates of nuclear arms. It must not be forgotten that the rapid -
growth of arms procurement entails the strong possibility of fostering such a
trend.
(3) Securing Personnel
The qualitative improvement and quantitative growth of equipment, resulting from an
- increase in defense spending, pose a nunber of problems concerning the securing of
personnel. For the function of a given equipment to be fully demonstrated, there
must be a proper balance in the relationship between the equipment and its accom-
panying expendables (between f irearms and ammunition; between vehicles and fuel,
etc.). Naturally, adequate consideration must be paid at the respective stages of.
~ production and procurPment. However, what is more important...the education and
training of the personnel handling the equipment, and the protection of the per-
sonnel in charge of safeguarding and repairing them, must be secured.
As the equipment becomes more modernized, a certain number of trained personnel
for its handling and prote~tion becomes increasingly indispensable. Aircraf t is
; a typical example. T'herefore, as the equipment becomes more abundant, the average _
quality of the personnel using it must become higher. There was a period when
- aircraf t technicians (pilots and ground crews) were transferred en masse from the
Self-Defense Forces to private enterprise, and it signifies the extremely impor-
tant role of human resources.
The rapid expansion of equipment requires the securing of personnel to cope with
the situati.on, but it 3.s clear that the mere increase of authorized Self-Defense
; -
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personnel would not suffice. The reaeon the "quality" of SDF personnel becomes a
public issue is because of a few who co~mit criminal acts. But a more basic and
important point is, it is difficult under the present recruitment system to recruit
- an adequate number of personnel able to cope with new equipment. It may be said,
therefore, that some method, whereby young and outstanding men can be secured, is
indispensable for any buildup cf arme procurement. Any marked increase in defense -
spending is thus tied to a"study of the draft system," and the social and ;:ultural
price to be paid is indeed high.
(4) Financial Pressures
A drastic increase in defense spending bec omes a preasure factor on f inances. _
Especially in times like the recent low-growth period of the economy, natural
revenues fram taxes tend to drop on the one hand, and, as the weight of increased
ex,~~nditures becomes greater on the other hand, the hardening of finances and a
dearth of revenue sources result. An increase in defense spending under such con-
ditions would naturally apply pressure upaa the other areas of expenditure, unless
revenue sources are buil.t up through such means as the iasuing of nati~nal bonds.
The rate of def ense expenditures within the general accounting is 5.24 percent for
this year's budget. Although the defense spending in relation to the GNP is
generally stable at this time, the rate within the general accounting is lower.
This is because the growth of the general account is greater than the gxowth of
the GNP, and the cost of government is relatively higher.
The share of 5.24 percent within the general accounting indicates that, if the
defense spending in relation to the GNP is raised to 1.72 percent, it would be
- exactly 10 percent of the budget. As we have seen in the previous trial balance,
if the rate to the GNP is raised to 2.5 percent, it would be 14.6 percent of the
budget. This would b e an extremely heavy burden under the present f inancial
conditions. Nonetheless, it is difficult to apecify what other areas would be
pressured by it as a result.
The issuance of national bonds would alao serve to heighten the dependence of
f inances as a whole on national bonda, and, in the long run, public bond issues
would apply pressures on f inances and impact on other sectors of the people's
livelihood and the economy through commodity price fluctuations. -
Our explanations so far have made it clear that, increasing the rate of defense -
~ spending to the European level is bound t o raise various problems. When we are
asked about Japan's role as a member of ~~he international co~unity. we do not
consider our reply to be, "To not spend 1 ess than 1 percent, but on an equal level
with Europe, for exampl~." The reason we wotild not answer thus is bec:ause it would
not indicate any sort of concept or doctr ine. In form, it would be catering to the
United States and imitating Europe. In terms of content, it would mean the mere
procurement and arraying of mainlirae equipment.
Both the United Sta t es and China--Japan's chief adversaries during World War II--
are now applauding the buildup of Ja~an's arms. However, now is the time for us
to rPview our defense ideology. There is no necessity to share in the Pacific
Basin co~peration concept, which is a Pacific veraion of NATO. ~
~
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- The positions of the United States as the leader of "free world nations," of the
~and-connected European nation~, and of Japan, are inherently different. There
should be self-reflection on the part of Japan, as one of the chief perpetrators -
of the aecond world war, It should have a unique position as a nation which
received the baptism of the atomic bomb. There should be greater debate by the
entire nation on various dimensions, ind~pendentlq and uninfluenced by outsiders.
A sharp buildup in defense spending without going through such a process would be
a waste of national funds and fraught with dangers.
COPYRIGHT: Iwanami Shoten 1980 -
5884
CSO: 4105
:j
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ECONOMIC ~
_ i
~
AFTER ITC RULING: U.S.-JAPAN AUTO DISPUTE ANALYZED
Tokyo MAINICHI DAILY NEWS in Eaglish 21, 22, 23, Nov 80
~1'hree part series : "After ITC Ruling"~
I21 Nov 80, p 51
~Axticle by Soji TeramuraJ ;
~Text~ Edltor's Note: The recent seeds of tbe aofo trade~ war ca~e of receaf vaemployrnent
ruling handed do?~n by the U.S. whkb m}ght bceak out at any and record finaacial laeses in
InternatJonad Trade Com� moment ~ePaJaprnaad tbe the U.S. auto industry trom the
a~lsslon tbat Japaaese cars G.S., or Japan aad Wut legal vieapoink but that in
lmpotte~ Into the Americae EutopeaD couatr/es, It actualitytheyare. ,
market are notlnjuring the U.S. something goes Wroag /n Had thls vi~ea+ prevailed. the
car lnduslry and that, haodlingthetra~elssues. ITC commiasioners would have
t1~erelor~ the U.S. government WASHINGTON - Com- a~~ a~~'tO'~ d~~ - _
shoWd not take rcsttlctlve m~. J. the Japeaese side ~rould have -
measu~es agalast auto /mports ~ R~~, W~ lost tbe case.
l~m Japan must have be+en ve the fitst "not gu~h,'~ vote In tbts sense, the 1'tC decision
nothfag but good ne~ tv of eould be interpreted as having
Japanese car prndracers� ~n ~ U.S. I~teraatio~al Trade 8~vea a nominal victory to the
heartng the rulin~ tawever. Commission cTTC) on Nov. 10. Japaneseautomakers. _
Japanese car Industry circ~es ~d ~~~y~ ~~g In looking back on the~ 18-
as well as the SilrrisMY of In- month bilateral ~automotive
ternatJona/ Trade and Induvtiy that toref~n automak~rs bad ��war." no other expcession _
st~ow� 8� llttle -pcvde�ce and would be more a t than to sa
stopped short ot expressing se ns i t i v f t q to w ard t h e ~t ~ g~~ oi fortuue hays
teelingsol~oy. p~~ ~jve industry.
Theywer~eratherc~llntheir sided with the Japaaese
whicd is trapped in the
reaction to the ITC dec3sioa. automakers for the past three
simply commenting that the years. This was amply
n~Iing was Just one step on the The commissioner made tl~e demoastrated' by the fact that
remart at tbe eod ot b!s ex-
- Jongraad towarrlssettlement ot the Japanese auto export
tbecartradeLssue. ~ planatba as to why be cast a ~~,th had coincide exactly
They were we!! eware that ~~AO~ 6~~Y~~ vote. It is bighly with a~ternal eveats.
~Y Prablems lfe ,ahead unuaual tor a judge to giv~e such
- despite the ITC nrUng in ttxfr aa expl~matfon. Tbe ti~st stroke ot luck came
lavor. H~re IolJows a th~ ~ 1n April 1977 when Presideat
- installmeat serles consistfng o! Not Legally. But. Carter laid do~m the fuel ef-
reports from ~titalaich! ticiency regulation as part of
~~,~~a His explanatioa 6owever. bis energy poi icy.
Bonn and Tokyo, unvelltng the ~ m pl ied t h a t j m poc ted The secoad luclry event was in
. automoblles are not the main late 1978 when the Islamic
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revolution led by Ayalollah presf
e~`"~t
T~a! campalgn period. Japanese-made cars betore the
Khomeini occurred and brought the ITC decision making was election. The ITC decision will
tnto being the second oi! crisis. deferred until atter the election, hardly dissipate their energy.
The third stroke of luck was and Presideat Carter who ~~ngressional pressure
the resurgence of inflation in c1e~'1Y ~W~ ~p�~ will constitute the touchstone
the U.S. last year. restrictioas, wasdefeated. for President~ele~ct Eonald
The fourth was the defeat o[ The ITC turned down the ~8gan. The president-elect
Presfldent Carter and the vic- presidential request to move up has at least three choices.
tory ot Ronald Reagan. who~ the decision-making day to Reagan administration
_ uphoids Ilberal trade, in the before election day, showin~ its ~y a~oid taking protectionist
latest U.S. presidential election. independence from ihe ad- measures at the start and wait
During this period. the tNnistration. for economic recovery by
~ market share ot JaQanes~� But it would be too naive to ~lstering fiscal and monetan~
- made passenger cars in the believe that the tive com- policies.
U.S. rose from 9.3 percent in misstoners were completely . If the above measures fail
19i6 to 16.6 percent in 19i9 and uninflueaced by the historic ~~ipate the congressional
to 21.4 peccent Iup to October~ defeat of an incumbent P~~. ~ administration
this year. This phenamenal presldent in making ehe may maneuver to concentrate
growth did not occur in such decision, which required boW ~e frusiration of protectionists
nonauto-producing regions as legal and political judgments. on Japanese auto imports for
Atrica and Latin Acnerica but in In response to the ITC ~e legislation of a restriMive
the U.S.. where the automotive decision, the 3apanese auto- acc and upon passage of the biJl
- industry is a national industry makers said that it was a vic- enforce the restrictions on the
and 200 million~ motor vehicles tory for free trade and that it Japanese-made cars and thus
areontheroad. would be befleficial to ~~~d of protec-
_ American consumers. ~~m _
VeryFort~mate However, the Japanese This scenario was im-
au~0~~~ j~�~t a~~ plemented by the then
The Japanese automakers ~ pe pn~ature.
have been very tortunate ~yg~ Fraser, president of ~~~t Richard \ucon at the
because exo enous factors such time of the U.S.-Japan textile
g the ~med Auto.Workers linion. ~~war."
as the energy crisis, the Iranian~ and Philip Caldw~etl, chairman . If the administration is
revolution, and the OPEC of Ford Motor Ca~_, who preyented .from implementin;
marl.vps had done more for the staunchly advocate impert. ~~nd senario, it may well
Japanese auto sales than the ~e1~~, ~ve taken ptompE divert congressional dissatis-
indisputable quality of the p~~ for the cext faction with Japan onto other
Japanese cars and Japanese ~d. pj~~ -~p~ially onto the
export ettorts. There is a strong chance that defense of Japan, Japan's
ITC Commissioner Paula congressmea ~vill sponsor Dills A~~les' Heel: to press Japan
gtern. Democrat, said that [t to empower tt~e president to ~ make a defense buildup.
was beyond the capability of ihe negotiate exciusively with option will be taken by
ITC to discuss the automotive 3apan on ttie curtailment of ~e Reagan administration
poticy as a national industry by Japanese car imports to the depends upon the speed of the
taking into account all the L'.S., and to require fareign Arnerican economic recovery
elements suct? as internal and ~ automakers writh a certain and the sales of American-
external politics, economy, market' share ia the L.S. W made automobiles.
energy and technology. make investments in the Thus, the Japanese car im-
- This remark tacitly acknowl- ~ Americaa market. - port issue will be the touchstone
edged that the Trade,~?ct of 19;4 jn the House and S~ate of the president-elect's free-
can no longer determine the elections ahich were con- trzde motto. The Japanese
, culprit of the injuries a U.S. currently hetd a ith the automakers. on the other hand.
indust~rysutfered. presidential election all the would be better a~vised to
A daible stroke of luck came automotir�e conqr~smen from recognize the good fortune that
at the end. In spite of the. high ~,I~chigan and Ohio states Kere has been pushing up the
level of politicization of the ~t~ ~~g~m~ Warit of Ja
automotive issue during the p~~~t Carter . to ~p y P~~-made
p cars on the American market
impose import restrictions on and refrain from falling into
insensitive export practices.
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I22 Nov 80~
rArticle by Kenichi Kono~ ,
- ~ Text ~ BONN -"To buy Japanese- I~jy u troubled by the sales I n re f 1 e c t i o n o t t h e
made cars is tantamount to ~~p ~ its largest automobile widespread popularity ot
dep~iving our felloa Germans ~facturers - Fiat, which Japanese-made automobiles in
of their jobs," reads a poster .had a deficit amamting to 103�7 the European market, a
put up by an automob~7e dealer m~~Q ~ ~~t iI.13 billion) Japanese automaker staff
in a small town in West GeF ia the January-SepteG~~~er member stationed in West
maay. ~ ye~. Germany said it would take
Another dealer selling ~~e of such a huge three moattLS on average, or ,
Japanese-made automobiles in ~ danger to the even su months, depending on ,
the same t~wn filed a strong ~t~ ot the automobile the model, for Enropean
protest with the other dealer for m~~~Ag ~try itself customers to obtain a Japa~nese
interfering v~~th its business and d~ ~ ~ after placing an order with
demanded the immediate I~y cardealers.
removal of the poster. in France, major automobile The superiority of Japanese-
This conflict over the sale ot ~~Ufacturers such as Peugeot automobiles over the European
Japanese�made automobiles and its sister compaay Turbo. ma!ces in fuel~efficiency, price.
was referred~ to t1~e judicial ~ well as the governmental and minimum amount of
~ f~enault. are mapping out trouble are behind their
This short anecdote, befng p~~ � for pec- mounting popularity both in the
talked about in Bonn at presen~ sonnel cuts in Ilne witb theeir United States and Europe.
reflects symbolically how production curtailment Buk wder the situation in ,
deeply the European countries ~y~~ ~mployment in the EC
are concerned about the fast- Nor is West Germany, the is coming to over 6 mi7lio~ and'
e x p a n d i n g J a p a n e s e even West Germany. boasting
automobile exports to Europe. compe~itive in European of its strongest economy is
especiallytoECcountries.� automobile productioa. an suffering from a deficit in the
The anecdote involves mixed ~~~~an, . , nation's intemational balance -
feelings of surprise that a small T~~g the top automobile of payments, the economic
island country in the Fast East ~anufacturer. Vollcswagen. as theory of "the weakest gces to
has been producing higher ~ e~p~~ it has suffered the wall" is not always _
quality goods with tec6nology from a shatp reduction of sales tolerated unanimoasly among
topping European standards since this April against the EC countries. '
and apprehension that there background ot the overall In the market share, even
might someday be an "alieo of domesiic demand in Japan's No. 1 automobile
conquest" economically. R,~ ~~any. manufacturer Toyota and No. 2
- Examples A V0~'aBeA factory ia West Nissan are both raNced lower
C~ermany has a large backlogs t b a n s u c h E u r o p e a n
In the United Kingdom, ot the latest model Audi 80 type. manufacturers as Renault and
voices are being heard among Meanw6ile. Japanese~m~de Fiat. .
- high British government of- automobiles are surging at top in spite ot this fact, ex-
ficials rueing the existence of ~ Europeaa cessively rapid sales expansion,
~ the deflcit-ridden giaat - BL CO~~~� � cogether with the phenomenon
c formerly British Leyland). Particulatly in ~Vest Ger- that as many as nine Japanese
It is expected that ihe British maoY� the ~nazket share of automobile manufacturers are
goverament will have to ia- Japanese-made cars has been competing in tbe European
crease relief expenditures trom ~P~~�g ~C an astonishing market, are causing big
its state budgeG estimated W cate - from 0.05 percent in 1970 ~rcussion against Japanese
- BL. wbich is eapected to incur ~ 3�7 P~nt W 1978 aad to 5.6 cars.
an additional deficit of f4oo Pe~t w 19i9. ITC's niling that Japanese
million this y ear. It is fa~ecast that the sharn ~~rts to the United States
will go over the lo percesit level ~ not the cause of Detroit's
tdis year. ~
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i
problem has beeci wekomed by ~y, ~e EC leadecs qo doubt ~ t~at fhe automobile
some European automobile r e g a r d~ t h e J a p a n e s e issue will be takeA up as the -
' manufact~u~ers who believe that automobUe import issue as a biggest Item of the agenda at -
~ tQ~e possibility ot Japan shifting �~adowm" for t6e future the torWcoming EC toceign
its export drive from the � trade strategy betrreen EC aad miutster le~'el counc}i oa Nov.
' American n~arket to the Z4, 25 atBrussels.
European market has shrunk. J~~ ~ut a techcwiogy The coun~tl is to draft _
i gap betweea Japan arxi the E~ some kind ot stricter-thar?~ver
Sh'icter Attitudes in the area of advanced trade strategy against Japan.
It is coasidered i~levitable, ~echnolog~+ relating ta com� Spearbeading this strategy,

' however, tbat irom now~ on tbe Puters, some EC ofticials said high-raoking officials oi seven
attitude of EC cotmtries toward ~ major trade ,friction bound automoblle manufacturers in
~ Japanese car e~cports to tbe EC to come atter automobile the EC visited Japan recently.
will become stricter than P~1ems Will be in the com- ~ T. Sctunuecker. president of
before. puter tteld. ~ olkswagen, said that he pays
; This is because EC leaders No matter in what way the respect to Japan's ac6ieveme~t
interpret the rapi~y e:cpanding JaP~ at the same time, Japan
automobile imports frnm Japan EC apprehens-ioa. tt~e EC side is should ~~ealize that soac'ks may
as signlfying worserung in- c e r t a i n to re g ard t h e fall upor? itself if it gces to ex-
temational payments of the automobile import problem as a
member countries. Ttils year's ~ forecast long- He went on to say that this is
range Japan�EC relatioas, because Japaa cannot lire
EC deficit vis-a�vis Japan ratuer than as a simpte trading without markets for the export
being estimated at S10 billion. a of its products while both the
50 percent increase over last In � consideration of this Uaited States and Europe can
year. ~ ~o~g apprehensioa there is go without the Japanese
' market.
(23 Nov 80, p 5~
' [Text]
~
Why were Japanese car in-
dushy circles and Ministry of t~~ might be growing on ~~e MITI ofticials and auta
International Trade and In� ~p~~ ~ll ~~FP�rt of maker executives said they
IegisiaHon to curb suto lmports rather wis6 the ITC's rulin had
dustry ofiicials not unreser- S
vediy pieased at the new~s that fmm Japan, even thougd the ~n the other way rnund. If the
~ the U.S. International Trade ~~d given a niling to put an ~ bad niled that Japan's auto
end to tbe dispute. ex orts were hurtin the
Commisslon cITC) had given a ~ p 8
The second concern stemmed ,~erican car indu , the
rulic~g in favor of the Japanese ~'Y Y
auto industry, rejecting We irom reports that apprehensioa said, "tbere might have been a
h~ ~D ~~g chance for Ja anese auto-
complaint thai Japanese cars about a possible fast in� P
' imported into the United States � make~ W face less severe
crease in Japanese car ship~ ~m rt cutbacks than croWd be
had been injuring the American Q�
~ ments t6ere, and thls expectedhereafter."
pheoomenon might cause ~
The reaction of Japanese trouble ia the future. However, becauae of the
automakers to ihe ITC decision ITC's ruling mjecting import
The third concern, probably ~trictio~, "I fear," a car
was a blend ot coacealed joy the biggest of the three, arose
and cooiness. There were three companY executive remarked,
out of the suspicion that ��~at U.S. con men with
reasons behind this com- ~
p~a~ A m e r i c a n a u to m a k e rs , ~terests in the auto industry
although slow in recovering might push harder for -
CaUSes For COnCeTn from business slumps~ might legislation to kick our cars out
grow steadily to bernme a of the American market.,~
, The firsi was concern amoog threat to the Japanese car in- Meanwhile, the Japanese
Japanese car manufaMurers dustry.
~ and MITI officials that sea- auto industry is worried about
~
~
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their sour relations with G~it-Throat Rivalry engineeriag the time-
European countries, which may Generai Motors and Ford are consuming U.S.�Japan auto
- overshadow the future of now enthusiastic about building trade war.
~ Japan's au~o trade with them. stmngholds in the smatl eat This speculation is based on ,
Before the ITC ruling, major market, said Yamamoto. the susplcion that the American
European auto makers �~ere �~a~ y~ can say with con- car manufacturers were
stanc~ng on the same side as f~~ ~s ~hat thei~e will be cut� engaged in covert maneuvering
Japanese car makers vis~a-vis ~~petiti~ou in the neaz in a bid to dominate small car
the American market. The f~ture between car manufac- inarkets thronp,hout the world.
Europeans as the market tu~ers of Europe, Japan aad the ~~The stubborn American
remained open. But with regard U.S." demand tor Japaaese auto
to the sales competition on the What is startiing Japauese assembly on American soil is
European must have Felt rellef a~tomakers is tbe huge amount one example," one ofitcial
at the ITC's ruling. as the U.S. of funds the Amer~caa "Big maintained.
market remained open. But bave been pouring into �`The Japanese andertaking
with regard to the sales com- the cieveluQment ot subcompact of suto productioa ia America
petition on the European cars. would mean that they a~ould
market, which Japaaese cars The buge amount of moaey have to shoulder costiier
are rapidly tlooding, the invested in car production is payrolls tor American workers.
European automakers are large enough to frigbten qnother fact is that American
- looking at the Japanese makers ~apacese caz maaufacturers, auto workers are iess sldlled
as rivals. as their funds are faz below that than the Japan~e.
Up to September this year. level. Eveu the money spent by ~~1'be result ls clear. The
Japanese caz exports to ihe EC Toyota, the nation's biggest Japanese auto makers having
memb~er nations reached automaker, on technological their productIon plants in
668.050 units. The export ~vation, Is considerably less American would be fomed to
volume impressively rose 24.9 one-eIghth ot the above market more expensive and ;
percent in comparisoa with the amount. inierior quality can than those
same period of 19T9. Agafnst J a p a n e s e a u t o m a k e rs ~Y ~~8 at twme."
this background top executives acknowledge that signs have Tadaald Yukawa, Nissan's ~
of Japanese and European car ~ady begun to emerge that senior researcher for overseas
producers such as Fiat, Renault their market share in the U.S. markets, had co.nsistently
aad the U.K.'s BL met in Tokyo h~ ~~adually eroded by contended that ITC wouid be
- last week. Betore the meeting. automakers. sure to deliver a ruling against
Takashi Ishihara. president ot jn p~~r, the share ot impori restrictions.
Nissan Motor Co., was atraid J~p~ ca~. sales tell to the He based Wis prediction on
that European automakers lowest level so tar this yeaz, the fact that the business fall-off
would be "very tou~" o~ ~a~ down to 16.7 percent. of American automakers has
Japan'scarexports. ~ g~d govemment bottomed out, and the U.S. '
A more serious concera, ofGcials thiak. is the impact of economy is picking up.
however, comes from the ~e fotuth price markup of "~pparently, the adoption of
possibiIity of an otfense Japanese-made cars this yeaz any preventive steps against
latmched by American car made as part of the attempt to imported Japanese autos will -
manutacturers, according to ~~n U.S.,Tapan auto trade mean swimming against the
Japaaese auto industry so~u'� friction. tide of the age," commented
ces. They are atraid that there H~~g ~les of an array of Yukawa.
mtght be a greatee impact on pew small cars mar�keted Minlster of International
their future business from the recently by American makers Trade and Industry Rokusuke
influence ot improving business ~ believed to be a much Tanaka called the ITC ruling
of American car maaufac� ~a~ facWr w the diop than "fair" and evidence of the
t~~� the price markup. American sound sense. The
. Says SWge��bu Ya~�~0i0' Looking back at past develop- ITC's rtiltng seems to lend
vice president ot Toyota Motor ments some of~cials hoid that It support to t6e pet phrase of
~~a~~ ~ J~~ was the United Auto Workers Ja anese automakers that
car industry does aell now in p
cUAW) union who started the ~bNy superior cars meeting
sales In the world maricets, you ~nt caz war, but behind them user's aeeds can win good sales ~
~~OL~~~~T0;p0~ were American car ~r~,~~
~~s trend win deGaitely manufacturers actually
t~nue three years irom now. -
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; . .
~ By raising high the banaer oi
this motto JapaQPse car
~ manuEacturers may remain
' competitlve -oa the global
mazket as in the past. ~
- But thls depends on how the
worid map of caz industry
; competition develaps heace-
forth.
Severe sales competition has
~ already stlrred up a mood of
protectlonism in a number of
; countries, and car business is
likely to be facing a cough road
from now on. Thus, it seems
inevitable that the Japanese car
- industry will eventually be
_ , ~forced to gire second thoughts
to its stance on free com-
petition.
, COPYRIGHT: Mainichi Daily News, 1980
CSO: 4120
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- ECONOI~IIC
ROUGH GOING FOR U.S.-JAPAN NTT NEGOTLA.TIONS
Tokyo BUSINES~ JAPAN in English Nov 80 pp 29-30
~Article by Hokaji Mino, Visiting Scholar, Harvard University, Former Editor-iri-
Chief, Busd.ness JAPAN~
rText~ FiE procurement of materials by the state�run Nippon ~
T Telegraph and Telephune Public Corp~ration (N'i'T)
has become an area of trade fricdon between Japan and the
United States rivaling the issue of Japan's car exports.
. Hopes that U.S: Japan negotiations on the procurement
issue would bring about a settlement as early as October ~
1980 have now been set aside, and the chances of reaching
a settlement by the end of the year appear d'un. There is ,
growing suspicion on the Japanese side of the negotiating
table that, judging from the American attitude toward the ~
_ talks, the U.S. side is not seriousiy working toward reaching ,
a conclusion to the negotiaaons.
Following the postponement of the anticipated October
agreement in the U.S.�Japan NTT procurement negotia-
dons, the Foreign Ministry entered a new round of policy
formation led by che go~emment foreign trade representa-
tive Saburo Okita, who retumed from the United Staces
Oct. 8. The Foreign Ninistry maintained its stance of
seeking a sectlement of the issue by the end of the year, but
the Uniced States would not budge on its hardline position .
thac all NTT equipment procurement contracts should be
open to competidve bi~ding. The ministry initially believed
the U.S. side had indicated considerable understanding
toward 2he "three level systam" for NTT equipment
procurement as presented by Okita during high level talks
_ with U.S. trade representative Reubin Askew at the
beginning of September. Tt~ey consequently were unde: the
impression that a substantive agreement was a~ithin reach ~
when Okita met Askew in the Uniced States on Oct. 3. This
became the basis of thr opinion that the U.S.�Japan
negotiations could be brought to a conclusion in October.
What does the '`three level system" signify? The three
- categories are as follows:
1. The first category includes those materials such as
~ storage batteries, electric poles, steel pipes and circuitry
equipment which are offered un the general market and
which meet standard requirements as set b}� Japan Indus-
trial 5tandards (JIS). These products would be open to
competitive bidding based on the General Agreement of
Tariffs and Trade (GATT) code on government procure�
ment.
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2. Consisting of celecommunications equipment ;~nd
specific measuring instrumencs such as teletype and fac-
simile which are on the general muket and can be utilized
; with some degree of remodeling. Procurement of such
materials would be by optional contcacting, with, intent of
purchase made public to domestic and foreign producers
and impartial screening of those makers trying to sell their
' � products.
These o~tional contracts would differ from similar
- contracts ~IT has heretofore tied with producers desig-
nated by the public corporation in that by publicizing
purchases tiTT would be seeking sales openly from both
domestic and foreign producees before deciding on a
' designated maker. In addition, NTT would give a detailed
; explanation co those makers which, under screening, had
been excluded from the designated list of contractors.
3. Consisting of high technology equipment such as -
telephone receiven, electric s~itchboazds and microwave
; equipment which is not availabte on the general market and
~ which requ'ues fuRher researcll and development. :vTT _
would seek participation from the maker at the research
' and development level, and would open procurement
! contracts to chose companies which have jointly developed
new products and helped perfect superior telecommunica-
tio~s equipment.
This is the "three level rystem" as proposed by the
Japanese. Japan's aim throughout in devising this system
has been to procure with the utmost efficiency high quality
; facilities, equipment and materials. .
~ When the sixth working level talks wece held in Tokyo
' from Aug. 4, the U.S. side insisted that categories two and
three as indicated in the "three level system" proposed by
- ' Japan covered articles in which procurement was possible
' un~er the GATT govemment procurement code. However,
~ the Japanese countered that this argument disregarded the
realities of electric communications equipment procure-
ment. The assertions of the two sides ran along a parallel
course.
The GATT code on government procurement sets down
standards which ignore quality control and gve total
emphasis to price compeution. In this respect, Japan's
assertion is that public corporadons like NTT should
recognize highly efficient goods available on the general
marke~[ that belong to the first category, but that the GATT _
code dces not apply to articles covered by categories two -
. and three.
[t is correct to say that even if a rompany provides
' detailed specifications when bidding for high :echnology
equipment contracts, there are no guarantees it will be able
to cume up with a high quality product. Considerable
j knowhow and outstanding quality control technolo;y are
~ important factors. Esp~cially for those materials belonging -
to the third category, by means of joint research and
; development we can promote the accumulation of manu-
facturing knowhow, the establishment of quality concrol
~ methods, and the formation of specialiaed lines of produc-
tion. From this interrelationship, the smooth supply of high
j quality materials becomes possible.
~
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It is indisputable that ~tFie ,american side showed
considerable understanding toward this "three level sys- `
_ tem" proposed by Japan when Askew and Okita held talks
in New York at the beginning of September. Thus emerged
the supposition amung the Japanese that an agreement
would be reached in October, and repeated consultations
were held in Japan under ~he direction of Fureign Minister
ldasayoshi Ito and Okita. among the policy decisions made
at this time was one to expand the scale of those materials
subjecc r.o open bidding in accordance with che G~1TT
government procurement code from S600 million to 51.~
' billion.
However, the United States obtained the details of the
new Japanese proposal in ailvance and rejected it forthright
~vich che statement thac "we will not be able to convince
che :~meriran people with this." The U.S. side both
propused that negociations be reopened after the U.S.
presidential elections in Vovember and repeated their
demand that all VTT purchases be opened to bidding. The
opinion thac the U.S.�Japan negotiacions could be con-
cluded in October consequently all too quickly dis-
appeared. ,
The greatest point of dissatisfaction among the Japanese
was that the United States to the very end persisted only in
advocating complete open bidding, without coming up with
any concrete counter�proposal to Japan's "three level
ryscem." There thus emerged within the Japanese govern-
ment che suspicion that the United States has yet to form a
consznsus conceming the ~.5: Japan negotiations on NTT
materials procurement. Further, some questioned that the
U.S. side was seriously interzsted in brin~ng a successful
conclusion to the negotiations. _
Actually, the Japanese side had begun to harbor these
doubts from some tim? before. The direct springboard for
this was the tifth round of workin� level consuitations held
- in Washington last June. At [hese talks the U.S. trade
representative replaced every member of the negotiating
team with the exception of deputy representative Hormatz,
settine the talks back to the situation even prior to the June
1979 L'shiba-Strauss agreement. This agreement stated that
the two sides would seek a method of procurement based ,
on the situation in the electrical corrimunications industry
and the mutual interests of the two countries.
ln actuality, directly following this agreement, from the
first working level talks held in July 1979 through the
fourth round of talks in Februar}� 1980, the negotiations
- made progress along the lines set by the Ushiba�Strauss
agreement. As a result, both the United States and Japan
deepeited their understanding about the realities of elec-
trical communications equipment procurement and ap-
proached the stage where they could be~in to hammer out a
~ concrete plan for materials procurement based on this
understanding. Tnis progress continued until Ma}� 1980
when the process was completely reversed at the iifth
round of talks.
- This abrupt change in the attitude of the American side
w~.s indicative of :he fact that the government, Congress ;
and industry within the United States has still been unable =
to reach a consensus regarding the problem of VTT
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. _ -
; materials pcocurement. According to information gathered
by the Japanese, the failure of the United States to reach a
consensus on the issue was the major reason the U.S.-Japan
negotiations were unable to proceed in a consistent fashion.
Chief Cabinet Secretary Kiichi Atiyazawa often urged
' Trade Representative Okita to "carefully observe in your
~ high-level talks with Askew what he is thinking and whether _
he is trying in good faith w reach a settlement in the
negociatiuns, and make your decisions based upon these
; observations." ~fiyazawa's adz~ce here indicates the distrust
Iteld concerning the U.S. attitudes toward the negotiations
; snd the underlying desire of the Japanese govemment, in
consideration of U.S: Japan relatiuns, to settle che issue as
; quickl~~ as possible. Whatever the future judgcnents of
Okita, it is conceivable that the U.S: Japan neeotiations will
again develop in a different direction before the issue is
resolved, p
~
~ ~PYRIGHT: Nihon ICpgyo Shimbun 1980
;
. CSO: 4120
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ECONOMIC ~
KEIDANREN FAVORS AIRCRAFT PRODUCTION COMMITTEE
OW201343 Tokyo JIJI in English 1231 GMT 20 'lov 80
[Text] Tokyo, Nov. 20 (JIJI Press)--The Federation of Economic Organizations
(Keidanren), Japan's powerful business body, is reacting positively to a
proposal that it establish a committee to help foster the nation's aircraft
industry, according to informed sources.
Moves to set up such panel are gaining momentum mainly among Japanese
' aircraft manufacturers, which believe a powerful private body is necessary '
- to push Japan's large-scale aircraft project in the 1980s. '
At present, there is the Society of Japanese Aerospace Companies as a trade
association of tt~e aircraft industry. But it is said to be not powerful
enough for high-level negotiations with the government for obtaining its aid.
Therefore, the industry wants Keidanren to establish a co~ittee on aircraft
manufacture as a parallel body to its ex3sting committee on production of
defense equipment.
In Keidanren, aircraft business has been covered by the committee on defense
production.
But an industry leader recently said that Keidanren should establish a separate
committee on aircraft production, now that agreement is being forged between
_ the public and private sectors to bring up civil aircraft production as a
"frontier industry
So far, Japan's aircraft makers have relied on orders from the defense agency
for the most part.
But the ~3hare of civil planes in their output is deemed likely to climb
- rapidly in the years to come, since Japan is proceeding with two big pro~ects-- `
development of the next-generation co~erc3al jetliner, codenamed "YXX,"
and of a jet engine for civil aircraft both with foreign manufacturers--in
addition to the production of a new wide-bodied sirbus with the United States
= and Italy.
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~ But the Japanese manufacturers face the difficulty of raising massive funds -
for the development pro,jects. -
Observers said that without government assistance, such ventures cannot go
into full swing owing to great risks involved.
Therefore, the industry is all the more eager to have a powerful commitCee
for obtaining government aid to the pro~ects.
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ECONOMIC !
NEW FOR~IGN EXCHANGE LAW VI~+1ED
OW210234 Tokyo THE JAPAN TIMES in English 20 Nov 80 p 12
[Editorial: "The New Foreign Exchange Law"]
[Text] The revised version of the foreign exchaage and foreign trade control _
- law, incorporating what is now known as the foreign investment law, is to
take effect on December 1. The new legislation, which passed the Diet last
December, marks a capital transactions, trade and itrvestmenC.
' The basic problem in the current foreign exchange law, as it is called for
short, is tha~ it is restrictive in nature. This is because the law was
enacted in 1949, wh~n the Japanese economy ~equired much prot~ction. The
same is true of the investment law, which went into effect in 1950. Now
- this "nega~ive" character has been changed. Henceforth, restrictive or
prohibitive measures will apply only in cases of "emergenc,y." ,
- It is the first time that both laws have been :.Qvised fundamentally, in the ~
sense that the principle of restriction has been changed to that of liberali-
zation. In practice, however, various liberalization measures have beEn
taken so far in line with Japan's economic development and the changes in
the international economic situation. Now that Japan is comm3.tted to freer
external transac*ions both in name and substance, such measures wi11 be
further promoted.
- In the area of capital transactions, for example, official approval will be
required only in "special" cases. Three cases are mentioned in the new law.
They are: (1) when th e yen rate has sharply fluctuated, (2) when it has
become difficult to maintain equilibrium in tihe balance of paym~nts, and
(3) when mass ive movements of money between Japan and foreign countries
- threatens to adversely affect the domestic f ~nancial and capital markets.
A foreign exchange council, to be established shortly, will determine whether
- specific transactions should be approved in these cases. Orders or recom-
menflations will be issued accordingly to alter or cancel "undesirab le" de}~ls.
. In order to live up to the stated principle of liberalization, however, the
council needs to make certain that such emergency restrictions or in~unctions
are limited to the minimum.
In the area of foreign trade, export and import procedures wi11 be simplified. _
In the case of imports, the present procedure requires notification through
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, foreign exchange banks, covering about 700,000 contracts a year or 90 percent -
of total imports. The prior approval system, which currently applies to
S,OOA cases a year, will also be aboliahed.
- In the field of inward direct investment, the relaxation of tt~e restrictions
on forcign stock ownership in Japanese corporations is particularly signi-
- ficant in view of the recent upsurge of foreign investors' interest in
Japanese shares and the increasing "internationalization" of Japanese firms.
At present, ownership by a single imrestor is limited to 10 percent, and
! that by two or more investors by 25 percent. In the case of companies in
sensitive fields, such as electric power, banking and shipping, the limit is
15 percent. Stock acquisition exceeding any of these limits ie not allowed
unless the investor or investors concerned have the consent of the company
involved.
Obviously, these restrictions are imposed in order to prevent the takeover
of domestic enterprises by foreign investors, whether they be individuals
or organizations.
Under the ne~a law the 10 percent limit for single investors will remain. The -
25 percent limit will also continue, but i~ will apply only to designated _
companies, such as oil companies, in which collective foreign ownership is
~ said to have reached 50 percent. In otk~er cases, foreign investors will be
free to acquire as many shares as they want, without obtaining the consent
, of the firms involved.
Again, special cases requiring approval will be considered by the foreign
exchange council on the basis of guidelinES now being worked out. In this
case, too, the council needs to minimize restrictions by limiting its orders
or recommenciations to cases, in which such action is considered absolutely _
_ necessary. In recent months, oil money has been flowing rapidly into the
Japanese stock market. As a result, foreign ownerships in some well-known
compan3es have increased noticeably. This reflects in large ~easure the -
_ growing confidencs which overseas investors, especially those in oil-
producing countries, place in the future of the Japanese economy.
The government is now in the process of designating companies, ~n which
- foreign ownership will be restricted. ~uch restriction is necessary for
enterprises in agriculture, mining, petroleuu?, leather and certain other
industries since heavy foreign investment in such fields could have serious
impact on the domes tic economy .
But this, of course, is an exception rather than the rule, The thrust of
' liberalization in investment as well as in trade and capital transactions
must be maintained steadfastly in the spirit of the new law.
COPYRIGHT: The Japan Times 1980
cso: 4i.2o
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- SCIENCE AND TECHNOLOGY
~
~
COAL DIRE(:T LIQUEFACTION PROJECT MOVING ASEAD
Tokyo NIKKAN KOGYO SHIMBUN in Japanese 20 Oct 80 p 7
- [TextJ Nippon Kokan Kabushiki Kaisha and Mitsui Shipbuilding aad ~
Engineering Co., Ltd. will soon embark on the ~oi.i?t construction of
a direct hydro-cracking method liquefaction test plant at Ke3han
- Steel Foundry's Mizue District. This task was commissioned by the ~
Agency of Industrial Scieace aad Technology as one aspect of the Sun-
shine Plan. The scale of operation is to be 2.4 ton daily ~roduction/ '
processing volume and it is to be completed by the end of 1981. ~
Testing will commence in 1982. As a result of this innovation, coal
liquefaction, direct hydro-~rackimg method research will take a . ;
giant stride forward. ,
With respect to coal liquefaction which ~s an important e~ructural s+ipport of ,
the Sunshine Plan, three methods are currently being researched--solvolysis
liquefaction, solvent extraction liquefaction and direct hydro-cracking lique- :
faction. Of the three alternative methods, 3irect hydro-cracking method is a
technique whereby coal is pulverized, solvent is added, hydrogen and catalytic -
- agents are mixed in and heat processed under 200 atmoapheric pressure and 400 .
Centigrade heat in the heater. '
It is a tzchnique unique to Japan. Heretofore Hokkaido Technical Industrial ~
Testing Laboratory and Mitsui Shipbuilding and Engineering Co., Ltd. have been
conducting research pertaining to plant design and so on. Now, Nippon Kokan,
Asahi Chemical Industry Co., Ltd. and Aitachi Ltd. will ~oin the project in order
to strengthen it. Nipon Kokan, along with Mitsui Shipbuilding will have charge
of the construction and operation of a amall-scale test plant, Asahi Chemical
will research catalytic agenta and Hitachi Ltd. will research and develop the
pressure reduction facility.
The test plant construction stage has finally been reached. The plant will consist _
of coal paste manufacture facility, hydro-cracking reaction tower, liquefaction -
petroleum separator and distillation facility. Mitsui Shipbuilding will construct
the plant's main body and Nippon Kokan will handle equipment of the plant.
This year's budget includes an appropriation of 780 million yen for installation,
labor costs and so on. The plant is slated for completion during the coming year.
Starting in 1982, a 2-year testing period, using this plant, will begin. Paralleling
this pro~ect, there is a plan to prepare for the construction of a 250 ton daily
_ ~0
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� producing/processing capacity plant 3.n 1973; and an eventual scheme to construct
a 25,000 ton daily output operational plant is being examined as well.
Direct hydro-cracking method is a coal liquefaction technique unique to Japan.
The U.S. Government is interested in it and it has rea~hed basic agLeements with
the Japanese Government regarding shouldering one-fourth of the necessary cost.
As a result, the research operation focusing on the said method has steadily pro-
gressed; and now it has made a giant stride forward. This significant development
has generated expectations regarding research accomplishments in the future from
various sectors.
COPYRIGHT: Nikkan Kogyo Shimbunsha, 1980
11460
CSO: 8129/0156 END
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