JPRS ID: 10633 JAPAN REPORT U.S.-JAPAN AUTO TRADE FRICTIONS

• Document Type: CREST
• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000500080007-1
• Release Decision: RIF
• Original Classification: U
• Document Page Count: 139
• Document Creation Date: November 1, 2016
• Sequence Number: 7
• Content Type: REPORTS

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JPRS U10633
6 JuLY 1982
Japan R ort
~p
CFOUO 38/'82 )
U-S.-JAPAN TRADE FRICTIONS
FB1S FOREIGN BROADCAST INFORMATiON SERVICE
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JPRS L/10633
6 Ju1y 1982
JAPAN REPORT
(FOUO 38/82)
U.S.-.JAPrAN TRADE FR I CT I ONS
CONTENTS
Count-Dawn for Free Trade 1
Little Effec.t From Lowering Tariffs 26
Trade Friction With E C ,
(Yoshimori Osade) 37
Interviews on Relations With United States
(Tadae Takubo; Seiichiro Saitc) 47
American Left-Hand Drive Syndrome
(Keitaro Iiase gwa) 90
American Way of Business
, (Fumitoshi Takahashi) 105
U.S.-Japan Economic Frictions .
(Yoshizane Iwasa Interview) 116
No Iimmediate Remedy for Trade Frictions
(Rinjiro Sodei) 120
Thinking PYocess Is Root of Fri.ction
(Kiyoshi Sakai Interview) 123
Mfferences in Situations
(Jiro Tokuyama) 125
Need for Japanese Self Confidence
(Toshihiro Tomabechi Interview) 134
_ a _ [III - ASIA - 111 FOUO]
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COUNT-AOWN F4R FREE TRADE
2'okyo SHUKAN DAIYAMONDO in Japanese 3 Apr 82 pp 16-31
[Excerpts] Liberalization Makes Japanese Economy Strong
Upon reflection, we can observe that every time trade, or capital pe,rticipation,
has been opened up, the Japanese econoaqr has grown stronger. I*c has been
characteristic in Japan for industrial competitiveness to inerease the more the
market is opened. This will probably happen again. The "dramatic opening" of
the Japanese market now being demsnded by Amerjca may backfire and cause more
trouble for America in the future.
From the first round of capital liberalization in 1967 to the fourth round in
1971, there was an excited reaction that "big American companies will land on
our shores and take us over." That idea is riow irrelevant'. There seems to
have been no "threat of foreign capital." It was pushed aside. The results
were the same for subsequent liberal.ization of specific industries including
- aut omobiles, computers, real estate; and retailing.
Exceptional industries for which capital participation was not opened up were
limited to agriculture, forestry, fishery, mining, and�leather. Trade was
almost completely liberalized during the 1960's� Now there are only 27 items
which axe still under import restrictions. America end the EC also havF
restricted categoriee and are making too much of afuss over these few excep-
tional items.
The U.S. trade deficit with Japan was $19 billion in 1981, In order to reduce
the more than $20 billion deficit in 1982, America is demanding that "stingy"
Japan open up its reme,ining categories dramatice,lly, even though it realizes
thQt this will not help much. As evidenced by the use of the adjective "dramatic," this is no longer a matter
of economic rationality. It ie the epitome oP political irrationality.
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Fur exacnple, let us consider agricultural prod:lcts, an item which causes
problems among all countries. A recent forecast by the U.S. Depe,rtment of
Agriculture showed that American exports of agricultural and food products
~ will actually cirop this year on a monetary basis. This is the first time this
has occurred since 1969. The main reasons are the worldwide recession and the
loss of Soviet purchasing power due to ashortar;e of foreign currency.
The Reagan administration has just doubled. the agricultural product price
support budget to $17 billion, and the prospects for exports are bleak. The
burden on government finances for protect=ng fa.rmers will increase.
Flzrthermore, off-year elections are caming up in November. In an important
agricultural country like AmF�rica, the rural vote is more important than in
Japan. The effects of this development w,.ll lead to reciprocity and eventually
extend to Japan. The American media and government officials clearly
acknowledge this concern.
Dramatic Opening Up of Information
Since the "demand for a dramatic opening of the market" is a political problem,
it is always possible that once the reality is exposed, just as with a scare-
crow or a mirage, the results may be disappointing.
For example, there is the problem of material purchases by the Nippon Telegraph
and Telephone Public Corporation. Based an U.S.-Japanese negotiPtions, NTT
clearly beqan opening up last year, and has praised its own effort as "overall
liberali:!c.tion." However, there are unexpect edly few offers from the United
States.
Did America draw back because of the firmly rooted reputation of "purchases
being made only inside the NTT family?" Or was Japan too quick to go along with
American complaints which were based upon anly a small amount of informa.tion.
Iluring 1981, the first year of the open system, U.S.-Japanese trade in
~ communications equipment ended up with a large Ja,)anese surplus.
There is a similar story in the field of banking. During U.S.-Japanese
negotiations, America voiced the following criticism: "Japanese b anks can bu}r
~ American banks, and consolidate their b ase of operations. But the same action
by American banks is not allowed in Japan. This is unfair." To this, the
Ministry of Finance replied: "The purchase of Japanese banks by foreign banks
is not prohibited by law. Furthermore, there have never been ar~y such
ap-~lications."
_ In this example, there was a clear error on the pe,rt of Americans, who iTent
along with the criticism of Japan raised by ignorant amateurs, including
Ambassador Mansfield. The bla.me for allowing such a silly mistaY_e must partly
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be taken by the Japanese Goverment with its usual clumsy diplomacy and
inability to give information s,s well as receive it. The hiring of private
public relations companies, the publishing of PR publications through auxiliary
organizations, and the dispatching of missions obviously designed to build
up the Japanese image are examples of lack of skill in public relations.
Public relations should be a"dramatic liberalization of information" and a
"dramatic opening up of- government offices," including administrative reform.
Reversing the Pressure Being Put on Japan
In this context, why not dramatical.ly liberalize imports of beef, which ha-tre
for many years been a symbol of isolationist import policies which are not
appropriate to the wor ld situation?
The governme,.t-'s response, that "liberalization of beef imports would not be
sufficient to bal.ance America's huge trade deficit of $19 billion," hardly
bears scrutiny in terms of the extremely political nature of the problem.
The same thing can be said for oranges and tobacco. Since there are deep-seated
political and economic interests involve3 in these agricultural products, it is
impossible to avoid domestic friction. There a,fe dea,lers who are receiving
monopolistic privileges, farmers who are "being protected with aid, and
legislators who are receiving votes as compensation in connection with the
allocation of import restrictions. The pressure on Japan in this area will
inevitably lead to the destruetion of part cf the postwar ~'apanese social
struc+ure which has been controlled by the LDP. An unexpectedly large segment
of public opinion seems to think that would be all right. Now that Japan is
being asked to assume an international role, it is necessary to open up the
society and econom}r, and by doing so, make the Japanese economy even stronger.
- For example, there is tobacco. Tobacco is one of the few superior products
America can offer Japan. Why not let the Americans sell it freely? Some say
that it wil.l hurt more than 100,000 1'&rm families who raise leaf tobacco.
However, even thotigh it is aii agricultural product, there is no argument that
it is necessary zor food security. Japanese leaf tobacco is inferior in
quality and productivit y, and cultivation of it should gradually be reduced.
Japan is seid to be strong in production technology. This is true for tobacco
also. Taking the 1971 figure as 100, labor productivity in tobacco production
had grown to 133.6 by 1979. This was about the same as the overall growth in
manufacturing productivity (136.5), so envied by the rest af the world. The
industry had the strongth to challenge thz maJor foreign tobacco companies
head on. In fact, one executive of the Japan Monopoly Corporation said:
"If we manufactur.ed cigarettes using Japanese t echnology and labar with
inexpensive American tobacco, we Gould make cigax ettes good en,ugh to export
to the United States."
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At, ttii;; point, it is necessary to develop positive ideas for taking the anti-
.Iapanc�se pressure and turning it around. Japan has the strength to do that.
Beef
Trying to Avoid the Opponent
Import restrictions on beef have.been in place since 1958. At that time the
previous system of automatic approval was changed to a system of foreign
Lurrency allocation. The Livestock Promotion Corporation, a,n auxiliary organ-
ization related to the Ministry of Agriculture, Forestry, and Fi.shery, now
stocks and releases imported beef in the name of protecting domestic cattle
raisers.
The beef exporters, America, Australia, and New Zealand, are h=ghly concerned
about the Livestock Promotion Corporation because of its huge marginal profits.
The marginal profit (also known as adjusted income) is the difference between
the high cost of domestic beef and the low cost, even after the payment of a
25 percent tariff, of imported beef, which is pooled by the corporation and
used for the promotion of domestic beef production. The margin varies with
fluctuations in the export price from the beef exporting countries, but it
usually falls within the range of 200 to 400 yen per kilogram. Annually, this
amounts to 30 to 35 billion yen.
Twenty years have passeu since the Livestock Promotion Corporatior_ was estab-
lished. However, it is a fact that many people doubt that a strong foundation
has been created for a beef production system. Of course, if beef were liber-
alized, most of the reasons for the existence of the Livestock Promotion Cor-
poration would disappear.
Government negotiations with America over beef imports were scheduled for this
fall, but the date has been moved up by half a year.- The negotiations will be
held just before the Paris summit (meeting of hee.ds of state of the advanced
nations) in June. In these negotiations, the Americans will undoubtedly use a
very logical approach to demand liberalization of beef imports. In response,
Japan will continue to advocate nonliberalization of beef, and it will turn
into a fierce wrestling mat::h. However, Japan will probably end up running
around the ring trying to escape its opponent.
Livestock Management on the Verge of Failure
It is impossible to predict the outcome of the U.S.-Japanese negotiations over
liberalization or nonliberalization of beef.. What can be said at this stage,
however, is that Japan does not have reasonable arguments sufficient to over-
come the U.S. demands to open up the beef import market.
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One of the reasons given for the high price of Japanese beef is that the
cattle here are raised on grsin. There are two main ways to raise beef: the
method in which the cattle are kept in a small space and fed large amounts of
grain and the grazing method where they feed in an open pasture.
Even in Japan, ranches with large pastures have been created in various places
throughout the archipelago. There are ranches in Wakkanai in Hokkaido of
1,000 hectares. There are also more than 1,000 re,nches of various sizes in
Japan which are si.milar to "public corporations," created with investment from
the central government or the prefecture, town, or village.
These ranches are generally suffering from an accumulatio n of debt, and opera-
tions are on the verge of failure. One could explain this situation as simply
a result of mistaken policies for promotion of beef cattle production, and that
would be the end of it. However, if the applications of the marginal profits
and subsidies were discovered, it would probably stir up a great deal of
controversy.
There are now 360,000 farm households raising beef cattle. However, the
11publi4 corporation" ranches and the agricultural cooperative system raise
the banner of protest against beef import liberaliLation more than do the
individual farm households. The liberalization of beef imports would let out
the "pus" accumulated in the system over the years.
The idea th at the cost of raising beef cattle is necessarily high in a sniall ,
country is no longer convincing. This can be seen by observing a New Zealand
ranch. New Zealand is an island country just like Japan with lots of steep
mountains. PPatures were developed in those areas to create fine ranches.
The public corporation ranches mentioned above caused the farm families who
raiseri cattle to see "visions" of ranches like those in New Zealand, which are
kno*an as the most advanced in the world. The central and local goverrunents
created livestock cultivation areas with everything from the beef cattle to
physical plant and sold sections at a low price similar to that a white collar
worker would pay for a cooperative apartment, However, this project has many
problems and is likely to end up like a drawing vf food that looks good but
cannot be eaten.
The liberalization of beef imports would be likely to affect faxmers who raise
dairy bulls, which are thought of as a byproduct of dairy farming. The price
system for dairy bulls in the market is related to the distribution of imported
beef. That is because the quality of the meat is about the same. If beef is
liberalized, farmers who.raise dairy bulls will have to change their business
or create a demand for veal. They must somehow find a new field which is not
in competition with imported meat.
Also, the liberalization of beef would contribute to improvement of the strange
and complicated beef distribution system. Imported beef is known as a sppcial
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interests substance, distributed to the ordinary consumers only after passing
through the hands of special organizations and dealers. The liberalization of
beef imports would undoubtedly be strong medicine that would clear away the
deep mist which has enveloped this business for so long.
The liberalization of beef would be a windfall for the Japan Food Service Chain
Association which is made up of 200 large food and beverage businesses. Hotels
and schoal food programs are included in the business categories which receive
imported beef, but the restaurant business is excluded.
Therefore, the association has had the goal of being admitted to this category
for a number of years and has taken serious action toward that ^.nd. The
restaurant business consumes 70 percent of all imported beef, so there is a
large demand. In 1980, restaurant and catering businesses accounted for 27
percent of beef consumption.
Also the liberalization of beef imports would probably be good medicine f or
reviving meat retailers who are struggling for survival. This is because most
small butcher shops have relied on large ham companies for their supply of
beef since 1955. They have had to accept a combined supply of processed meat
products and raw meat. Because of this, the profits of the small retailers
have been decreasing year by year, and they have begun going out of business
one after +he other.
At the same time, beef, chiefly imported, now makes up more than half of the
sales of the large ham companies. The Japan Ham and Sausage Industry Cooper-
ative Association, made up of the large ham companies, is one of the organiza-
tions which receives an allotment from the small amount of imported meat.
From this point of view, the liberalization of beef imports actually would
have many advantages, not just the negative aspects of a general downfall of
a11 cattle raisers claimed by the legislators who are backed by livestock
interests and agriculture cooperative representatives.
The American demand for the opening of the beef import market has the st rength
to remove the disguises from Japan's useless policies for protecting cattle
raisers. That is because of the information on the Japanese market collected
by America over many years.
Cii;rus Fruit
Unknown Ties to Special Interests
If orange imports are liberalized, the Ministry of
Fishery and the agricultural cooperatives say that
of 300,000 farm families who grow mandarin oranges.
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Agriculture, Forestry, and
it will cause the bankruptcy
However, it cannot be
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dc:nied that in the background there is a feverish attempt to protect the
interests oP certain orange importers which make huge profits from orange
i.mports and are known to have special political connections.
There are 100 orange imparters in Japan. Last year 72,000 tons of oranges were
imported; 60 percent of this amount was handled by the big four--Flijii Osami
Trading Company, Nishimoto Trading Company, Small Trading Company, and
Kanematsu Gosho--a completely oligopolistic situation. The representative
member of the group, Fujii Osamu, has tremendoua eaxnings.
The president of the company, Kazuo F.ijii, is also president of the Japan
Citrus Import Association. He is close to Iwao Yamaguchi, executive managing
director of the Central Committee of the National Federation of Agricultural
Cooperatives, and the cutting edge of protest against orange liberalization.
F~zjii has carried on continuous protest actions since last year. At the U.S.-
Japan agricultural product negotiations in 1978, an import timetable was set
for 82,000 tons of orange imports by 1982. Then, during talks between Prime
Minister Suzuki and President Reagan last year, America made a renewed demand
for expansion of orange imports.
Why Stop Import Liberalization?
So Ftzjii had the idea of discussing the problem with American growers and
attempting to achieve a peaceful solution before the import of oranges became
a serious political problem.
The Japan Citrus Import Association established the "Citrus Expansion Commit-
tee," and a party of 18 viaited the United States in March last year. The
purpose of the visit was said to be to maintain harmonious relations with the
producers and exporters of oranges in the United States. Of course, this was
3ust a pretext. The real purpose was to prevent liberalization of imports.
One can understand why Japanese mandarin orange growers are opposed to liberal-
ization. The regulation of rice production has spurred an inerease in pro3uc-
tion of fruit trees and animal products. Because of this, fruit production has
doubled in the last 10 years. Citrus fruit production has grown rapidly, by
2.6 times. The cultivated area in 1975 reached a high of 200,000 hectares, and
the amount of production was .4 ,250,000 tons.
Then there was an American demand to increase the allowed amount of ora;l3e
imports, and mandaxin oranges became subject to a reduction in cultivatad area
just as was the case with rice.
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Two-thirc's of the mandarin orange growers are in the Chugoku, Shikoku, and
Kyushu regions, and mandarin oraiiges are an important crop in these regions.
As the importing of oranges exprands, the roar of bulldozers is heard in the
mandarin orange orchards, pullirig trees out by the roots.
Production of mandarin oranges has dropped to less than 3 million tons. At
the same time, the mandarin orange growers are continuing an effort ta cut
cos-hs. As a result they have increased productivity and there are many
growers rrho view the liberalizatian of orange imports calmly. There are even
some mandarin orange growers who say, "The best product will win out."
However, most growers operate on a small scale, with an area of about 40 ares
per househoZd. Oranges are grown on flat land in Califor nia where machines can
be used, but Japanese mandarin ore,nges axe grown on sloping land and there is
a clear difference in productivity.
If orange imports are liberalized, it will become possible to buy oranges at
American prices. At present, oranges go through three or four stages of
distribution, and this system would be simplified promptly. For example, the
trade departmentsof supermarkets would be able to import oranges directly and
they could then be sold through affiliated stores.
Naturally, it would be impossible to avoid competition with mandarin oranges.
However, there is a solid demand for mandarin oranges, and some fruit dealers
believe that they would not be beaten out by oranges, that peaceful coexistence
- is possible.
Although they axe both restricted import categories, oranges differ from beef
in that only a he.ndful of i.mpori:ers. are opposed to libexal? zation.
Australia Also Dissatisfied
Let us discuss the Fujii Osamu Trading Company some more. The compan;y was
established in 1957� President Kazuo Fujii was said to be an old friend of the
late former Prime Minister Eisaku Sato and he was from the same prefecture,
Yamaguchi. He has several affiliated businesses.
One of these is race horse breeding; he owns ranches in Hokkaido and in the
United States ( California) . -
The ranch in California was purchased in 1972. The amount of authorized
capital is $500,000, and the area is 200 acres. Two hundred thor.oughbreds are
being raised there. With this ranch and tre Fujii Ranch in Hokkaido, Fujii
is attempting to expend profits from race horses. .
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However, the race horse breeding business is not very proPitable. It costs
several hundred million yen a head to import thoroughbred horses, and this
business is knowa as a"money eater." Thereforey it is not surprising t.hat
he is putting the profits from the orsnge business, where the profit for an
imported case (17 kilograms) of reconstilu-uted juice is 1,500 yen, ir.to these
affiliated businesses.
There is a tendency to loudly oppose the liberalization of orange imports on
the grounds that it will destroy the mandarin orange grmrars. However, it
would be wrong if what is behind ';his is a selfish desire on the pari; of
importers to protect the profits they have enjoyed for maz~y years. It can be
said that liberalization of orange imports is the only measure for improving
the distribution system without cost. Also, the liberalization of imports
would open the doors equall,y to the countries desiring to export to Japan, and
it w0121d eliminate the charge that Japan is a closed market.
For example, Australia has attempted to export oranges to Je,pan for some time
and is unhappy because the Japanese Government does riot allow imports.
The liberalization of arange imports would bring about great changes for
- growers and exporters in the United St ates as an exporting country. At
present, access for exports to Japan is limited to certain exporters such as
Sunkist. However, through liberalization, large orange growers in the United
States could carry out direct transactions with Japanese importers. It would
~ be possible to lower the high export price of oranges.
According to the prime minister's office survey cf household finances, the
average household purchases 160 kilograms of fruit per year. This breaks down
into 55 kilograms of mandarin oranges (35 percent), 19 kilograms of apples
(12 percent), and 14 kilograms of bananas (8.8 percent). There is a limit to
the a.mount of fruit a person's atomach can hold, but if, through liberalization
of imports, the price was reduced to one-third the present price, the amount of
consumption per person would probably increase. If that happened, it would
probably have an effect on the market shaxe of other fruit such as apples and
pears. .
Survival Tactics for Mandarin Ora.nge Growers
There are three possible strategies for mandarin orange growers after the
- opening up of orange imports.
One is to change from mandaxin oranges to other crops. Specialists see the
kiwi fruit, of which consumption is rapidly expanding, as a promising candidate
for such a change. Kiwi fruit cF4n be harvested after 3 years. It does not
require the use of insecticides or a great deal of labor. In addition, the
regions where mandarin oranges axe grown are perfectly suited to kiwi fruit as
we12.
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The second strategy is a shift to other citrus crops such as navel oranges and
hassaku. ' These f.rui.t-s can be produced with grafts on mardarin orange trees,
so this is regaxded as the most efficient type of change in operations.
mhe third approach is to organize groups of mandarin orange growers. There
will probably be some failures among mandarin orange growers if liberalization
occurs. Once oranges are liberalized, it would be essential for mandarin
- orange growers to work quickly to cut production costs through larger scale
operations in order to survive.
Therefore, one issue for the administration would be hoa to bring together and
organize dispersed mandarin orange farms.
Orange imports grew from 13,000 tons in 1972 to 72,000 tons last yeax. The
liberalization of orange imports would undoubtedly remove the veil from
"political businesses" which exe closely tied to certain politicians.
- Tobacco
The r".it in U.S.-Japanese relations caused by tobacco has a long history and
cannot be healed with stopgap measures. At the Japan-U.S. Trade Improvement
Committee meeting in February 1978, the U.S. Government charged that the import
of cigaxettes to Japan is obstructed by a number of restrictions. Then in the
Strauss-Ushiba statement in June 1979, tobacco was mentioned along with beef
and oranges as a product which symaolizes the closed nature of the Japanese
; market, and both parties agreed that "talks will be started soon."
Under this pressure f rom outside, Japan announced a series of reform measures
in November of last year.
These included the following measures: The tariff was to be reduced from 90
percent to 30 percent. The standard ~rice of the major American products
(king size) was to be reduced by 10 yen to 280 yen beginning in 1981 in order
to reduce the difference with the price of, say, Mild Seven to 100 yen. The
number of stores handling imported tobacco wa,s to be increased from 14,200 to
20,000 stores (of 260,000 retail outlets in Japan). The retail profit mandin
f or imported tobacco was to be increased from 7 percent to 8.5 percent,
- then after 1981, to 10 percent, which would he comparable to the profit on
Japanese tobacco. Also, advertising was not to discriminate against foreign
tobacco.
Now Is the Ti.me To Attack
Now trouble has arisen again after only about 1 year. There are several
reasons for this. Tobacco is a strong product for the United States. American
tobacco commands 20 to 30 percent of the market in France and West Germany, but
only 14 percent (in 1981) in Japan. America cannot stand for this. Cansumption
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;L; falling oYf domestically, and the three major tobaccQ companies, including
- Yhillip Morris, are angry. With off-year elections coming up, legislators from
tobacco states such as Virginia and North Caroline are also going izAto action.
In addition to the overall prob lem of the trade imbalance with Japan, they are
aware that the temporary trade problems coordinating committee is acting to
reform the tobacco monopoly system, and they have judged that now is the time
to attack.
America is now demanding that the American share of the huge Japanese maxket,
where 300 billion cigaxettes are consumed a year, be expanded to 10 percent, or
$.t billion. For this purpose, they are asking that the Japan Monopoly
Corporation make inclusive bulk purchases of foreign tobacco and reform the
"distribution monopoly" in which products are priced and distributed to
designated retail outlets. In addition, America is ciemanding that the import
price of cigarettes be raised by 30 percent b2cause of the rise in the value of
the dollax and the reduction in the value of the yen, and at the same time,
that the standard selling price be kept at the same level to avoid a reduction
in market share.
At first, Japan used tricks with figures to deal with these demands, President
Izumi of the Japan Monopoly Corp said: "Look at the record for this year.
Domestic tobacco grew by only 1 percent while American tobacco grew by 21..6
percent." However, in terms of the total maxket share, not just the growth
rate, American tobacco or~l.y grew from 1.1 percent to 1.4 percent, a miniscule
increase that would require a micxoscope to see.
"Even so, tobacco is a matter of taste. You cannot stop people from buying
what they are used to," protested Finance Minister Watanabe. In response,
- Secretaxy MeDonald, Deputy U.S. Trade Representative, said: "In that case,
why not liberalize it right away?" Finally, the Japanese side pramised to
increase the number of stores selling foreign tobacco. A negative attitude is
being taken towaxd the American demand to hold.the selling price while raising
the import price. "This is impossible; it is like asking for a subsidy.
However, many observers believe that it will be necessary to reduce the taxiff.
Strategy of the Me.,jor Tobacco Companies
However, what America is demanding is an expansion to 10 percent of the market.
Unless the tariff reduction and delivery of foreign tobacco to rural shops
causes a dramatic increase in market shaxe, the Americans are not likely �-o lay
down the sword. Ultimately, they want Japan to stop monopoly distribl,.tion and
to open up the path for free maxketing of American tobacco in Japan.
afficials of the Japan Monopoly Corporation have this to say about the strategy
of the major U.S. tobacco companies in Japan: If marketing is opened up, the
U.S. ma3ors will not rely only on retail outlets designated by the Japan
Monopoly Corporation. They will probably try independent marketing approaches
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such a3 tyi.ng up with a cola distributing network. It is also possible that
they will dump American tobacco in Japan, selling high grade tobacco at the
same price as our domestic brands."
Some observers say that even if prices are reduced, the Japanese will not bily
because they do not like the foreign product. However, cola, at first
regarded-as a"strange i-.ink," and hamburgers hQVe taken a firm hold in Japan.
Also, 30 percent foreigi. tobacco leaf is mixed into Japanese tobacco, so an
aversion to it is not likely. The Ministry of Finance predicts that if
marketing were liberalized, "The American shaxe would probably increase to
about 10 percent, the level of the American demand."
Furthermore, the temporary coordinsting committee reported that if the Japan
Monopoly Corporation is turned into a private corporation, the Americans plan
to create companies in Japan. If tobacco saited to Japanese taste were produced
locally using cheap American leaf tobacco and superior Japanese labor, it is .
, not unrealistic to suppose that the market share would jump to 30 percent,
similar to that in Europe.
The tobacco interest legislators in the LDP probably do not expect Japanese
tobacco farmers to be greatly hurt by increasing the number of stores handling
foreign tobacco. But the latest Americe.n demands axe raising fears because the
Americans are asking for freedom in marketing.
Leaf tobacco is three times as valuable a crop as rice in terms of income per
10 ares. It makes up 2.3 percent of net agricultural production. It ranks
seventh emong farm products. If animal products such as pork and milk are
excluded, it stands next to rice (33.3 percent) as a basic product. Also, the
consumption of tobacco is falling off. The Japan Monopoly Corporation has a
1-year supply of excess inventory. Beginning in 1982, it embarked on a forced
reduction of 5,000 hectares of tobacco producing land. It is in difficult
circumstances. If the share of foreign tobacco is increased now, there is an
understandable Pear that this will develop into a serious agricultural problem.
What About Reverse Exports to the United St ates?
It is necessary to think about the basic issue of whether leaf tobacco is a
- necessary crop for Japan or not. It is not essential from the standpoint of
food security. Also the price is three times higher than that in the United
States, and production of tobacco is spreading to regions not suited to its
cultivation. Quality is decreasing, and a commercie,l product cannot be created
without blending in foreign tobacco leaves.
Ultimately, would it not be more reasonable to eliminate leaf tobacco from
Japanese agricultural production and uss the same land and labor to produce e,
crop which is necessary for greater self-sufficiency? However, since the
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Japan Monopoly Corporation is in cautrol of cultivation, leaf tobacco falls
outside the jurisdiction of the comprehensive agricultural policies of the
Ministry of Agriculture, Forestry, s,nd FYshery.
~ As a result, it is not possible for agricultural officials to provide the
necessary guidance to reduce the crop of lear tobacco and shift to another
crop. When the Japan Monopoly Corporation plans a reduction, it stops produc-
tion without considering substitution of a different crop. Therefore, compen-
sation of 150,000 yen per are is pQid, a much higher rate than the 60,000 yen
per are paid for rice. This leads to a vicious circle of inaction. Because
the financial burden is so great, large reductions in this crop ce.nnot be
carried out.
Considering this, a major key to ending the Japan-U.S. tobacco wer is to cast
off the territorial consciousness aE the bureaucratic organs and reduce leaf
tobacco production through a comprehensive government policy. If this is done,
there may be soma concern about the impact of the major U.S. tobacco companies
on the 3apanese tobacco market. However, there will be no abe,ndoni.ng of
Japanese production technology for tobacco products. The major U.S. companies'
strategy can be turned to our advantage. Japanese productivity is good enough
to allow Japan to develop as a production base for tobacco.
Communicatioiis Equipment
Why Again?
The Nippon Telegraph and Telephone Public Corporation (Hisashi Shinto, presi-
dent) has sent a"materia]. procurement survey team" to the United Stetes,
giving the impression at home and abroad of a 180 degree turnaround in NTT
policy.
When the issue of opening up material procurement at NTT first arose as a major
political problem between the United States and Japan, the president at the
time, Mr Akikusa, wQS firmly opposed to opening up, saying: "The only things
we wish to buy from foreign countries axe telephone poles." Also, it took 3
_ long years before the actual items to be opened up for bidding had been deter-
- mined and agreement was reached between the United States and Japan. When this
is considered, it would be appropriate to rePer to this import promotion mission as a radical change.
The survey teem left Narita Airport on 15 March and made the rounds of prospec-
tive suppliers for 13 days. The mexnbers of the party were all veteran pur-
chasers, but even before they started most of thern were doubtful about the out-
come. "Is there anything we can bu}r in knerica? There probably are not any
quick remedies."
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In any case, the party energetically visited t:1e ma,jo: U.S. manl,.facturers of
telecommunications equipment, beginning with Rockwell International and then
ITT, ATT International, and GTE, and approached them about supplying NTT.
They also made courtesy visits to the related government agencies including
the Department of State, the Department of Commerce Trade Administration, and
- the FCC (Federal Communice.tions Commission). They did everything possible to
demonstre.te a positive attitude on the part of NTT toward international pur-
chasing.
In the House uf Representatives, an amendment to the Communications Act (inser-
tion of a reciprocity clause) was being considered woith the aim of boycotting
Japanese telecommunications equipment. At a public hearing on this issue, a
critical view was presented at every opportunity to the effect that NTT was
not moving ahead with international purchasing. If the atnendment to the
Communications Act were passed with the reciprocity clause included, the sur-
vival of Japanese telecommunications manufacturers, who export 30 percent of
their products to the United States, would be in danger.
Irritation e,t Huge Trade Surplus with United States
Of course, President Shinto completely denies this sort of political approach.
Iis orten repeats: "NTT collects money from the consumers who use telephones,
and it is natural for us to seek out the best quality products at low cost.
Therefore, we are going as far as America to look for them." He evinces no
concern for U.S.-Japanese relations. In spite of this disavowal of politics
from the president, the survey team visit was carried out as one step toward
normalizing U.S.-Japanese economic relations.
Right now, there is a huge Japanese surplus in the trade balance in telecommun-
ications equipment between Japan and the United States, and the U.S. industry
is getting more and more irritated. In Japan, there is growing concern about
NTT, which is seen as having great resources, and voices calling on the public
corporation to "open the door" are becoming louder. According to data of the
Telecommunications Equipment Industry Association, last year's exports of
Japanese telecommunications equipment a.mounted to 468.2 billion yen, a growth
of 58.2 percent compared to 1980. Of this, 185.143 billion yen, or approxi-
mately 40 percent, went to the United States. Furthermore, last year's growth
in exports to the United States was 78.2 percent compared to the preyious year.
In contrast, although imports from the United States doubled in comparison to
the year before last, they were only 24.113 billion yen, one fifth the amount
of exports. This imbalance is increasing every year.
~ Fujitsu's difficulties in bidding for construction of ATTts optical communica-
tion facilities, made known last year, were certainly related to this problem
of trade imbalance between the United States and Japan.
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Although F~zjitsu presented the low bid to supply optical communication lines
for ATT, the contract was awarded to ATT's affiliate, Western Electric. This
was reported to be the result.of pressure from the U.S. Government and legis-
lature because of a need for secrecy in comr ..lcations. However, in ar inves-
tigation following the incident, it was found that Nippon Electric Company had
previously supplied optical communications facilities to the Department oi
Defense. Therefore, there are not sufficient grounds for the axgument that
F'u,jitsu lost uut just for reasons of maintaining secrecy in communications and
national security. One can see in this an expression of irritation at the
increasing trade imbalance with the U.S. telecommunications industry.
The amendment to the Communications Act has two sides. One is the separation
of regional telephone companies affiliated with ATT in con3unction with the
settlement of litigation betwcen ATT and the Department of Justice, and
- improvement of telephone chaxges and the service system in relation to this.
The second is the introduction of a reciprocity clause. The problem here is
the latter item. This provides that if a foreign compar~y which attempts to
export communications equipment to the United States does not take a position
of reciprocity in trade with the United States, the FCC (Federal Communications
Commission) will not approve the exports of that company at the stage of
- equipment inspection, in effect boycotting those products.
The American telecommunications equipment industry fears expansion of the trade
imbalance, and it singled out Japan as a target and lobbied certain legislators
to bring this concern out in the open. The U.S. legislature is facing off-year
elections,. and the supporters of the amendment are repoxted to be increasing
in number. In addition, the field of coaIInunications equipment includes the
most advanced technology such as optical and satellite communications. America
is concerned about Japan catching up or moving ahead in these areas, and this
growing alarm about Japan has also been a spur to these political moveso
The amendment to the Communications Act will be coming in for serious debate
and there is no predicting the outcome.
No Enthusiasm Seen From American Industry
In actuality, the opening of material purchases to international bidding has
been moving ahead on the basis of the GATT (General Agreement on Tariffs and
Trade) agreement concerning government procurement of January 1981. On the
basis of this agreement, the procedures for procurement determined in a U.S.-
Japanese accord, were categorized as Track I, Track II, Track III, Track II-A,
and Track III-A.
Under Track I. when NTT purchases items which are already available on the open
market, it will make a public announcement in advance concerning the qualifi-
cations for bidding participation, determine the bidders who axe g,ualified, and
invite the que,lified bidders to submit a bid whenever a public announcement of
purchasing plans is made and determine the successful bidder.
15
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Uiider Track II, for purchases of items which are available on the open market
Lut for Which NTT requires modifications, NTT will make a public announcement
an3 announce the proposed requirement. It will then mske a fair and even-
handed review of applications submitted by suppliers, make a comprehensive
eValuation, and select a supplier.
Track III is the procedure for selecting a partner for joint research and
development of items not presently available on the open market. A compre-
hensive evaluation will be made in the same way to select a supplier. Track
_ II- A and Track III-A are procedures for making continuous purchases from
suppliers which have received orders under the procedures of Track II and
Track III. These also include procedures for ordering from new prospective
suppliers if they are found to be superior to existing suppliers.
According to results on intE:rnational purchasing compiled up to February of
this year, bids were awarded on 33 items (136 billion yen, contracts awarded
to 49 companies) in the Track I category. American companies were awarded con-
tracts for only 7 items (800 million yen, 9 companies). Most of these were
U.S.-Japanese joint venture companies such as Sumitomo-3-M, Graham, Memorex,
and Applicon. The names of the major U.S. corporations were not to be found
among them.
In Track II and Track III, there was only one application from a major company,
Motorola. With this complete lack of enthusiasm, the people in cha.rge of pur-
ehasing appear as if they would like to complain: "After all the pressure Lo
open up bidding, what is going on?"
Careful Guidance
- During this process, at the beginning of this year, NTT concluded an agreement
with Motorola, independent of international material procurement procedures,
to buy pocket bells worth 9 million dollars (about 2 billion yen) annuelly.
Also, it forma,lly approved the switching function push-button telephone of
ITT Asia-Pacific, the Japan branch ot' the U.S. firm ITT, and gave permission
for its sale in Japan. In the case of Nlptorola, the agreement was made
after 2 years of guidance by NTT on modifications in the pocket bell. Taking
such things into consideration it seems very likely that these two cases are
the result of "concern over U.S.-Japanese relations."
Except for such hand-holding operations as these, the supply of materials
from American companies to NTT is showing no progress at all. Why? NTT
officia,ls point out that (1) the procedures were not well understood during
the first yeax so there were few applications and (2) it has been found in
the investigations conducted so far that the American companies are not price
competitive in comparison to the Japanese companies. They stoutly maintain
that there is nothing wrong with NTT's purcha,sing policies.
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Pre::ident Shinto has repeatedly made it clear that "we are always ready tu
buy high-quality, low-cost items from America or anywhere else." NTT believes
that American criticism of the "narrow door" of NTT is "putting the blame on
the wrong party." There axe even aome who criticize the American side as
lacking in - 37
s �~~r~.{5a.~tir~s . 41 ~f+tiy.h'a1 i
T917
( �~l~i+> fi+>:4~ ~J~�li~i-r
(11 74 11�3 i F...... 10 7 (3
3
I 2 *#iRAtta2S
1) Af.}Q.}.. g (*X)s2
~r* 6
.~r~.= .~~E1o~cr_wm~39
, �
(13 p* ...............27. 2 2 5�� (-+i1B1Uo) 60))(27) 71 A 9. try~ x~
. ~�~,ft1~.~~ it ~wgxv ~~0)
(lk 1r.~-......... a 4e i D . nr.e~ ~ 2~ * (41)
(15 x->=-?v..... 6 - s 1 ~~ivnr~f~Ri~-A :~~~~+2)
7t+Ji~............. 7 ~�rtiw.-rs1J � (44)(~+3)
(169
Key:
1.
2.
3.
3a.
4.
5.
6.
7.
8.
17.
18.
19.
20.
fiumber of Restricted
country
no. of items
agri cultural it ems
industriel items
Canada
Benelux
Import Items
in Major Countries (as
9. 4lest Germar~}r
10. Italy
11. Ireland
12. Great Britain
13. Japan
14. Norway
15. Sweden
16. Am.erica
of September 1980)
21.
22.
23.
24.
25.
26.
27.
28.
n9.
30.
Denmark
France
List of Import Items Restricted
beef (fresh)
herring, cod (fresh)
cod eggs (salted), salted cod,
herring yellow tail, mackerel
scallops,scallop eyes
milk and cream
condensed milk, sugarless
condensed milk
cheese (not including
natural chee s e )
azuki beans, fava beans, peas
oranges, tangerines (fresh)
oranges, tangerines
(temporarily stored)
wheat flour, rice flour,
barley flour, rye flour
ground or cracked wheat, rice,
baxley, or rye
starch, inulin
in Japan
31. peanuts (except those for oil)
32. sea weed, devil's tongue
33. processed beef or pork products
31+. grape sugar, lactose (without sugar),
sugar water, artificial honey
35. fruit puree, fruit paste
36. processed pineapple, fruit pulp
37. fruit juice, tomato juice
38. tomato ketchup, tomato sauce,season-
ing with monosodium glutamate as the
main ingredient
39. processed food products with added
. auge.r, ice cream mixes
40. coal
41.. horse hides, cattle hides
42. sheep hides �
43. goat hides
44. leather shoes
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(4~' ~ ~
7 F f j
19X11%**
si
~s
ea
es
12
47
se
61
ee
129
129
ios
iu
g;9 1
ies ,i so -
388
455
a-YT9-3
105
121 �
173
~ 1
~ ~1~~8?~i~ 1
-
. : �
' 76
-
1
a-%%A~ry
IW
: ,-.17L.:'

161
^
'.�I'^".
134
-
1
4~
615
-
,
386 .
223 .
(Q
476
462
:
278
145
(2
) ~
737
766
604
271
loAat)(2 ) (*U: �.ran P9)
w( 9 ) 4.10
107
es
ia
79
i0
a
iu
-
133
3Q6
310
654
1to�
-
e7
-
�
,
121
-
.9T
596
' 'S40
45t
360 380.
9!0 !35
c ~,o
3 '
. ~ 22) candr) 6p9
60
. , ~o
; 24) . 30
~ 2 5) E c~~~o� ~ mMJlp- .~~,a~..._ xo
(26) il~~~ ~a~M7li~--~~~~~~~~~~~T~~oN!~ ~ I 10
. 1e1W 7e n n 79 eo
Key :
1. Wholesale Price Comparison for Major Confection Ingredients
(as oP October 1981)
2.
unit;Cjren per kilogram)
11.
hard wheat Plour
3.
America
12.
soft wheat flour
4.
Canada
13.
sugar
5..
Australia
14.
whole eggs
6.
New Zealand
15.
corn starch
7..
Great Britain
16..
wheat flour starch
8.
The Netherlands
17,
corn syrup
9..
Belgium
18.
liquid glucose
10.
Japan �
19.
whole powdered milk
20.
non-fat powdered milk
21.
butter
22. chocolate candy imports
24. total import amount
26. import emount from U5A
23. (CIF)
25. import amount from EC
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= Key :
1.
Changes in Taxable Volume of
Imported Whiskey
2.
Changes in price of Scotch
3.
(Standard Retail Price
per Bottle of Standard Scotch)
4.
(12 bottles per case)
9.
duty lowered 20 percent
5.
10,000 cases
10.
taxable volume
6.
retail price raised
11.
Scotch import liberalization
7.
duty lowered
12.
Bourbon liberalization 1969
8.
Scotch price raised
+`~P( 3) . ' (aFM) ~ 'k-. ~
. . � � ::r,'p.'q?';
s ~-----s �
� , ~ .
~ ~ -
50
1
� , y,3.
. :r~. .
41#L 75. 76 n r 79 00 81~
COPYRIGHT: Daiyamondosha 1982
9651
Cso: 4105/95
Key: 1. Ski Boot Imports
2. money amount (CIF)
3. billion yen
4. no. of pairs
5, (estimate)
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TRADE FRICTION WITH EC
Tokyo KAIGAI SHIJO in Jspanese Apr 82 pp 54-58
[Article by Yoshi.mori Osade, manager of European Section, JETRO (Japan External
Trade Organization)]
[Text] The problem of trade Priction between Japan and the EC drew a great
deal of attention when the Tsuchimitau m,ission visited Europe in October 1976.
Then, 5 yeaxs later, in October 1981, the government-sponsored economic mission
to Europe headed by President Ynayama oY the Keidanren visited the.EC countries
seaxching for a way to solve the problems between the twoo
The roots of friction between Japan and the United States and the countries of
Europe, including the EC, run deep, Recently, with the move towaxd reciprocity
- in the United States, there is talk of not just trade friction but cultural
friction as well. In this article I will concentrate on the aspects of trade
between Japan and the EC. I would like to identify the problems and suggest
some quick there,py to treat the symptoms as well as some long-term remedies.
I would like to m,e.ke it clear in advance that mpr main intention is simply to
analyze the friction problem in these terms. This does not represent the
official view of JETRO.
Special Features of JapQn-EC Trade
Let us consider why the trade imbelance between Japan and Europe became such a
big problem. It is because unlike the complimentary North-South trade where
food and raw materials are imported and industrial products Qre exported, the
European countries and Japan all export industrial products to each other.
Therefore, they are in a competitive relationship and the difference in competi-
tiveness reflects directly on the trade balance. Therefore, there is no other
way to improve this rela,tionship than that specified recently by the GATT
office directoro The European countries must increase their productivity and
catch up with Japan or, more fundamentally, a thoroughgoing horizontal
division of le,bor must be created between Japan and Europe in industrisl
products.
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Y
Non-metallic mineral
products
Ceramic ware
Metal & metal products
Steel and iron
Non-ferrous metals
Metal products
Machinery & equipment
Motors
Office Machines
Metal processing machines
Weaving ma,chines
Sewing machines
Besrings
Heavy electrical equipment
Television receivers
Radio receivers
Electron tubes
Automobiles
Motorcycles
Ships
Scientific & optical
instruments
Watches & clocks
Tape recorders
(Incl, VTR)
Table l. Japenese Product Export to EC by Product
(unit: million dollars, percent)
I
80
81
Amount
Change from
Amount
Change from
previous year
previous
year
~
Total amount
169650
31.3
189894
..~...r
9.9
Food products
,118
24.3
91
A24.0
Fish and shellfish
86
19.7
66
624.3
TPxtile & textile products
422
32.4
399
A 6�7
Synthetic textiles
126
18,7
139
9.7
G`hemicals
703
16.3
654
A 7.7
S nthetic plastic
127
13.2 ~
108
A16.5
Source: Japanese Customs Statistics, MOF Reports
FOR OFFICIAL USE ONLY
175 ~
91 '
1,134 '
487
298
349
129033
162
589
274
58
77
130
75
221
582
433
2,663
643
373
1,552
248
1,200
44.5
60 .7
48.5
11.8
174.3
58.9
29.2
30.5
21.4
58�4
29.7
6.5
43.9
32.4
16.5
2.8
46.9
23.2
43.2
015.4
20.6
39.1
I 71.5
153
73
740
251
205
285
14,956
247
647
261
I 60
68
102
92
200
606
429
2 , 810
712
1,590
1,77$
248
1,919
A13.3
A21.1
02 8.5
054.4
031.7
019.5
19.9
43.6
9.2
A5.4
0.1
e15.o
A 21.7
17.4
010.0
2.7
A 0.8
A 0.2
9.2
189.5
14.1
0 0.1
I 59.0
,
Note: 1980 amount is for 9 EC countries, excluding Greece; the 1981 change
over previous year is calculated for 10 EC countries, including Greece.
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Table 2. Japanese Product Imports from EC
(units: million dollars, percent)
~
..0
fm
gp
81
Amount
Change fram
Amount
Change from
previous year
previous year
Total a.mount
7,842
3.5
8,552
8�6
Food products
842
A 6.8
984
13.9
Meat
123
635.4
301
144.8
Raw mat erials
146
4 8.8
155
4.3
Cher.iical products
19644
7,8
1,604
A 2.4
Pharmaceuticals
442
9.4
453
2.5
Machinery & equipment
2,587
14'.0
20453
A 5�2
Office machines
133
~+.5
91
A31.8
Motors
100
5.6
111
10.4
Metal processing
.
equipment
91
25.7
87
04� 4
Weaving machines
64
024,6
44
A32.0
Aircraft
99
335.8
104
5.5
Ships
230
337.3
480
108,7
Procision equipment
303
3.2
227
Q25.2
Other processing goods
2,545
0.9
3,267
28.0
Textiles
703
A 6.1
640
A 9.0
Non-ferrous metals
199
12,6
264
31.2
Source: Same as Tab le 1.
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- Table 3. Trade Balance Between Japan and Major EC Countries
(units: millions of dollars; items in parentheses are percentages
of change of present period over previous period) -7 79 80 81
US A
exports
imports
balance
EC
exports
import s
balance
Great Britain
exports
imports
balance
France
exports
imports
balance
West Germar~y
exports
imports
balance
Netherlands
exports
imports
balance
Belgium
exports
imports
balance
Italy
exports
imports
balance
Ireland
export s
imports
balance
26,403( 6.0)
200431( 38.1)
5,972(o41.o)
129685( 14.2)
7,581( 24.8)
5,105( 1.4)
3,097( 32.3)
1,681( 21.9)
1,416C,1+7'.1)
1,395( 26.5)
1,078( 43.0)
317(A $.5)
4,266( 16.7)
2,584( 29.4)
1,682( 1.5)
1,671( 4.5)
419( 31.7)
1,252(A 2.2)
12087( 13.0)
381( 20.8)
706( 9.3)
681( 39.2)
993( 51.3)
A312( )
208( 8.3)
ioi( 34.8)
1o7(Q 9.6)
31,367( 18.8)
24,408( 19.5)
6,959( 16.5)
161650( 31,3)
7,842( 3.5)
8,808( 72.5)
3,782( 22.1)
1,954( 16.3)
1,827( 29.1)
2,021( 44.9)
1,296( 20.2)
726(i29.o)
5,756( 34.9)
2,501(A 3.2)
3,256( 93.6)
2,061( 23.3)
38o(e 9.4)
19681( 34.2)
1,419( 30.5)
372(A 2.4)
1,047( 1+8.3)
955( 40.3)
938( 5.5)
17( )
221( 6.1)
78(022.6)
11+3( 33.1)
38,609(23.1)
25,297( 3.6)
13,312(91.3)
Source: Japanese Customs Statistics
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189b94(13.5)
$,552( 9.1)
10,342(17.4
4,789(26.6)
2,694(37.9)
2,095(14.'T)
2,222( 9.9)
19171(09.6)
l,o5i(44.8)
5,968( 3.7)
2,429(A2.9)
3,539( 8.7)
1,902(e7.7)
427(12.4)
19475(A12.3)
1,436( 1.2)
337( 9.4)
1,099( 5.0)
912(04.5)
856(08.7)
56(
245(10.9)
io6(35.9)
1.39(02.8)
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Table 1 shows the amount oY exports from Japan to the EC and the rate of
increase and decrease by product'. Table 2 gives the same inPorme,tion for
imports.
Exports to the EC in 1980., with the exception oP ships, were higher overall
than in the previous year. Tape recorders in particular jumped dramatically .
in comparison to the previous yeax. The largest factors monetarily in increas-
ing exports were automobiles, VTR, snd numerically controlled machine tools.
In 1981 also, machinery and equipment, including these items, showed a 20 per-
cent rise over the previous year. However, as Table 1 shows, there were a
fairly large number of items in 1981 which did worse than the previous year.
Total exports did not increase by even 10 percent compared to the previous
year. Ships went up rapidly, but overe.lJ., export results were rather moderate.
Imports from the EC in 1980, in spite of an increase in chemical products and
machinery and equipment, showed an overall rise of only 3.5 percent over the
previous year. This was due to a reduction in food products and fiber products.
In 1981, imports of food and other processed pzoducts showed a relative
increase, so the totQl import amount rose by 8.E percent over the previous year.
In any case,the increase was smalla
As a result, the total amount of exports to the EC in 1980 was $16..65 billion,
while the import total was $7.842 billion. The Japanese export surplus jumped
to $8.8 billion from the $5.1-billion surplus of 1979. This was a record
figure, but in 1981 the surplus passed the $8,8-billion mark in the first 10
months and reached $10.3 billion for the year (the figures for 1981 include
Greece)o
Table 3 shows the trade balance between Japan and each European countryo The
largest imbalance was $3.5 billion with West Germany in 1981. Next came $2.1
billion with the UK, $1 :5 billion with the Netherlands, $1.1 billion with
Belgium, $1.0 billion with France, and $1.0 billion with Ireland.
The imbalance with Italy did not reach the $1-billion maxk, and in some years
there was even e, surplus of imports to Japan. This was an exceptional case.
At ar~y rate, there was an overall trade surplus of $10.3 billion, the highest
figure in history, with the ECo This figure explains why the EC has been
pressing Japan for the last yeax or two to redress this imbalance. The
imbalance with the United States also grew dramatically in 1981, passing the
$10-billion mark in the first 10 months, to reach $13.3 billion for the year.
European Recession Amplifies Criticism of Japan
The pattern of trade payments between Japan, The United States, and Europe
shows a flow of payments from Europe to the United States and from the United
States to Japan. Japan shows a surplus with regard to both the United States
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and the EC. The United States has a deficit with Japan but a surplus with the
rC. The EC is in the unfortunate position of having a deficit with both Japan
and the United States.
Furthermore, the economic difficulties which began with the second oil crisis
have caused the greatest amount of unemployment in Europe since the Great
Depression of the 1930's. Therefore, the criticism of Japan, which is the only
country with a good economic performance, is growing haxsher.
The causes of Europe's economic difficulties have been identified as a loss of
workQr morale, insufficient plant and equipment investment, and a lag in tech-
nologicai developments in some fields. Also, there is reportedly a lack of
effort to sell to the Japanese market. However, there are two sides to this
argument, and it is necessary to hear them out sufficiently. In this article,
I would like to consider how the friction between Japan and Europe can be
reduced, even a little. I will consider the measures taken so far and the
direction to be taken from now on.
Industrial Revitalization of Trading Paxtners
The method for solving the problem which is being carried out most actively is
industrial cooperation between Japan and Europe. The concept of industrial
cooperation can be very broad. Here, I will consider it in three main
categories--investment exchange, technological collaboration and joint
research and development, and third country maxket cooperation.
- Investment exchange helps create employment opportunities in the host country
through joint ventures and direct investment.
Technological collaboration and joint research and development promote mutua,l
transfer of technology and knowhow and make it possible to reach a higher
technological level at low cost. In third country market cooperation, each
party takes priority over the other in certain areas. For example, in plant
exports, complimentary groupings of the equipment supplied can increase
economic efficiency and help spread out the risk.
These approaches will not lead to an immediate resolution of the trade
imbalance between Japan and Europe. But when we consider how the trade
imbalance is chiefly caused by differences in industrisl competitiveness
between Japan and Europe, these kinds of industrial cooperation axe very
important as we,ys to reduce the differences and improve our relationship as
trading partners. Here are some specific recent examples.
--VTR joint venture between Japan Victor, Thorn EMI of Great Britain, and
Telefunken of West Germany
--VTR joint venture between Ma,tsushita Electric Works and Bosch of
West Germany
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--Joint development of ajet engine (XJB program) between Rolls-Royce of Great
Britain and Ishikawajima Harima and other companies
--Joint development of a cosl-fired boiler between Kawasaki Heavy Industries
and Babcock of West Germany
--Minifax joint venture between Nhtsushita Electrical Transmission Equipment
and the British Government
--Joint developnent of a ship turbochar,qer between Ishikawajima Harima and BBC
of Switzerland
--Technological assistance for industrial robots between Fujitsu Fanac and Six
Hundred of Great Britain
--Technological assistance for lighting and air regulation equipment between
D4a,tsushita Electric Works and BBC of West Germany
--Technological assistance for large computers and semiconductors between
Ftizjit su and I CL of Great BritQin
--Technological assistQnce for a ship turbocharger between Mitsubishi Heavy
- Industries and GEC of Great Britain
--Joint venture for carbon fiber production between Toray and Elf-Acquitaine
of FYance
Mutual Effort Necessaxy by Japan and EC
- Although we can recognize the necessity of such industrial cooperation, the
effects will generally come too late to contribute to a solution of the trade
- imbalance. The situation could be remedied more quickly if the European side
expanded exports and the Japanese restrained exports.
First, let us examine the problems involved in expanding European exports to
Japan or, in other words, expanding imports to Japan.
According to a JETRO survey of inquiries made to JETRO last year, only 9.6
percent concerned exports, while 90.4 percent concerned imports. As in the
past, there was a strong desire to import from Japan and, while interest in
exporting to Japan is increasing year by year, it has not yet reached the
level of 10 percent of total inquirieso .
The five top ranking items of export to Japan are: 1) processed foods,
alcoholic beverages, and tobacco (21.0 percent); 2) furniture, toys, and
sundry goods (18.3 percent); 3) textiles and textile products (11.8 percent);
4) machinery, electrical equipment, and parts for the sa.me (7.8 percent); and
5) art and antiques (5.7 percent). With the exception of item 4), machiriery
and. electrical equipment, the list includes onlyr food products and light
industrial products which do not make a great monetary contribution to improv-
ing the balance of trade. Therefore, it is necessary for the European side to
make a more careful study of the characteristics of the Japanese market in the
fields of capital g0odsand durable and consumer goods. JETRO and other organi-
zations stand ready to help as much as possible. Beginning this year JETRO has
installed an Export to Japan desk in its offices in Europe and is ready to
provide consultation on exporting to Japan.
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111w. h:iiropean nations will have to reconsider the Japanese market, with its 100
million population, as a major market and me.ke the necessary effort in export
ma.rketing to exploit this market, not as a limited Far Eastern market, but as
an important market with great future potential. JETRO has held seminars to
promote exports to Japan and export clinics in the major EC countries in an
effort to introduce the special features of our market and explain the system
of distribution and import procedures. We have provided help from the side-
lines to aid in removing barriers to their exports.
The problems on the Japanese side have been repeatedly pointed out by Europe
and the United States. The demands of the EC countries to open the Japanese
- market and expand imports, made on the occasion oP the Inayama mission's visit
last year, were typical. An extreme example of these demands was the list of
20 itemized demands presented by Great Britain. Another list of demands for
improvement of trade with Japan was submitted in December and it centered on
demands to open the maxket, lower tariffs, e,nd modify import inspection
procedures.
The demand to open the maxket specifies such measures as modernization of the
- distribution system, reform of the import marketing system, promotion of
~ government purchasing of i.mported goods, and expediting of customs ptocedures.
Many of these areas cannot be made subject to government intervention. How-
ever, Japan is attempting to deal with the demands by creating a single contact
organization for handling complaints.
_ Also, the government is taking positive action to lower tarifl's, moving up the
1,653 items agreed upon at the Tokyo round of GATT talks by 2 years, and
lowering tariffs on the third year items at one time.
- Also, with respect to improvement of import inspection procedures, an intial
study was completed at the end of January for food products, pharmaceuticals,
high-pressure gas containers, electrical products, automobiles, and agrichemi-
cals, and a decision was made to accept 67 items out of a total of 99 demands
for improvement of nontariff barriers. Although the United States and Europe
recognize aur effort, they both hold the view that it is still insufficient.
In a,ny case, the purpose of these improvements in the system is to increase
the amount of product exports to Japan, and flzndamentally, to balance the
expansion of Jape,nese exports by promoting imports. The United States and
Europe are becomir.g impatient at the lack of visible results. However, product
exports make up 25 percent of total exports in Japan, compared to a rate of 60
percent in the United States and the EC, and they recognize that we are making
a substantial effort.
As we have seen, even with the continuation of mutual effort, we must be a bit
_ pessimistic about a simple solution to the trade imbalance between Jape,n and
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Europe. The areas in which Japan has strong international competitiveness,
where there is little possibility for i.mports, are roughly the same areas in
whi.ch Europe has strong export products. This competitive relationship between
Japan and the EC, which I mentioned at the beginning of the article, will
alwe,ys remain.
Therefore, the problem of Japanese moderation of i:.ports comes up as a final
proposal. The EC demands mentioned above ca11 fo_c Japan to restrain imports to
the EC of automobiles, color television sets, color television tubes, machine
tools, and light commercial vehicles. The EC asks that the laserlike concen-
tr3tion of these export items be moderated and that time be given to the EC to
rebuild its own forces.
This method is fundamentally in opposition to the GATT principle of free trade,
and it leads to a balanced reduction of trade or protectionism. So it is not
at all desirable. However, when as today, our partners in free trade are faced
with great economic difficulties, helping them can be considered a pragmatic
policy for maintaining the market in the long run. Also, even though it does
not lead to the vitalization of European industry, such restraint can be seen
as having an imtnediate effect as an emergency relief ineasure, and therefore,
is being put into effect.
Reassessment of the Horizonta,l Division of Labor and the Cultivation
of Freferred Industries
The last thing I would like to point out is that there are naturally sAme
fields in which the EC has a position superior to Japan in terms bf industrial
competitivPness. As is often noted, Europe is firmly in the lead in certain
fields, such as chemicals end nucleax power (light water reactors) in West
Germany and aircraft and nuclear power (fast breeder reactors) in France. In
the field of machine tools, for example, J'apan is strong in numerically con-
trolled machine tools, but West Germa,r~y is still highly competitive in tradi-
tional precision machine tools.
In the area of equipment, Japan is generally strong in mass-produced equipment
such as cameras, watches, audio equipment, automobiles, and household electri-
cal products, while Europe is strong in non-mass-produced general equipment
(farm equipment, weaving machines, printing machines, pumps, boilers, etc).
Therefore, it is necessary for the EC to streamline these industries and
regulate industry in the region in order to cultivate them as export industries
with overwhelming competitive strength. However, at present, Europe is in
difficulty because it cannot find the promising areas of industry suitable for
cultivation. No matter what happens, the trade imbalance cannot be radically
improved without exports of heavy industrial goods. The Japan-EC trade imbal-
ance problem cannot be solved if European exports continue to center on food
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and textile products such as British trhiskey, French wine and cognac, and
Italian fashion products. As for Japan, it goes without saying that it must
make even greater efforts to.expand imports while it continues to eliminate
nontariff barriers and open its market.
For the immediate future, it will be interesting to watch the results for
imports of rare metals and grains which were discussed at the end of last year,
the increased stockpiling of oil, and the emergency import of aircraft, as
well as the effect of the import promotion mission that will be sent to France
and Austria this May. Japan will attempt to expand its internal demand, but
the way in which the EC works to gain access to the Japanese market and dis-
cover new possibilities will be an important factor.
COPYRIGHT: JETRO 1982
9651
cso: 4105/95
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INTERVIEWS ON RELATIONS WITIi UNITED STATES
Tokyo SHOKUN in Japanese May 82 pp 46-83
- [Joint article and interviews by Tadae Takubo, foreign policy critic, and
Seiichiro Saito, professor of socioeconomi.cs at Rikkyo University]
[Text] Declining U.S.-Japan Relations; the Japa,nese Rebuttal
This Is What the Politicians Think
The present economic tension between the United States and Japan is not a
problem of particular products. It is becoming a problem that will require a
comprehensive response by Japan. We can say that a response in the political
- dimension is necessary. Can Jape,nese politicians exert the leadership to make
a political response which is above buresucratic limitations?
We interviewed six politicians--Me,sumi Ezaki, Ichiro Nakagawa, Koichi Kato,
Shintaro Tshihara, Yoshiro Hayashi, and to represent the opposition parties,
Eiichi Nagamatsu of the Socialist Party. They had many different approaches
and requests for America, but they were all highly critical of the Foreign
Ministry. .
Only the Soviet Union Is Pleased
The interview began in Masumi Ezaki's office in Sebo Hall in Tokyo. Following
a visit to America at the end of February, Ma.sumi Ezaki is planning to visit
Europe soon and seemed very busy.
Masumi Ezaki was born in 1915 and is 60 years old. He is a member of the House
of Representatives and is the chairman of the LDP Special Study Committee-on
International Economic Measures. He graduated in economics from Nippon
University in 1941. After serving as secretary to the president of Daido Steel
Company, he became a member of the House~of Representatives. He has served as
director general of the Defense Agency, minister of home affairs, and minister
of international trade and industry. In addition, he is an influential member
of the LDP, having served as chairman of the party Executive Council and chair-
man of the Political Coordinating Committee.
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It was reported that when Masumi Ezaki visited the United States as chairman
of the Special Study Committee on International Economic Measures, he was
thoroughly worked over by the Americans.
According.to him, "The opponent was waiting to pounce on me."
[Question] Whe,t would you like to say to America?
[Ezaki] "During the time of the Fukuda government, we were asked by the Carter
administration to take a"locomotive" role in the world economy along with
West Germany. I remember this well because I was serving as chairman of the
party's Political Coordinating Committee and Executive Council. Japan issued
large amounts of government bonds for 3 years to stimulate domestic demand and
assist in creating international harmony. The debt for that still remains in
the form of 450 billion yen in government bonds. Japan is making sacrifices.
The problem is why American goods do not sell on the Japanese market. Is it
because the Japanese market is closed? That may be true to some extent, but
doesn't America have ar~y responsibility for the.problem?
"It is wrong to turn people's frustration toward Japan and say that Japan has
more to lose than the United States if the t rade imbalance is not corrected
immediately. It may be easy to make Japan a scapegoe,t and put more and more
pressure on us. It will lead to a harsh reaction from Japan if they do not
give us credit for the good ,job we have done but go on making statements that
unless 'something dramatic' is done, this problem cannot be solved and pro-
tectionism and reciprocity le,ws will be passed. There may even be a political
upheaval in Japan. If this happens, the only happy party will be the Soviet
Union."
[Interviewer] It seems that Ezaki said what he had to say in the United States
while being hit with a barrQge of criticism of Japan. However, he was probably
more relaxed in an interview with fellow Japanese. His counterargument flowed
smoothly. He did not get upset at our questions but countered them with a
smile. This "man of the hour' was probably une,ble to smile like this when
Secretary of Commerce Baldridge demanded "dramatic" measures.
During the U.S,-Japa.n textile negotiations in 1970, it was reported that
Mr Miyazawa, the minister of international trade and industry at the time,
turned white when he was threatened by Secretary of Commerce Stans during a
meeting at the Watergate Hotel. Miyazawa's recent statements have an anti-
American tone. Perhaps hP still hol@s a grudge. In compaxison, Ezaki seems
more of an old.pro.
[Question] So what is the best way to get out of the present difficulties?
If i:he approval system is abolished, the Tokyo round Qgreement is moved up by
8 years, or beef and oranges are liberalized, won't the Suzuki government fall?
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[Ezaki] "Yes, it will fall. Japan will make efPorts to open its market, but
there is e, limit to whet esch country cQn do by itself."
- "Take the action of moving the Tokyo round tarifP changes up by 2 years. What
other country could have done something like that? I think we should be given
more credit. That agreement was worked out in multilateral negotiations and
it called for a graduel lowering of tariffs,to a reasonable point over a period
of 8 years. I..think we should be given`more credit for moving up the schedule
by 2 years.
"Is Japan really the only country with a lot to lose if things keep going as
they axe? Does not America hsve a lot to loae as well? It is necessary to
discuss this patiently over a long period. To determine the proper course of
action, we must gather the advice oP experts, debate the issues between the
ruling and oppoeition parties, and get the parti.cipation of the Pinancial
sector. The proper responsive measures will naturally emerge from this
process. I have my idess, but if I let them out little by little, taking this
or that position, the opponent will think that our policy is Qlready set.
This is not in the nationel interest. Carefully, but quickly, we must deter-
mine the measures to take."
[Interviewer] Ezaki is not the only person without a clear answer on how to
reply to U.S. demands. Hardly anyrone is able to say whe,t to do.
Japan is suffering because it is caught between the demands of a"domestic
logic" and "international logic." Aowever, there is no trace of bitterness
in Ezaki's face.
[Question] How do you rate the Foreign Ministry on its gathering of infor-
me,tion, public relations efforts, and response after the problem developed?
[Ezaki] "The Foreign Ministry asks that we leave matters of diplomacy to it.
It is still dominated by a tendency to sectionalism and overconfidence. In
the U.S. Senate, there are four rooms for eating. One of these is the
Mansfield Room. It is said that Am:bassador to Japan Mansfield is the only
postwar politician to have hie name affixed to a room. A man of his stature,
now 78 years of age, has come to Japan. In comparison, Japsnese ambe,ssadors
are assigned by turn according to a seniority system. With such a way of
doing things, how can an upstart power like Japan carry out decent diplomacy?
"Reportedly, there are 500 or 600 employees in the U.S. Embassy in Tok,yo. If
auxiliary organizations are included, there must be at least 800. Now that
Japan is such an influentiel country, we should freely select the ambassadors
for major countries, although this would require administrative reform, in
order to have an ambassador similar to Ambassador t+tansfield whom the U.S.
President or his adviser, Mr Meese, could meet with respect."
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[Interviewer] Ezaki's criticism of the Foreign Ministry was very severe.
From Domestic Logic to International Logic
The next person we interviewed, Eiichi Nagamatsu, is the top expert in the
Socielist Party on defense and foreign policy. Unlike the LDP politicians,
who are tied to a variety of domestic special interests, he presented a clear
argument on U.3.-Japan relations.. Nagamatsu was born in 1918. He is a member
of the House of Representatives (Democratic Socislist Pe,rty). After graduating
from the law department of Tokyo University, he joined the Navy (crew of the
battleship Yame,to). Before taking his present post, he served as a member of
th.e Kyoto city council, the Kyoto prefectural assembly, and the House oP
Councilors.
[Question] If the m$rket is opened, it will cause a disturbance in domestic
politics. If not, there will be a crisis in U.S.-Japan relations. Should we
give priority to "domestic logic" or "international logic?".
[Nagamatsu] "Japanese politics are based on an old social structure, but we
should pay attention to the fact that the social structure is changing. The
LDP has not attained 50 percent support in urban areas, including the six
major cities. It is now a 30-percent political party. Here we see a tendency
toward a multiparty system. However, in the nation as a whole, the LDP has 60
percent of the seats in the Diet. This is because it has a aolid base in rural
areas. The Socialist Party is also unable to get many Diet seats from the
cities, but in the rural areas it is the only influential opposition party, so
it has a substantial number oP seats. The middle-of-the-road parties are most
influential outside of the farming villages. We can say that the old system
which gave great importance to the rural villages has created the political
concepts of the present. Does this accurately reflect the will of the people
of Japan? I do not think that everything the Americans claim is true. How-
ever, we must move in the direction of building the political and social
structure necessary for Japan to live in international society. Unless we meke
this decision, the tensions over trade will never be eliminated."
In other words, he is saying that changes axe already occurring in Japan in
line with an "international logic" and that is the direction we should take.
His argument is very cleax. He points out that most of Japan's import
rest'rictions are being carried out in accordance with the needs of damestic
politics and "domestic logic."
If beef and oranges are liberalized in accordance with "international logic"
the Diet members from rural villages will be violently opposed. This is a
strange situation, and by opening the domestic market, the political system
can also be changed. It fohlows that the Democratic Socialist Party will
benefit from this since it.is based in the cities.
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Nagamatsii's statements turned to wholesale criticism of the government and the
LDP. "When foreign countries observe the dramatic advance of the Japanese
economy, it is only natural for them to complain that it is due to a lack of
defense spending. They get angry when they see Japan audaciously living next
to the Soviet Union while only spending 0.9 percent of its GNP on defense.
"The prime minister comes and celebrates an alliance in talks with the president,
and then before the words are out of his mouth, Prime Minister Suzuki turns
around and says that this 'has no military meaning' and fires Foreign Minister
Ito who accompanied him on the trip to America. How can the Americans under-
stand Prime Minister Suzuki? The way to eliminate the tensions between the
United States and Japan is for the politicians to get a clear understanding of
where our country is going and make certain that Japan builds the kind of
economic and social system that can be understood in international society. If
we perform our proper role as a member nation in the free world, there will be
no reason for anyone to complain about a trade imbalance."
[Questinn] It costs money to carry out this responsibility, and the government
purse is empty. It is deep in debt. '
[Nagamatsu] "This will require administrative reform. Because of continued
high growth; Japan was able to keep increasing government revenues by simply
keeping the tax system in place, and under these conditions,'the government
kept on spending. We cannot go nn this way. Last year there were 1,000
instances of agriculture,l subeidies. This year the number has dropped to 600.
However, the amount of money involved exceeds 2 trillion yen. This is foolish.
It is due to pressure from legislators from the rural villages. The national
railways is receiving 700 million yen in subsidies this year and is still 1.4
trillion yen in the red. Isn't this wrong? If we carry out administrative
reform, taxes can be lowered and foreign aid and defense spending can be
increased. Outside pressure may create the opportunity for this.r'
[Question] In conclusion, how do you feel about the Foreign Ministry?
[Nagame,tsu] "I had the experience of going to Washington as a member of a
representative group from the Democratic Socialist Party. We ate lunch in a
restaurant next to the office of the Senate diplomatic committee. The Japanese
~ ambassador was with us and he said that that was the first time he had eaten in
that restaurant. I was emazed at this. Doesn't the Japanese ambassador
associate with American politicians? Because of the separation of powers in
the U.S. Government, there is e, limit to what the Department of State can do.
No matter how much the Japaneae Foreign Ministry deals with the Department of
State, the Department of State has little connection with the Americ.an people.
If it has no dealings with the legislators who represent actual American
society, it cannot be conducting real diplomacy. Also, the Foreign Ministry
has a very Eima11 budget. With things as they are, it is unable to understand
the feelings of the United StQtes."
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Liberalization of Beef Would Destroy Agriculture
[Interviewer] After hearing the clear argument of Nagamatsu, we listened to
the frank opinions of Ichiro Nakagawa, who has climbed to a position of great
influence in the LDP.
Ichiro Nakagawa was born in 1925. He is the director general of the Science
aiid Technoloa Agency. After graduating in agriculture from Kyushu University,
he worked for the Hokkaido goverrnnent office. After serving as a development
officer for that office, he became a member oP the Fiouse of RepresentaAives.
He has served as minister of agriculture, forestry, and fishery. He is one of
a breed of new leaders with independent opinions on domestic government,.
foreign policy, and defense problems.
Perhaps for that reason, this man's statements are full of confidence.
[Ruestion] What do you think about the present tensions in U.S.-Japanese
trade?
[Nakagawa] I think both sides have a point. The United States has not tried
hard enough to sell. The Japanese trading companies have carried out marketing
activities unlike any othsr companies in the world. Also, Japan has exported
good products at low cost. In both cars and television sets, the decisive
element iB that the Japanese products are high in quality. In addition, the
price of American produets has gone up because of high rates of inflation and
interest.
"As for Japan, if Japan spent as much for defense as America, 5 or 6 percent
of the GNP, the econou~y would not have grown this much. We would not be able
to build roads or houses or anything. There would be more unemployment. It
would be terrible. So there is an axgument that we should sympathize with the
Americans in this regard."
[Question] In that case, wouldn't it be all right to liberalize agricultural
products, as America so strongly desires?
[Nakagawa] "America and Japan each have their own views on this question.
America bought cheap Japanese cameras, televisions, and cars and this led to
unemployment. Therefore, they say, why not buy our cheap beef and oranges?
This is one theory. However, if we imported a lot of beef, Japanese agricul-
ture would be destroyed."
- [Ques+,ion] What? Japanese agriculture would be destroyed?
[Nakagawa] That may be an exaggeration, but there are a lot of beef producers
in Kyushu and also in Hokkaido. Beef provides side-product income to help
support dairy farmers. If inexpensive beef were imported, it would have a
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- very great effect on them. Wnen I was minister of agriculture and forestry,
American Secretary of Commerce Strausa said that if the Je.panese farm popula-
tion was reduced, the government should take care of them. I said that Japan
would be in trouble if the faxm population dropped below 10 percent. Good
honest people of strong character come from the faxm villages."
[Question] Did this explanation satisfy the United States?
[Nakagawa] "Strauss did not say he understood, but we decided to negotiate
in good faith in a range that would not hurt Japan's rural areas."
[Question] However, America is calling for "dramatic" measures. It seems to
be a critical situation.
[Nakagawa] "It is troublesome because we do not knoFT if by 'dramatic'
measures they mee,n beef or oranges. Even if we libera"ize beef, it will not
help correct the trade imbalance. We may get a large amount of inexpensive
beef from Australia in both Japan and the United States. The situation may be
serious now, but I believe it was the same 3 yes,rs ago when I was minister of
agriculture and forestry. I had table-pounding talks with then Secretary of
Cotrmierce Strauss which resembled a fight. At one time, I even considered
resigning. Ambassador Me,nsfield finally took the matter to the White House
and we ar rived at a compromise."
Nakagawa takes a very hexd line on liberalizing beef. As he stated, he had
the experience of negotiating with a letter of resignation in his pocket, so
his present thinking does not come from desperation. He takes the position
that "Japan cannot possibly separate itself from America and be independent.
Harmonious relations with the United States axe a prerequisite for everything."
- He continued; "Nobuhiko Ushiba knaws both Japan and the United States well.
He is a type of person similar to Nr Mansfield. It is best to have a person
like him act as umpire, participating in discussions and attempting to find a
solution."
Altheugh he balks at the liberalization of beef, Nakagawa is not just another
farm-interest Diet member.
"The Soviet Union invaded Afghanistan with its sights on the Middle East and
there is trouble in Poland. The United States has no choice but to undertake
a military buildup. This in turn w?11 have a bad effect on the American
economy. The world is in a typhoon condition. At the same time, Japa.n is in
an unhealthy financial condition. However, our overcast sky is in a favorable
state when compared wi+.h circumstances in other countries. At a time like this
many people wonder if we can aPford to have a conflict over whether to give
bombing capacity to the F-4 fighter or not."
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In discussing the internationa,l situation, his specialty of defense issues
ceme up.
[Question] What do you think about the American demand for the strengthening
of our defense capacity?
[Nakagawa] "After the war, America pushed a constitution on Japan which
included the concept of unarmed neutrality. It is awkward for us to be asked
to strengthen our defense capability now. I recently stated something to this
effect to a U.S. Government official. We can suppose that America did not have
a long-term strategy. At the end of World War II, it did not understand the
threat of communism. It was concentrating on preventing tl:e return of milita-
rism in Japan�"
[Interviewer] As is well known, Nakagawa has consistently advocated constitu-
tional reform and the strengthening oP Japan's defense capability. He believes
that the United States has created a situation that makes this difficult to do.
The tlnited States Is an Economic Color~y of Japan
The liberalization.of agricultural products such as beef and oranges has become
a focus of concern. What is the opinion of Koichi Kato, the chairman of the
LDP Agriculture and Forestry Committee and an internationalist?
Koichi Kato was born in 1939 and is 42 years old. He is presently a member of
the House of Representatives and chairman of the LDP Agriculture and Forestry
Committee. AFter graduating from the law department of Tokyo University in
1963,he entered the Foreign Ministry. After serving as a deputy chief of the
China section, he was elected as a member of the House of Representatives.
He served as the deputy chief cabinet secretary in the Ohira cabinet.
Because of his experience in the Foreign Ministry, Koichi Kato is recognized by
everyone as the top international expert in the LDP. He recently visited the
United States as a member of the Ezaki mission.
[Question] What do you think about the growing strain in U.S.-Japan relations?
Koichi Kato gave his reply with a tone of conviction: "This is a problem we
must consider seriously. Although it is partially due to the difficulties of
the American econoiqy and the effect of the upcoming elections, the roots of the
problem go much deeper. The fire has just been lit, but there is a danger
that it could spread through an appeal to the simple emotions of the American
people."
After saying this, he spoke of a speech given by a woman legislator in e; public
hearin6 in the U.S. Congress.
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"This Congresswoman called for an import duty of $150 per vehicle on cars
imported from countries for which the United States bears a defense responsi-
bility. There are grounds in America for making such frank proposals. The
basic problem between Japan and America is not trade. It is the fact that
Japan is not doing enough in defense and economic cooperation."
In short, from the American point of view, Japan is thinking of nothing but
itself and this is unfair.
[Question] How much of the defense burden must Japan bear for America to be
satisfied. It would seem that America would be cautious about militarization
in Japan.
[Kato] "Two percent of the GNP is the upper limit. Nbre than that and it
would be on guard."
[Question] However, iP it goes to 2 percent, won't America be afraid we will
escalate further.
[Kato] "There is certainly some uneasiness, but it believes that the Japanese
coiistitution and maintenance of the U.S.-Japan Mutual Security Treaty will keep
- the brakes on Japanese militarization."
He emphasized that the problem was how to expand Japan's military spending
from the present 0.94 percent rather than a concern with Japanese militariza-
tion.
[Question] Then Japanese military spending will advance further and further.
Domestic criticism will grow.
[Kato] "Yes, criticism will grow. But that is a political decision. Japan
must gradually increase its spending for defense."
[Question] In addition to a gradual increase in militaxy spending, there is
the matter of economic cooperation. Does America recognize the increase in
Japanese foreign economic aid?
- [Kato] "Japanese economic aid must not be limited to the purpose of 'stabili-
zation of the people's livelihood.' It must be carried out with diplomatic and
strategic intent. For example, to the Caribbean countries. If the aid is
_ unrelated to political diplomacy, the IInited States will think that our
economic cooperation is only being used to expand the Japanese market."
Kato emphasized again and again that the root problem of U.S.-Japan relations
is ciefense and economic cooperation. If the sum of defense spending and ODA
(official development aid) reaches 2.0 or 2.5 percent, trade will cease to be
a great problem.
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[Question] However, won't it be necessary to liberalize agricultural products?
On this point, Koichi Kato, who is chairman of the LDP Agriculture and Forestry
Committee, suddenly turned reticent and spoke like an isolationist.
[Kato] "Qver the middle and long term, I would like to eliminate the remain-
ing import restrictions as much as possible."
He repeated the phrase "over the middle and long term."
[Question] In 5 years?
[Kato] "No, over the middle and long term."
[Interviewer] I felt that it would be meaningless to press him any flzrther on
the farm products question, so I turned to the next question.
[Question] Since Japan is now a great economic power, should it not open its
market from the point of view of making a contribution to international
society?
[Kato] "Up to now, Japanese policies have all been in accordance with GATT
and on a level with other advanced countries. We have been saying that there
is no reason for complaint. However, Japan is the country that stands to gain
the most from free trade. Japan must make even greater efforts than the
c'cher countries. I beceme convinced of this on my recent visit to the United
States."
[Question] Specifically, what must be done7
[Kata] "In simple language, the liberalization of tobacco imports. In addi-
tion, making it possible to import drugs which have passed inspection in the
United States."
fQuestion] What about beef and oranges as a symbol of an open ma.rket?
[Katoi "The political sacrifice would be too great. We cannot shake up the
fundamental political support of agriculture."
With this, Kato said he had another important point and continued.
"Recently, there has been a strong feeling in the United States that the United
States has dropped to the status of an economic colony of Japan. America has
become an exporter of primary raw materials and Japan has become an exporter
of high-level industrial products. Automobiles are a symbol of this. There-
fore, AmericQ feels that its pride has been hurt. The Japanese have ignored
this feeling and have even begun sermonizing, offering to teach management
methods to the Americans. We must not become arrogant."
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[question] Whether Japan expands its economic cooperation or becomes a model
of free trade, it will be difficult for it to continue with the foreign policy
of the past. It will be necessary for Japan to make fundamental changes in
its foreign policy, will it not?
[Kato] "Exactly. President Reagan told Mr Ezaki that even a tame horse must
be beaten occasionally or it will not do what you ask. He was hinting that we
should make more use of our bureaucrats. There is a growing awareness in
America that Japanese politicians have trouble controlling the bureaucrats.
Certainly, pblitical leadership is importanto"
[question] But can the politicians exercise leadership?
[Kato] "When it is necessary, the LDP will. If the prime minister and the
three party executives make a decision, it can be carried out even if special
domestic interests are involved."
[Interviewer] In the interview with Koichi Kato, I was somewhat surprised at
- this optimism about U.S.-Japan relations and change in Japanese foreign policy.
He said: "If defense spending and economic cooperation are improved, the trade
tensions will be reduced to a business problem. Business problems can be
worked out,"
[Question] Are you saying that Japan can take the "dramatlc" measures being
asked for by America?
[Kato] "America is saying that it is time for Japan to consider what to do by
itself and take positive action. It does not seem to feel it necessary to
specifyr the content of the 'dramatic' action. Japan must get rid of the idea
that it is a small country and that protectionism is justified."
With this, Koichi Kato concluded as follows. "The United States is bearing
down hard on Japan. There may be some racial discrimination in this. However,
Japan should not cooperate with Etzrope in building a strategy against America.
Compared with the United States, Europe is more protectionist and racially
discriminatory. America is simply trying to protect its own trade. Did it not
take good care of Japan in the past?"
Racial Discrimination?
[Interviewer] Shintaro Ishihara, like }Coichi Kato, is a young man with
experience as a cabinet minister. Shintaro Ishihara has alwys spoken frankly,
and he presented clear views on the present relations between the United States
and Japan.
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^hin+..aro Ishihaxa was born in 1932. He is presently serving as a member of the
House of Representatives. He graduated from Hitotsubashi University and won
the Akutagawa Prize for literature with his novel "Season of the Sun." He
served as a member of the House of Councilors and as director of the Environ-
mental Agency before being elected to his present position. He has always been
active in- making pronouncements on defense and diplamatic issues.
[Question] After hearing the U.S. statements, do you have anything to sey back
to them? '
[Ishihara] "Senator Muskie proposed the Muskie bill to strengthen emission
- regulations, and Japan implemented it immediately. Muskie visited Japan and
was impressed when he rode in the Matsuda automobile which was the first to
apply the Muskie standards. However, America itself did almost nothing in this
regaxd. Now these Japanese measures have become a barrier to trade. When I
asked an American Congressman who came to Japan in connection with the trade
barrier issue, ' Who made this Muskie law ar~yway7' he had nothing to say.
"In an int erview with e, West German reporter, the chairman of Ford Nbtor Co
said: 'I don't mind Volkswagen selling in America, but I can't stand to see
Japanese cars selling that well.' When I told this story to Mr Reagan in a
television discussion, he became angry. He told me another story. 'When I
was in New 14exico, I saw a runner with a placard saying 'buy American:'
Below 'American' wa.s the word 'Japanese' crossed out in red. But when I looked
at the car he was driving, it was a Toyota.'
"The kind of angry emotionalism represented by the Ford chairman exists in the
United States. They taught Japan very carefully and kindly and now they are
shocked that we have not only caught up with but surpassed them."
[Interviewer] The specifi.c examples given by Shintaro Ishihara are very
interesting. How would President Reagan, Senator Danforth, Secretaxy of
Commerce Baldridge, and Senator Muskie react if they heard him.
Tshihara continued: "On the issue of defense as well, the United States would
probably not be in favor of Japan having all the information on even the sea
lanes in the Indian Ocean. It would be different in the case of New Zealand
or Australia. If such information cannot be exchanged with Japan, we must see
it as racial discrimination and prejudice. When we point out that there is
racial discrimination at the root of the U.S.-Japan trade tensions, they wince.
In foreign countries, when racial discrimination is mentioned, the other
party's annoyed expression seems to say: 'Why bring that into the discussion?'
However, unless this is overcome, tension will occur unnecessarily, and prob-
lems that should cool off will not. Racial discrimination is always lurking
in the background of civilization and history."
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[Interviewer] "Raciel discrimination" has become a kind of taboo. There are
many observers even in Japan who say that it cannot exist. Ishihaxa explains
the history of superiority and inferiority complexes, using the examples of
the decadence of Edo culture and the Nbngolian rule of Europe. This is some-
thing that ar~yr Japanese who has lived in America for a long time has had one
or two painful experiences w3.th.
[QuestionJ What do you think about problems on the Japanese side?
[Ishihara] "Isn't the Japanese press.making too big a fuss over U.S.-Japan
economic problems? When you read U.S. newspa.pers, there is a big difference
from the commotion in Japan. When automobiles became a problem, the NBTI
adviser, Mr Ameya, ran about shouting, 'It's terrible: It's terrible:'
There were American politicians who had rational views, but the Japanese did
not approach them. F1urthermore, the Foreign Ministry, the Defense Ministry,
and MITI all held bilateral discussions with the United States without ar~y
communication among themselves. They used the crude method of saying, "You
go to America," to the people who were making the most noise. The business
sector did some lobbying, but it was scolded by the politicians and the
bureaucrats, and it ended up making unnecessary concessions. Japan has little
tradition of government offices.working together and lenc?ing assistance to
each other in order to deal with even me,jor problems in internationel rela-
tions. It is the t ask of the politicians to bring the goverrnnent agencies
together, but the international awareness of the politicians is limited. In
fact, they are used by the bureaucrats.
"The Foreign Ministry is poor at gathering information. The bill proposed by
Senator Helms to revise the Security Treaty was submitted in October of last
year. It was Pinally withdrawn, but the Foreign Ministry hed no knowledge of
movements prior to the submission of the bill and it was unable to take any
action. It would probably be impossible to get an appointment with an impor-
tant person in Washington by going through the embassy."
The criticism kept coming. [Question] What is the solution for the present trade problems?
[Ishihara] "Take farm products, for example. Even if they are libera,lized,
the amounts involved are insignificant. However, when those of us from the
city say this, the politicians'with a rural base get angry."
[Interviewer] Although he is a member of the Nakagawa Paction, his opinion
differs from the head oF the faction, Ichiro Nakagawa, who is opposed to the
liberalization of beef. It seems that there is no definite proposal for a
solution.
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fshihara says the following about Japan's role. "The peace in Southeast Asia
is due to the fact that it is in the Japanese economic sphere. U.S. policies
in Africa and the Middle East are not working. If Southeast Asia falls apart,
it will mean trouble for the United States and the world. The United States
is not the only country with an international viewpoint. When I explain this
to Atnericans, they say, 'I understand,' Japan must take the position of,pro-
tecting Southeast Asia and the sea lanes in the Indian Ocean, even if this only
- takes the form of gathering information with the use of civilian ships. We
must change the regime based on the concepts produced by Shigeru Yoshida.
Japanese politicians axe still part of the Yoshida regime. If social welfare
expenses are held down so that Japa,n does not i.mitate the decline that has
occurred in Europe, it should be possible to raise defense spending to 2 per-
cent of the GNP."
U.S. Congressmen Afraid of Elections
[Interviewer] Yoshiro Hayashi is the director of the LDP Accounting Office.
Like Kato, he is a former bureaucrat and an expert on international affairs.
He made his way to the United States and to the EC countries in a public
relations effort for Japan as a member of the Ezaki mission.
Yoshiro Hayashi was born in 1927 and is 54 years old. After graduating from
the law department of Tokyo University, he entered the Ministry of Inter-
national Trade and Industry. He was elected to the House of Representatives
in 1969. After serving as chairman of the Executive Council and the Fisheries
Committee of the LDP and as parliamentary vice minister of finance, he took
his present post as director of the Accounting Office.
Hayashi said that he was shocked at the unexpectedly bad state of the American
economy. "Observing from Japan, we get the strong impression only of the
decline in the auto industry in America. Autos are in bad shape and so is
steel. The construction industry and the housing industry are both in trouble.
Agriculture is in the worst condition it has been in since 1937. Because of
high interest rates, there are almost no industries which are doing well. The
only ones that are doing a11 right are the industries related to oil and
military demand."
[Question] What image do Americans have of Japan?
[Hayashi] "When you watch television in America, you see a lot of commercials
for Japanese products--electrical products, transistors, videos, cameras, cars.
Even the invader game is mistekenly thought to be Japanese. To the average
person being bombarded by these advertisements for Japanese products every day,
through the television set in his living room, the ima.ge of the Japanese is of
people who are always coming to sell something."
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[Question] Is there an evident attack on Japan, especially from members of
the Iiouse of Represente,tives, in forums such as Congressional hearings?
[Hayashi] "Aa if prearranged, they bring up all the obvious items such as
oranges, beef, Qnd tobaeco. I got the impression that there is an image beirig
built up atnong Americans of 'Japan, Incorporated' where the Japanese e,gree
among themselves, using a language that the Americans cannc,t understand, and
come to sell their products."
Hayashi then turned the discussion from forEign policy concepts to U.S. domes-
tic politics, in other words, to the Congressional elections coming up in the
fall and the relationship of the tensions with Japa,n to votes. In his own
position as a politician, he understands how they think.
"Japan buys 55 percent of its wheat, more than 94 pereent of its soy beans, and
90 percent of its corn from America. Thereforea Japan is one of America's best
customers. When I talk this way, the Americans say that they understand what
I mean. It is the same with beef. American beef is high in quality.
Australia's beef is a more ordinary grade. Therefore, if beef were completely
liberalized in the Japanese market, American beef would be pushed aside and
only Australian.beef would come in in large amounts. If that happened, it
would be a severe blow to the Japanese animal industry, there would be a
decline in the need for feed grain, and imports would decrease. When I explain
this, they say they understand me:'
However, according to Hayashi, when the politicians say they understand, they
still have one eye on elections and mean "yes, but...." When the elections
are over, will the fierce American attack on Japan also end? If so, then
perhaps we can be optimistic'about U.S.-Japan relations.
"There e,re not mar~y Japanese in America. Therefore, there axe no votes to be
gained by siding with the Japanese. When the politicians return to their
electoral districts to campaign for the offyear elections, it is easy to say
that so mar~y people are losing their jobs because of the large amount of
Japanese imports. Therefore, Japan is to blame. I think this feeling exists."
[Question] So there is a pe.ttern of American Congressmen understanding the
Japanese position intellectually but being opposed on an emotional level?
[Hayashi] "I asked the Americans to consider the Japanese problem from the
overall point of view of food and energy security. They say they understand
that but what about beef? The same arguments get repeated over and over."
[Interviewer] Tlie relationship has declined seriously when the other party
understands with his head but his body will not go along. Whether Japan can
overcome this situation or not will depend on the strategy it takes as a nation.
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This Is What the Business Sector Thinks
Following the views oP the politicians, let us investigate the issues of U.S.-
Japan relatfons from the business sector's point of view. The direct cause
of the tension between Japan and the United States is the trade imbalance.
Behind this is the fact of the great expansion of the Japanese economy.
Twenty yeers ago the ratio of the size of the Japanese and U.S. economies was
1 to 10. Now, it is 1 to 2. Thus, there has been a big drop in the relative
position of the American econoiqy. Because of this, the U.S. demand on Japa,n
to open its markets is growing in intensity. How do Japan's top business
- executives feel about this?
Problems in Vertical Diplomacy
Our interviews with major busineas leaders started with Haruo Suzuki. Suzuki's
views were moderate, perhaps because of his long experience in the business
world or because his industry is not directly involved in the tensions.
Haruo Suzuki was born in 1913 and he is 68 years old. He is the chairman of
Showa Denko K. K. and director of the Japan Committee for Economic Development.
After graduating from the law department of Tokyo University in 1936, he
entered Showa Denko. He became president of the company and then chairman.
Recently, he received an honoraxy doctorate in economics from Humboldt Univer-
sity in East Germar~y. A logical thinker, he is known as a top theorist in
financial circles.
Speaking in a soft tone, Suzuki began by pointing out the low level of aware-
ness of U.S.-Japan relations in Japan. "I believe the present situation in
U.S.-Japan relations is serious. There was a meeting in Hawaii this February
between the Japan Committee for Economic Development and the U.S. CED (Council
for Economic Development).. The American side was surprised at the limited
awareness of the Japanese.. What I noticed at this meeting was a sharp general
perception of Japan rather than an}r thing specific."
He said that "perception" is e, conceptual image that dii'fers from both certain
facts and ideals, so it is difficult to understand. With a trace of sarcasm,
he said that it seemed as if there was a common text for the critical U.S. view
of Japan because everyone said the same things.
[Question] However, isn't the reaction of the Japanese press excessive?
[Suzuki] "No, it isn't. U.S.-Japan relations are very bad. There are not
that mar~y people who think the situation is serious. That is true even in the
business world."
[Question] Then, what is the fundamental problem in this serious situation?
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[Suzuki] "Even though the American economy is weak, the Americans do not want
to admit it. So they have begun harping on the faults of others. Then they
bring up such things as farm products, which puts us in a difPicult position."
Haruo Suzuki said that from an objective point of view, the solution to the
problems between the United States and Japan is the passage of the proposed
reciprocity bill. According to his ingic, passage of this bill would absorb
all the frustration directed at Japan. This could be thought of as reverse
psychology.
"However, the businesa sector would say that this is ridiaulous. So, symbolic
measures are necessary. JapQn should make an all-out effort to remove the
remaining restrictions on imports such as tobacco. However, this should be
done effectively, with due consideration to timing and the manner oP public
announcement."
[Question] What about the linkage between these issues and defense?
[Suzuki] "U.S. Government officials are now recognizing Japan's efforts in
defense. A situation ie developipg in which economic matters and defense can
be kept separate. A domestic debate will probably develop on the issue of
'excessive advance,' but as long as the buildup is gradual, the United States
will probably be satisfied."
On this point, he was in agreement with the opinion expressed by Nori Yoshii
(Sony adviser) later in this article while substantially disagreeing with the
views of the politicians seen above. Thia may be the majority view of the
business sector.
[Question] There are some in Japan who reject the U.S. demands for opening the
Jananese market as excessive. [Suzuki] "There is a lot of that kind of feeling in the business world as
weTl. I also think that many of the American clai.ms are illogical and excesr
sive. However, there exe areas where we should take action. There are areas
that we should open up without being told to. In this regard, the American
pressure will help promote rationalization in the Japanese economy."
[Interviewer] After making this statement', he made a strong cle,im that more
freedom from government control in the financial and insurance fields is
essential from the ste,ndpoint oP internationalization. This refera to America's
attempt to have the service industries liberalized.
However, there are many people in the Japanese financial sector who tbink that
the system of goverrnnent controls is what has made Japanese ecoaomic growth
possible.
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This will be made clear by the statements of Toshihiro Tajima (vice president
of the Industrial Bank of Japan) le.ter in this article.
[Su2uki] "Certairil.y it has advantages, but there have been mar~y excesses. It
is difficult for the United States to understand government guidance which is
not based on laws or official documents."
Certainly this Japanese system must be haxd for the Americans to understand.
This obscurity ia commonly referred to as NTB (non-tariff barriers). There are
unique features in the Japanese system of which the Japanese themselves may not
be aware.
[Question] Isn't the United States being discriminatory toward Japan?
- [Suzuki] "The United States thinks that Jape,n is different Prom other coun-
- tries. The reciprocity bill is clearly directed at Jape.n. This is because it
believes that the Japanese concept of free trade is different from the concept
of-free trade in the United States and other countries. In America, there is
a tendency to think that world peace could be maintained if it were not for
the Soviet military three,t and the Japanese economic threat."
_ [Question] Perhaps Japan really'is unique.
[Suzuki] "In consideration of its position as a msjor economic power, repre-
senting 10 percent of the world economy, it has many peculiar features."
[Question] However, it covld be argued that ther.e is no justification for
critizing Japanese patterns of behavior.
He replied in a clipped tone. No. America can be self-sufficient, but Japan
cannot live without world tre,de. Otherwise, it must go into isolation. Ce,n
it exist as an isolated country?"
[Question] So there is no other way but to use skillful diplomacy?
[Suzuki] "Our diplomacy is not necessarily poor. The problem is that it is
conducted without horizontal coordination. There is no comprehensive strategy
for dealing with the United States. When there is a failure to resolve con-
flicts between the various ministries and agencies, everyone goes to the prime
minister. However., the prime minister is not able to exercise that kind of
absolute authority.".
[Question] So it is difficult for Japan to change its passive diplomacy.
[Suzuki] "Passive diplomacy is not necessarily bad. The Japanese are not
insensitive to foreign developments. They are oversensitive. Therefore in
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crisia situations, they have an unexpected espacity for prae9matic action. For
the time being we have no choi.ce but to rely on thie kind oP zigzag approach to
problem-solving." [Question] The United States seems to be developing a fear of Japa,nese
economic power. Can U.S. economic power ever be restored?
[Suzuki] "The present tensions betweea the United Ste,tes and JQpan come from
three sources of frustration--cultu,ral difYerences, a Pear of Japanese indus-
trial power, and the U.S. economic recesaion. However., I think thet the
United States,~-unlike Europe, has underlying vitality. In the fundamental
areas, military power., energy reeources, and food, America he,s tremendous
strength as w.,nation. It is necessary for Japan to be tolerant with America
until it recovers."
After making this statement, Heixuo Suzuki concluded by advocating that the
time has come for Japan to make an-international contribution.
"In the coming summit meeting in June, Japan should take the initiative for
overcoming the world recession. Interest rates ehould be lowered in the United
States. Domestic growth must be expe,nded in Japan. And we must increase our
foreign aid."
Govermnent Involvement Al:so Strong 3.w'!:the United States
[Interviewer] The next businessman to be interviewed was Atsuyoshi Ouchi oP
Nippon Electric Company. Since he has reaponaibility in a high technology
field which is being viewed with increasing alarm in the United Ste,tes, his
statements were rather strong.
AtsUyroshi Ouchi we,s born in 1919 and is 62 years of age.. He is vice president
of Nippon Electric Company. He entered Nippon Electric in 1942 after gradu-
ating Prom the engineering depQrtment of Tokyo University. He reached his
present position after serving as general me.nager of,the Integrated Circuit
Design Division of NEC. He holds a doctorate in engineering and is a major
force in IC development in Japan.
Throughout the interview, Atsuyoshi Ouchi spoke rspidly and aggressively about
U.S.-Japan economic problems. This was probably due to his pride as e,n 3.mpor-
tant figure in advanced technology standing on the front lines oP the
"Japanese challenge."
[Ouchi] "Theoretically, the Americans have no reason to complQin about the
battle over IC's with which I am involved. The U.3.-Japan trade is relatively
balanced in the Pield of IG's, and in September of last year, Japan speeded
up tariff reductions at the request of the United States, so the present
tariPf is 4.2 percent, the same level as in the United States."
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Af'ter this statement, he frowned and said: "However, this year the United
States began to complain about IC's along with othex items." An argument
has arisen in America that import restrictions should be placed on 64K LSI's,
for which Japan is the top producer, for reasons of national security.
It is a fact that 70 or 80 percent of the 64K chips sold in America are
imported from Japan. Japan is suddenly putting pressure on the high technology
industries of which America has been so proud, and it seems possible that, in
its momentum, it could surpass America. This idea took the form of alarm
at Japanese economic power expressed in the Gibbons report.
Ouchi frowned as he went on: "I do not understand the true intention of
America. -.s demands are confused. Is it asking us to get out of advanced
technology or is it asking us to cooperate in joint research?"
[Question] Can you say that Japanese advanced technology has surpassed that
of the United States?
[Ouchi] "No, I do not think so. Japan is superior in the 64K product, bu", we
rely on imports from the United States in mar~y high-performance items. In
other words, there is an.even trade between Jape,n and the United Sta,tes in
n
- high technology, and in this axea, there is coexistence and coprosperity.
[Question] Is the United States becoming more alarmed at the underlying
strength of Japan?
[0uchi] "Yes. The United States instir:ctively feels that it has been able to
maintain its leadership of the free world mainly because of its absolutely
superior world position in advanced technology. There is a fundamental
annoyance at this being threatened by Jauan. However, I cannot go along with
the idea that Japan and Europe must always be subordina�e to the United States
in advanced technology. It would be very sad if the United States came to
look at Japan in the same way that the Soviet lJnion looks at Poland and
Afghanistan."
After this statement, Ouchi turned to parrying U.S. critism of Japan Inc.
"The United States often criticizes the fact that the Japanese Government
prbvides support for research and levelopment of advanced technology, but this
is mistaken. Only 2 or 3 percent of the research and development in Japan's
a electronic and machine industries is paid for by the government. Almost all
of this expense is taken out of corporate prafits. In comparison, business in
the United States is much more dependent on Uncle Sam. Almost 50 percent of
research and development expenses in the U.S. electronics indu;;try is provided
by the U.S. military or NASA orders."
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Because of this, he emphasized that the U.S. view that Japanese competitiveness
has grown so much because of the small Japanese defense burden is not con-
- vincing. In short, the development of advanced technology in the United
States has been supported by defense expenditures.
[Question] In that case, the American ideas of linkage between economics and
defense and the Jape,nese free ride are mistaken?
[Ouchi] "That's right. The United States is carrying out research and
development on advanced technology in the name of military preparedness. The
strength of the Japanese economy is a result of the great effort we have made
since the end of the war, not of a failure to arm."
These strong statements are backed up by the record oY the Japanese high
technology industries, which, unlike fe,rm products and automobiles, have com-
peted fairly with the United States.
"Nippon Electric itself has built a plant in the United States and is working
_ with American employees. In this area, we were much quicker than the auto-
mobile industry to move into the United States a,nd make a contribution to
American employment."
[Question] So what action should Japan take?
[Ouchi] japan should open its maxkets where appropriate and stand up to
America wren necessary. When I observe the United States now,,I feel that it
is taking out its frustration on Japan because of the failure of its economic
policy. The United States has great underlying strength and if it makes the
effort, it can recover. On this point, it is different from the developing
countries. Japan has a large population, few resources, and a small land area.
You can say that Japan should provide aid to the developing countries, but
there is no reason to be concerned about the country like the United States
which is much wealthier than Japan."
[Question] Do you think that the Japanese Government is showing too much
deference to the United States?
[Ouchi] "The Japanese Government comes and tries to convince us not to upset
the United States; That is all right, but we must make our position clear.
Japan should conduct diplomacy in a much more straightforward way. If the
United St ates makes unreasone,ble demands about the defense burden, the Japanese
situation should be explained clearly. In other words, we should tell the
Americans that excessive demands will lend strength to the movement to abolish
the Mutual Security Treaty, that there is a danger of alienating Japan from
the free world."
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Financial Liberalization Would Lead to Chaos
[Interviewer] Along with high technology, America has taxgeted the isolation
of Japan's financial market. On this question, I asked the views of Toshihiro
Tajima, vice president of the Industrial Bank of Japan. The Industrial Bank of
Japan has been a major controlling power in the Japanese financial system since
it was founded in 1902, providing support for the industrialization of Japan.
Toshihiro Tajima was born in 1919 and is 62 years of age. He presently serves
as the vice president of the Industrial Bank of Japan. After graduating
from Tokyo University of Commerce in 1940, he entered the Industrial Bank of
Jap�aa. He reached his present position after serving as manager of the
research department of the bank. At present he is a representative spokesman
of the financial sector, serving as a member of councils associated with the
Ministry of Finance, MITI, and the Ministry of Posts and Telecommunications.
Perheps because he is very much aware that the focus of attention in the
economic tensions between the Hnited States and Japan is shifting toward ser-
vice industries, especially banking, Toshib.iro Tajima spoke with feeling about
the effectiveness and advantages of the Japa.nese financial system. His views
were in sharp contrast with those of Nori Yoshii of Sony.
[Question] What do you think of the condition of U.S.-Japan relations?
LTajima] "American emotionalism is escalating. I don't thi-nk it can be helped
- in view of the huge trade deficit it has with Japan, but there is much mis-
understanding about the closed me,rket of Japan. Attention seems to have
focused on service industries, especially banking,'but this is inappropriate."
[Question] Can you say that the Japanese financial system and financial market
is sufficiently open?
- [Tajima] In Japan, there is no distinction made between foreign and domestic
banks. In'fact, foreign banks even have some special privileges such as being
exempt from the obligation to purchase national bonds. However, the United
States is asking us to stop the administrative guidance of the Ministry of
Finance and to liberalize the system. It is difficult to change the unique
Japanese system."
With this, Tajima began to point out the merits of the Japanese financial
system. Banks have the important function of supplying funds to industry.
If the Japanese financial market collapses, it will have a serioiis effect on
ttie industrial order. If the financial market is completely liberalized like
that of the United States, mar~y new products will be introduced, as we saw
with zero coupon bonds. The results will be higher interest rates in Japan.
If the interest rate rises to 15 percent, what will happen? The economy will
be destroyed. The result would be awful if we imported the U.S. system."
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[Question] However, if Japan advocates free trade and free transactions in
physical products, but does not liberalize the financiel system, will the
Americans accept such a position?
[Tajima] "Just as Anerica allows possession oY guns, there is nothing wrong
_ with Japan having its own unique system as long as it does not discriminate
between foreign banks and domestic banks."
[Question] In America, marW people are sq}ing that the Japanese system itself
is insular and closed and are calling loudly Por reform.
[Tajima] "We would like to ask the mnericans to stop allowing the possession
of guns. The American system isn't perfect. A system cannot be changed
immediately."
Raising his voice, he went on to criticize the American charge of a"Pree ride"
in defense as being excessively. self-centered. The original cause of Japan's
low defense spending was the U.S. occupation policies and the constitution the
Americans forced on the Japanese. The seeds sown by the Americans have grown
into a great tree of Japanese resistance to defense. Therefore, just because
they tell us to increase our military capacity now, the system cannot be
changed so quickly. Then he continued; "I would like to ask which banking
system is better, that of the United States or Japan. Industry should have
= complete freedom for competition. Banks have the function of providing the
life blood of industry, and if they are not regulated to some extent,.the
- optimum distribution of resources cannot be achi.eved from the standpoint of
the entire national economy. This is something in which we have unshQkable
confidence. Without the optimum distribution of resources, high growth is
_ impossible. In a free financisl system, the ground the banks stand on is
weakened and bank operations come to focus on profits. If this happens, the
banks become unable to lend money to industry from a long-range point of view,
and bankruptcies increase."
[Question] This kind of thinking is the concept behind Japan Incorporated,
and this is exactly What the Americans criticize.
[Tajima] "Japanese postwar growth was possible because of the Japan Incor-
porated system. I would like to te11 the Americans to use a more moderate
system. A small government is fine. But a free financial system creates
problems. Interest rates should be controlled. I would li.ke to tell this to
Nx Reagan directly."
[Interviewer] I was somewhat e.westruck by Toshiro Tajima's argument criticiz-
ing financial liberali.zation and the American financial system and praising
the Japanese system of controls. It even had e, fresh sound to me because
there are so few people nowadays who argue against financial liberalization so
_ energetically.
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W' (�o1irsf!, thE: U. S. Depari:ment of the Treasury says that there is no necd tu
greatly revise the unique financial system of Japan. But how long can Japan
continue to ignore American demands for a more open market?
[Question] So is there no need for Japan to accede to American demands?
[Tajima] "As far as the financial system is concerned, there is na need to
introduce the American system because it does not work well. However, we
should liberalize the remaining import restrictions on the 22 fe,rm products
and improve import procedures as much as possible. These measures would
produce only a slight shock in the national econorr~y. There will certainly be
political problems, but we must plead with the people involved and beg for
their cooperation as much as possible."
[Question] However, as a great economic power, shouldn't Japan make a greater
international contribution?
[Ta,jima] "Defense spending should be increased to some extent. And for now
there should be an increase on ODA. As a first step, the sum of defense
spending and ODA should be increased from the present 1.5 percent to 3 percent."
Then Tajima concluded by reiterating; "If we liberalize the financial system
that has supported the Japanese econoiqy, the result would be the kind of chaos
we see in America."
The Friction Has Been Taken Care Of
[Interviewer] Hei Yoshii of Sony cautioned against an extreme reaction on the
part of Japan and presented a unique view of U.S.-Japan economic relatious.
Hei Yoshii was born in 1911 and is 70 years old. He is now a consultant to
Sony. After graduating from the Nagasaki Higher School in 1932, he entered
Diitsui Bank. In 1962, he moved to Sony and served as executive managing
director and senior executive managing director before taking his present post.
He has unique capitalistic economic views and is conversant with international
affairs. Hei Yoshii began expounding his unique views in a strong voice that
didn't seem to belong to a 70-year-old man even before I had finished asking my
question about what he thought of the status of U.S.-Je,pan economic relations.
[Yoshii] "I do not think that U.S.-Japan relations are bad at all. A number
of problems have come up, but they have been taken care of one by one. All the
problems related to physical products were solved with the automobile export
restraints last yeax. The only remaining problem for automobiles is how fast
the industry can move into local production. The only other problems concern-
ing physical things are oranges and tobacco, but these are small problems."
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[question] So are you saying that the only remaining U.S.-Japan economic
problems are minor ones?
[Yoshii] "Yes. The service industries come next. There are plenty of prob-
lems in this area in Japan even if the'Americans did not point them out. The
Ministry of Finance says that it does not discriminate against foreign coun-
tries in banking, securities, and insurance. However, there are many prob.lems.
At any rate, it is not desirable to invite problems just because of insignifi-
cant considerations in either farm products or service industries. Electronics
have competed openly, and sooner or later, the market should be opened in these
other areas."
Perhaps because of confidence gained in overcoming the television problem,
Hei Yoshii believes that the U.S.-Japan economic problems are fundamentally
minor ones. .
[Question] Is it overreacting to say that Japan is in big trouble?
[Yoshii] "Yes. The Japanese overreact to sma11 things and have unnecessary
feelings of victimization. This is because the Japanese are poor and good
people. Even the reciprocity bill is not a big problem. The U.S. Congressmen
are saying all sorts of things for the benefit of their voting constituencies,
but the major U.S. newspapers are ignoring this movement. The reciprocity
movement itself can be thought of as an opportunity for the Japanese to stop
some foolish practices."
[Question] There is a growing view in the United States which links.economic
issues with defense.
[Yoshii] "The increased defense spending in this year's budget was a big
success. The United States knows the,t it forced the peace constitution on us.
They are not really coming out very strongly on this issue, axe they? The next
target of the United States is the service industries, not defense."
Here he pointed out that many of the problems connected with tlie service
industries were minor but that there were others which could not be ignored.
Then he continued: "For example, if an American company wants to issue bonds
in Japan, it takes a year and a half after making the application to complete
inspections, underwriting, and other procedures. In the United States, it only
takFS 20 days. The United States will focus on such problems as this from now
on. At any rate, the Japanese financial market is not normal."
[Question] However, even though we are asked to liberalize the financial
market, there are some who feel that there is no justification for the
Americans to make such a demand on the unique Japanese system.
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[Yo.,hii] "Unless we liberalize the financial system, the Japanese ecoromy
cannot grow stronger. A system without competition will inevitably work badly.
U.S. color television was beaten out by Japan for this reason."
He emphasized that the bureaucracy has its fingers in every part of the
Japanese econamy, not just the financial system, and that this is beginning
to draw the vite,lity out of the Japanese economy itself as well as preventing
the penetration of foreign industry. He then concluded his statement.
"The thing that worries me the most right now is that the Japanese econoiqy is
not as strong as the Japanese people believe. By 1985 there will be a
reversal in the positions of the U.S. and Japanese economies. Observing the
recent developments and government policies in the United States, I believe
that a recovery of the Ataerican economy is very likely. The real problem is
that the Japanese economy is in danger of declining. Compared to this, the
present tensions between Japan and the United States are a sma,ll problem."
"S,ympathy" for America
These four businessmen gave their unreserved opinions on the economic tensions
between Japan and the United States. Next, in order to find out how a ls,bor
leader viewed these problems, we interviewed Ichiro Shiomichi, tY:e head of
the automobile workers union.
Ichiro Shiomichi was born in 1927 and is 54 years old. He is president of
the National Federation of Auto.Workers Unions and vice president of the
Japanese Confederation of Labor. After graduating from the law department of
Meiji University in 1953, he entered the Nissan Motor Compar~y. Recently he
studied at the Harvard Business School. After serving as president of the
Nissan Motor Company Labor Union, he came to hold his present position. He is
the most influential figure in e,uto industry labor unions and the top expert
on foreign affairs among labor leaders.
Ichiro Shiomichi spoke eloquently on the positive role to be taken by labor
is easing the economic tensions between the United States and Japan, especially
with respect to the auto issue.
[Question] U.S.-Japan relations have gotten quite bad.
(Shiomichi] "Rather than saying that relations are bad, I would say that they
have gotten close enough to make quarrelling possible. However, it is unfor-
tunate thQt the Japanese side has not clearly grasped what the real nature of
the trade problem is. Trade is a purely economic problem, but the friction is
a political problem. Therefore a solution cannot be produced with economic
theories alone. We have to get away from theories and take a political
approach. However, the Japanese Government and industry are, as usual, relying
only on economic theories and failing to deal with the problem politically."
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[Question] There is Q cormon view in Japan that the United States is wrong
to make an issue of the bilateral trade deficit with Japan rather than its
overall trade deficit.
Japanese Government officials and many econmists stoutly criticize the
Anerican claims as one-sided.
[Shiomichi] "With respect to an overall view, there is no agreement emong all
countries of the world. There are certain countries with a relationship
that must be considered bilaterally. The United States is not thinking of
limiting the problem to our two countries. However, it is saying that con-
sideration of the problems between the United States and Japan is necessary."
After making this statement in orle breath, he paused and went on.
"It is not a problem of money. The problem is whether there is "sympathy' in
Japan for America's difficulties. The biggest problem in Japan is thu
occurrence of large-scale unemployment. Japan is forgetting that the basic
economic problem between the Uni,ted States and Japan is the issue of employ-
ment."
[Question] Last yeax Japan determined restraints on auto exports to the
United States. Will this have ar~y effect in solving the unemployment problem
in the U.S. auto industry?
[Shiomichi] "There is no reason to expect an increase in employment because
of the reduction of 140,000 vehicles last May. This measure had great signif-
icance in showing Japanese sensitivity, or in other words, sympathy and
sincere concern, toward the United States. This is a matter of politics,
not economic theory."
After this statement, he emphasized that Fraser, head of the UAW (United
Auto Workers), had shown understanding of the Japanese position on this
point,
[Question] There is criticism the,t the Japanese auto industry has been slow
- in building plants in the United States.
[Shiomichi] "It could have been done better. Instead of resisting from the
start, it should have promised the United States at an early point to make
studies and investigations to see if local production would be f2asible. Just
because a study was made, it would not have been necessary to go ahead and
build a plant. The problem is that -the Japanese side was not sincerely
concerned."
[Question] In any case, we can say that tension over automobiles has been
eliminated for the present, can't we?
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[Shiomichi] "No, it still exists. Last year, 1.8 million Japanese cars were
imported in the United States, while only 7,700 American cars were imported in
Japan. This is an abnormal gap. F.ir+�hermore, U.S. auto production capacity
is 10 million cars per year, but only 6.2 million cars were produced last year
and unemployment is becoming a serious problem."
[Question] How should Japan deal with the United States?
[Shiamichi] "Such efforts as the Joint production being carried out by
Toyota and GM will help alleviate Priction. UAW President Fraser and other
offic:ials told me the following. They want Japan to build local plants to
help solve the employment problem. But they also hope that this will stimu-
late U.S. auto companies such as GM and Ford."
Following this, Shiamichi raised his voice as he began to criticize the
methods of the Japanese industry.
"The Japanese auto companies are attempting to prevent the organization of
unions at local plants. The Japanese companies are building their plants in
the sun belt where there are many non-union workers. What will happen if
Japanese companies carry out production with low-cost labor and poor working
conditions? American industry in the northeast employs union labor. There-
fore, the new Japanese plants in the United States will further exacerbate
the "North-South problem" in the United States. The United States is hoping
that Japanese companies will bring Japanese style labor relations to the
United States. The UAW has said that it will cooperate with these Japanese
style labor relations."
The approach of Japanese industry is to pursue immediate profits. It is lack-
ing in "understanding" of the United States.
[Question] What should be done from now on to improve U.S.-Japan relations?
[Shiomichi] "In U.S.-Japan auto negotiations, MITI, the Foreign Ministry,
and industry all take separate approaches. This sort of approach is odd for
a large country. With respect to automobiles, there is a relationship of
trust between the labor unions of the United States and Japan. In future
U.S.-Japan negotiations, the government and the unions should work together."
Because of his confidence in the strong trusting relationship between the auto
workers unions of the United States and Japan and his personal trusting
relationship with President FYaser, he concluded as follows.
"The relationship between one country and another is built up
relationships of individual people. If personal relationships
between people in the United States and Japan from the various
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government, business, education, and labor, I am sure that a close relation-
ship of trust will develop between the two countries. When this happens, the
tensions will disappear. However, at present, outside oP the labor unions, we
cannot say that there is trust between the United States and Japan."
Special System in Japan
A
[Interviewer]
Jiro Toku}rama.
the structural
of view.
Our last interview related to the business world was with
He is not purely a businessman or financier, so he analyzed
characteristics of U.S.-JQpan relations from an objective point
Jiro Takuyama was born in 1919 and is 62 years old. At present he is director
of the Nomura Management School. Af'ter graduating from the economics depart-
ment of Tokyo University, he worked for the Defense Agency, JETRO, and served
as vice president of the Nomure. Research Institute before taking his present
post. He is a proPound scholar of American politics and government and a
commentator with unique views.
Jiro Tokuyama began the interview with his theory of the uniqueness of
Japanese society. It was an extremely interesting theory.
[Tokuyama] "Many people do not like the argument that Japan is a country with
a unique structure, but I believe that, compared to the United States, Japan
has a very unique system. For example, the United States has 27 times the
land area of Japan but only twice the population. IP this ratio were applied
to Japan, only 8 million people would live there. However, there are 120
million people living in Japan. Under these conditions, the Japanese system
is 'warped' from the start."
He began with this statement and then said: "Because of this excessive situa-
_ tion, the Japanese have few opportunities and have a hard life. Many of the
mechanisms of Japanese society have resulted Prom this. Many of the things
that seem illogical from the viewpoint of the United States are logical under
the given conditions in Japan. Our resplendent method of decisionma.king is a
good example. Because of the lack of opportunity, group harmor~y provides a
guarantee of security. This leads to strong group loyalty. However, this also
resizlts in exclusion of other groups. The Japanese axchipelago is built up to
a total system of such groups and organizations.
"It is difficult for the Japanese themselves to be accepted in these groups.
In this sense, it is not only foreigners who are excluded."
He stated further that because the system is insular, it does no good to
advise the leaders to become internationalists. In the foreign branches of
Japanese companies, there is a system oP "noncoffinissioned officer" compensa-
tion for employees hired locally. The representatives of the company living
abroad work with their eyes on Tokyo. Their children discard their extra-
ordinary foreign experience and return to Japanese high schools and universi-
ties in order to adapt to the group system in Japan.
[Question] Then, is it necessary to revamp this entire system in order to
eliminate the tension between Japan and the United Ste,tes?
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[Toku}rama] "Theoretically, that may be true. Such a social system cannot be
simply changed overnight. For example, there are other problems than over-
population. Japan is being criticized for not bu}ring the products of foreign
countries, but until recentl,y there were no industrial countries around Japan
with which it could have a buying and selling relationship with a horizontal
division of labor like that in Europe. TherePore, Japan came to make all its
own products."
[Question] Wby doesn't the Japanese Goverriment explain these things to the
United States?
[Tokuyama] f'There are msr~}t Japanese who themselves do not understand the struc-
ture oP Japanese society. Also, the Jspanese elite, in government or in the
private sector, seldom move outside of the groups to which they themselves
belong. Since they do not have the experience of being cut ofY from the group,
these people on the "inside" in Japan may not be able to understand the
frustration of the United States at being on the "outside." Also because this
is not a contest where the losers have a che,nce to nake a comeback, the govern-
ment does not dare make ar~y bold statements."
Perhaps Tokuyama has a good understanding of the "logic of exclusion" because
of his own experience in changing jobs several times, from the Defense Agency
to JETRO to the Nmura Research Institute.
[Question] IP we do not provide an explanation to the United States or if it
does not understand our explanation, is there ar~y course left except defiance?
[Tokuya.ma] "Certainly, America is making some rather one-sided claims. How-
ever, if no common ground is found foi- the claims of the two sides, the
ree,lity is that the argument of the strongest side will prevail in the arena
of international politics. If we assume a defiant attitude, it will probably
lead to a repeat of the Pacific war or to a positio n oP isolation. But be that
as it may, because of modern progress in jet aircraft, communications, and
computer networks, the economic world is rapidly becoming more and more inter-
dependent. Japan can no longer go back to being an economically isolated
country."
After saying this, he emphatically stated that the most effective approach is
for Japanese companies to go overseas. PZrthermore, he said that in consider-
ation of the present pace of liberalization, it would be necessary for domestic
business methoda in Japan to become just the same as the business methods of
foreign countries.
[Question] How should Japan deal with economie tensions for the time being?
[Tokuyama] "In any case, we should open the market to symbolic items like
tobacco, oranges, and beef and service industries such as finance, insurance,
and data communications. Tobacco and oranges are irrelevant to Japan's food
security. Thoae who are hurt by this measvxe should be helped domeaticelly."
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[Question] Japanese diplomacy has a tendency to take the form of passive
reaction. This gives rise to an uneasy feeling about Japan's future.
[Tokuyama] Considering the previous position of Japan in the world, there
was a time when it was better not to have a diplomatic philosophy. Iiowever,
now that Japan is the second greatest economic power in the world, that will
not doo It should take an appropriate role in international society. IP
Prime Minister Suzuki is a novice at diplomacy, the foreign minister should
assign an expert in this area. The post of foreign trade minister should not
have been abolished.
".7apanese politicians cultivate their domestic voting districts with great
vigor, but they have completely failed to cultivste the electoral districts in
the arena of international politics as the world has grown smaller. If trade
friction between the United States and Japan occurs again, we will have no
bargaining power."
This Is What the Bureaucrats Think
[Interviewer] The real power to determine the will of Japan and formulate
government policies belongs to the bureaucrats. They have great intelligence
and access to huge amounts of information, and it is undeniable that their
thoughts and actions have a great effect in determining the direction that
Japan takes.
We obtained the frank views of three bureaucrats on U.S.-Japan relations.
They were Jo Hashimoto, a bureaucrat serving in the Foreign Ministry, Takashi
Hosomi, e,former MOF bureaucrat presently working Por the Overseas Economic
Cooperation Ftiznd, and Saburo Oki, a former Economic Planning Agency bureaucrat
who has served as foreign minister.
We Don't Feel Like a Great Economic Power
Jo Hashimoto was born in 1926 e,nd is 56 years old. At present he is chief of
the Public Information and Cultural Affairs Bureau. He entered the Ministry
of Foreign Affairs after graduating from the law department of Tokyo University
in 1953. He served as manager of the China section of the Asian Affairs
Bureau before taking his present post. Hashimoto has been on the front lines
in the trade conflicts with the United States. As a Foreign Ministry spokes-
man, he has had contact with the United States and has served in a coordinating
ro]_e among the various ministries and agencies in Japan. Speaking with a
uni.que accent, he advocated Japan's position and fiercely attacked the domestic
criticism of the Foreign Nli nistry.
[Question] What do you think has caused the U.S.-Japan trade friction?
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[Hashimoto] "The basis of problems between Japan and other countries is a
perception gap. Japan may be called the second largest economic power in the
world or an economic giant, but I tqyself and the msjority of the Japanese do
not have a sense that this is a reality. Other countries tell us to carry out
the responsibilities of a great power, but the Japanese do not feel as if they
are a great power, so this doesn't ring true. Since even th e United States is
telling Japan to take more responsibility, we must suppose that there is an
even stronger demand from countries which are economically weaker than Japan
such as the EC, Southeast Asia, and the Middle East. This is the basic nature
of the problem."
[Question] More specifically, what is this perception gap?
[Hashimoto] For example, in terms of statistics Great Britain has very bad
unemployment and inflation. However, if you drive along the Thames River,
you will see many beautiflil houses with large lawns and more people than you
can count enjoying themselves with their families on sailboats in the river on
Sundays. No matter how far you go up the Sumida River in Japan, there are only
small matchbox-like houses. And on Sundays, would you ever see families in
sailboats? There axe exellent restaurants along the upper Thames, but the
most you will find along the upper Sumid a River are noodle shops. I have no
sense of Japan being a great economic power. We were beaten in wax and have
- crawled up out of an environment of levelled cities where we were hardly able
to eat."
This is one Japanese viewpoint. When Japan is subjected to one-sided criti-
cism, it is not unusual for some Japanese to become defiant and say along with
FIashimoto: "That's ridiculous: We had to drag ourselves up from burned out
cities." The director of Public Information and Cultural Affairs at the
Foreign Ministry may be making this kind of statement because his position puts
him at the center of the tension. He continued to energetically defend the
Japanese position.
"Japan has opened its markets more than America says. The United States says
that it cannot do business in Japan. That's ridiculous: Last year the
American who is president of the Japan N1SD Company came to see me. He said
that he had had great success in Japan. The company has developed medicines
for use by doctors and hospitals, and not only medicines for human beings but
also for cattle, horses, dogs, and cats. It has built new factories in a
number of locations and is expanding. According to the president, the greatest
reason for success is that no trouble has been created between the partners.
They always speak openly to each other, and he and the officers of the joint
venture live the same life as the Japanese. He says that for the year-end
party, they go to a hot springs resort in the country and all get in the bath
together. And they do dances wearing Jaranese-style headbands. He cannot
speak Japanese but he understands the Japanese mentality perfectly, so he was
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able to open up his market. he is bringing students from America to have them
learn Japanese. He says that most Americans do not understand Japanese at
all. He emphatically stated that 'the Japanese are not shutting foreigners
out of their market.' I would like to have the Americans read a pamphlet
entitled 'A Success Story in Japan.'"
[Question] Eben if the Japanese viewpoint is understandable, it will not do
to reject all the claims of the other side in actual negotiations between the
United States and Japan, will it?
[Hashimoto] "There are always economic tensions between the United States and
Ctinada and between the United States and the EC. However, they are fighting
in the same ring and under the same rules so they always reach a solution.
However, the things the,t the United States is asking of JQpan show a difference
in the rules between the United States and the EC and those between the United
- States and Japan, don't they2 Also, Japanese customs are 2,000 or 3,000
years old. There are certain minimum conditions that make it impc,ssible to
change the rules immediately on demand. We must make the other party aware of
this. In other areas, it is necessary to move as close to the common rules
of the free world as possible."
[Auestion] Which requests is it impossible to accept?
[Hashimoto] One example is rice. Tr;e Americans want to sell rice from
California. But can we reduce the Japanese rice faxmers to nothing? This we.
cannot accept. If a war started and the sea lanes were closed off, what
country would guarantee a supply of rice to Japan? It is clear that this is
impossible. Because this is a consensus society, it is difficult to reach a
dec9.sion on what should and shouldn't be liberalized."
[Question] It is reported that the prospects of the Danforth bill will become
clear fairly soon. What measures do you think should be taken to solve the
_ problem for the time being?
[Hashimoto] "Fortunately, there is a definite feeling now that both the
related ministries and the LDP must take some sort of action. Postwar Japan
has handled these kinds of cris2s very well. Since Japan is being criticized
not for being a poor student of economics, but rather f:or being too good a
student, the solution is comparatively simple. The proposed solution is being
formulated right now, so I cannot divulge it in detail."
[Question] The Foreign Ministry is slow at catching information and slow in
taking action when a problem develops. Some very strong criticisms are being
made. There is a view that, irrespective of U.S.-Japan trade friction, the
Foreign Ministry is creating friction inside Japan between itself and other
sectors.
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Hashimoto responded to this immediately, perhaps because of his position at the
center of this strong criticism. "Politicians, businessmen, and scholars all
criticize the Foreign Ministry. But I am not surprised at this. That is
because the Japanese heve a common habit of self-abuse. This has been true
since the Meiji period,, whenever there is strong pressure from the outside.
They find a scapegoat, saying that he is to blame. Furthermore, there is no
feeling af affinity among the people regarding Foreign Ministry officia.ls. In
the past, most people never ca.me near the Foreign 14inistry except when applying
for a passport. Now the prefectures and municipal areas handle passport
procedures, so there is even greater distance. The Foreign 14inistry 3iffers
from the Ministry of Agriculture, the Ministry of Finance, the Ministry of
Health and Welfare, MITI, s.nd the Ministry of Construction which have a close
connection with the people. The peopl.e probably feel that diplomats marry
girls from rich families, receive guests from foreign countries,:and cavort at
parties in white tie and tails. Also, the strength of bureaucrats comes from
their authority to grant approvals, but the Foreign Ministry has none of that.
Therefore, no matter how badly a person speaks of the Foreign Ministry, there
will be no retaliation, so it is easy to criticize.
_ "The most important property of the Foreign Ministry is the diplomatic
. personnel themsel-ires. It is useless to ask the diplomats to do a better job
than politicians, businessmen, or the press. They are average Japanese. It
is wr-ong to simply tell the Foreign Ministry to shape up while refusing to let
oneself be the target of criticism. The people in the Foreign Ministry are
;�ather timid, nice people in comparison with media people, politicians, or
other bureaucrats. If the entire Japanese nation says that the Foreign
Ministry is no good, they fall into a state of depression. Therefore, they
should be treated with more finesse. If the politicians and the media would
_ cajole them a little, they would work themselves to death."
jQuestiion] Ambe,ssador Mansfield is an influential man who served as the
Senate majority leader for the Democratic Party in the United States. He makes
contact witr all sectors of Japanese society, including politicians, business-
men, and the mass media. Can you say that the Japanese ambassador to the
United States is doing the same kin3 of thing?
[Iiashimoto] "In ,just the last 2 or 3 months, Ambassador Ogawara and other
Japanese Embassy officials have met with over 80 American legislators from both
houses of Congress. The ambassador is continually having lunch and dinner with
influential A::ierican politicians. He even meets often with Senator Danforth,
who proposed the reciprocity bill. The Foreign Ministry is not good at communi-
cation and just has not advertised this in Japan. Just the same, we cannot say
that things are fine just as they are. We will give due consideration to our
shortcomings. Information is the life blood of the Foreign Ministry. The
ministry has always been aware of this. Another thing we must do is to carry
out the function of coordination between the ot'-^� ministries. However, the
execution of specific measures must be left up t,) zhe ministry involved."
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[Qaestion] If it is that type of government organ, it cannot be expected to
function well without the support of the Diet members and public opinion.
However tiie Foreign 14inistry seems to have a tendency to keep them at a
distance.
J [Hashimoto] "I am sorry for tha,t. We must get the Japanese people on our
- side. Public relations will not suffice for three thousand and several
hundred employees of i;he Foreign Ministry to obtain the support of a hundred
million people. Therefore, we must at least be supported by the Diet, the
mass media, e,nd the prime minister. The- prime minister's office is the only
organ which can make decisions from a high vantage point without being,swayed
by the positions of the various ministries. The mass medie, is stronger than
the old Imperial Army and Navy put together. Therefore, the Foreign r4inistry
must produce good policies and obtain everyone's support."
In conclusion, he said the following. "What I would like to say to the
leaders of every sector is not to make a big commotion and a7*erreact just
because of some demands from a floreign country. It is natural for the wind
to buffet the front runner. We should not sigh and brood about this, any more
- than we should take the small country attitude of slandering our fellow
countrymen. We must leaxn to take a tougher attitude."
The Japanese Are Too Nonchalant
[Interviewer] Jo Hashimoto is a uniquely patriotic buresucrat from the
Foreign Ministry. Takashi Hosomi is known as Q flexible but tough inter-
nationalist even though he served in the Finance Ministry where many of the
bureaucrats have domestic leanings. His statement was in sharp contrast to
that of Hashimoto.
Takashi Hosomi was born in 1920 and is 61 years old. At present he is the
president of the Overseas Cooperation Development Fund. He entered the
Ministry of Finance after graduating from the economics department of Tokyo
University in 1942. Af-ter serving as director of the Tax Bureau and as a
finance officer, he was transferred to the Industrial Bank of Japan as an
adviser and then moved to his present post. He is an authoritative commenta-
tox on international finance and economics. Takashi Hosomi spoke in a light
tone but he emphasized that the present U.S.-Japan relations are in a serious
state.
[Hosomi] "U.S.-Japa.n relations axe now in a more serious state than before.
What is worse is that the American perception of the Japanese has become
cynical. They are calling us commercialistic. I sensed this strongly when I
went to the United States in February."
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After this, he added that the Japanese have gotten carried away and over-
emphasized the charge that the Americans are not trying hard enough. Now that
America is imposing demands to open the market, insularity that the Japanese
themselves were not aware of has come out in the open. With a look oP great
irritation, Takashi Hosomi criticized the non-international character oP the
Japanese.
"On the issue of farm products, the Japanese are always being pressed hard by
the Americans and they always respond with tiny improvements. In other words,
- from the American point of view, the Japanese market is very hard to under-
stand. The Jape,nese should have let the Americans know in advance how fax
they were willing to open the market and how far they were going to put a
handicap on it."
[Question] But isn't the recent Japanese reaction excessive?
[Hosomi] "No, too nonchalant. We were taking the problem too lightly. With
the Ezaki mission, we finally understood how serious it was.
[Question] I get the feeling that America is saying whatever it wants.
But he denied this. "No, Japan has done nothing to make America feel obligated.
Up to now, we have just hung on the United States,"
[Question] Why is there no progress in opening the Japanese market?
[Hosomi] "It is connected with streamlining the administration.. 'I'here is a
huge number of government officials who participate in regulating the market in
direct and indirect ways. If the employment security of these officials is
considered, it is not possible to open the market easily."
After saying this, he stated emphatically that it will be impossible to change
the American perception of Japan unless a bold plan for carrying out liberel-
ization measures is presented.
"In addition to opening the market, another thing we should do in our role as
a great economic power is to increase our share of the defense burden. If the
responsibilities and burdens of a great economic power are undesirable, we will
have to lower our standards of living and live within narrower limits. Is that
possible?"
After this statement, Hosomi pointed out that there was no tradition in the
long history of Japanese political parties for political groups to think
about national security or diplomatic strategy. Before the wax these kinds
of problems were handled by the military and the diplomats. After the war, the
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bureaucrats took power away from the politicians, and as a result, they lost
the role of passing legislation on national security and diplomatic issues
from an international point oP view. Because oP the traditions of pa,rty
politics, it is easy not to think in terms of intErnational issues.
[Question] Ia it possible for Japan to carry out diplomacy as a major power?
[Hosomi] "In any case, it must be done. For this purpcse, it may be necessary
for memb3rs of political parties to take some blows from the United Stetes as
part of their patriotic mission. In this way, an international viewpoint may
begin to grow in Japanese politics. The Ezaki mission succeeded as the first
step in such a process."
In other words, Japan must cultivate new politicians to cope with the "inter-
national environment." According to Iiosomi, a system must be constructed in
- which international interests and sepa.rate loce,l interests compete with each
other within the political parties.
[Question] So you are saying that the passive diplaanacy of the past will no
longer work?
[Hosomi] "It is impossible. At any rate, the United States is poor now and
cannot do anything for us except provide a nucleax umbrelle,. Japan must make
an effort in defense. But we mutt consider the dangers of an aggressive
foreign policy losing its balance. There are ma.ny Yosuke Matsuoka's in Japan
who could stir up anti-Americe,nism."
Hosomi concluded with the Pollowing observation,.which he prefaced by ssying
that he wQS promoting his own personal interests.
"Japan could amaze the world if it doubled its ODA. The United StQtes might
not give us the credit due, but it would be good for the world."
Global Contribution by Japan
[Interviewer] The last person to be interviewed xas Saburo Oki, an inter-
national economist who spends a third of his time overseas at international
conferences. He is known for his balanced views.
Saburo Oki was born in 1914 and is 67 years old. At present, he heads the
Foreign and Domestic Policy StuCy Committee. After graduating from the
engineering department ot Tokyo University, he entered the Communiaations
Ministry. He has served as director general of the Economic Planning Agency,
director of the Overseas Economic Cooperation Fund, and Foreign Minister.
Although he had just returned from Hong Kong the previous evening, there was
no trace of fatigue in his expression, and he began to talk about the present
- difficulties in U.B.-Japan relations without apause.
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[Oki] "Previous economic rohlems between the United States and Japan,
whether it was textiles, color television, or automobiles, were always related
to specific products. Now the demand is for a general opening of the merket.
The direct cause of this is the fact that Japanese exports to the United States
in 1981 increased by 23 percent xhile i.mports from the United States increased
by only 3 percent. This sparked off trouble immediately."
[Question] Is it accurate to say that the roots oP U.S. criticism oP Japan
run very deep?
[Oki] "Recently I met with the former representative of U.S. commerce, Ar
Askew, in Miazai. He said that previously there were guidelines on botii sides
for taking the necessary steps in economic problems between the United States
and Japan. Iiowever, now the problem is snowballing to such an extent that
such guidelines no longer exist."
Because Saburo Oki's views are based on frequent contact with foreign officials,
even his matter-of-fact tone was very convincing. He continued.
~ "Therefore, in the present U.S.-Japan trade problems, there is a tendency to
forget the broad view. Even the U.S. side is concerned about this."
[Question] There axe some odd aspects to the American claims. For example,
the criticism oP Japan based only on the trade deficit....
He said that was true and went on with reference to trade statistics.
[Oki] "The American claim is lacking in basic common sense on economic issues.
First, there is the narrow focus on the trade deficit between only two coun-
:.ries, the United States and Jape,n. The United States certainly has a large
trade deYicit with Japan, but it has a surplus with the EC nations. Second,
the United States is only looking at product exports. It should look e,t the
current balence with service trade included. The United States has a large
deficit in product trade but the non-trade balance shows a large surplus. In
short, it should look at the overall current balance, not just at a bilateral
product trade balance."
[Interviewer] Oki's observation was logical. As fe,r as economic problems are
concerned, the U.S. claim is`.illogical. Houever, the f'undamental nature of
the economic friction problem relates to political logic, not economic logic.
Therefore, it will not solve the problem if the Japanese side continues to
repeat its economic arguments. The problem goes beyond economics. One source
of frustration.for the United States is the problem of J�pan's dePense burden.
[Question] In the United States there is a concept of linkage between
economics e,nd politics, ian't therei
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[Oki] "The U.S. State Department Qnd governutent oYficials oPficielly deny
this idea oP linkage. However, the linkage concept existe as a real problem.
There is an underlying idea in the United 5tates of the 'Pree ride,' whereby
JapQn has been able to direct its economic power to the expansion oP inter-
ne,tional competitiveness because of the small size of its defense burden."
Besides this idea of a"free ride," there is a growing fear of Japan that
underlies criticism oP JQpQn in the United States which ce,nnot be ignored.
Saburo Oki quoted from the Gibbons Report on this subject and pointed out that
the United Ste,tes is taking a serious view of the Japanese challenge in the
field of high technolcgy. Japanese industry ia holding a knife at the heart of
American industry.
Oki said that "Japen should do whQt it can to slleviate American frustration."
Then he continued.
"Japan has come to hold a great deal of economic power in the world. Japan's
present system and bureaucratic thinking seem very unnatural from the outside.
Japan is wearing clothing which does not fit its large body e,r~y more. Former
Treasury Secretary Solomon said that Japan is 'narrowly selfish.' It thinks
only of Japan. There have been too.many instances oP words snd actions which
show no consideration for the problems oP the entire world."
[Question] But is it possible for Japan to make a change in this area?
Isn't it difficult for an international viewpoint to get into the Japanese
decisionmaking apparatus?
[Oki] "No. that's not true. Japan is very sensitive to developments in
foreign countries. The problem is that a way of thinking has become estab-
lished in JQpan since the time of the N1eiji e,ccording to which Japan is a small
country dependent on the outside world. We have reQChed the point at which
this way of thinking will have to be pushed forward."
[Question] What should be done, specifically?
[Oki] Japan should not make the areas of agricultural products and service
industries into eQCred precinets. However, because everything cannot be
liberalized due to domestic conditions, what can and cannot be liberalized
should be clearly stated."
7D [Question] What do you think about the problem oP the defense burder.?
[Oki] "Twenty years ago the ratio between the U.S. and Japanese GNP's was 10
to 1. Now it is close to 2 to l. Because of this, there is good ree,son for
the United States to demand that Japan increase its share of the defense burden.
I believe thnt Japan made n major choice because of its experience in World War
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II. That was not to use Qrmed ferce in international conflicts as stated in
the prea$ble of the constttution. Japan's choice was to e,ttempt long-term
arms limit ation and use military forces'which are non-nucleax and used on].y
far defense,as it moves toward the 21st century. However, in the short term$
Japan must hQVe the power to deYend itself. Therefore, it should develop e,n
effective defense-only system using electronics technology."
[Question] What percentpbe of the GNP is an Qppropriate goal?
[Oki] "It will be enough if it ie alightly over 1 percent. In any ce,se,
research spending for defense technology should be increased, and a low-cost
defensF� system ahould be developed. This level of spending shouldn't meke the
Uniteel States aYraid that Japan will become Q great military power." Oki concluled his discussian aa follows. "Japanese economic power should be
used for world development. Therefore, the percentage of the GNP used for ODA
should be increased to 0.7 or 1.0 percent. Unless Japan takes an active role
in contributing to the world, it will be left in a blind alley in its attempt
to solve bilateral trade problems. Now is the time for Japan to formulate
global policies."
Five Proposals for Japanese Foreign Relations
[Interviewer] These are suggestions for future Japanese diplomacy. The first
- suggestion ia a aharp increase in Yoreign aid, especially ODA (official
development aid). Prime Minister Suzuki promised the world a large increase
in foreign s.id at the U.S.-Japan simmmit talks and at the Ottawa eunmit last
year. Unless we e,re sincere and actually make an effort to carry out this
increase, our positic,n as a major economic power will be undermined. There
were subtle differences of opinion among the people we interviewed about
foreign aid itself, but there is not likely to be any objective to the idea of
increasing foreign aid as a mQjor polir,y direction. Koichi Kato's idea of
using aid strategically is worthy of' being considered. There are some doubts
about the desirability of giving aid. However, while it may seem like money
thrown away from the point of view of short-term foreign relations, it is
possible that it will be unexpectedly useful for.national security in the
future. If we make a steady interna.tionel contribution in this way, no matter
how much Japa,n is criticized by the' United States, it cannot be called
"narrowly selfish"' in interne.tional society.
Second is a dePense effort. There is a principla of unarmed neutrality in
Je,pan, but there are probably few people who would object to Je,pan deCending
itself. The problem is how Japan is to be defended. As has been seen, there
were mar~y different views presented in the interniews, but it seemed the,t
there was no strong opposition to a strengthening of the present defense
capQbility.
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There was certainly no one who advocated weakening the defense capability.
The U.S. demand for a buildup of the JapQnese defense capability has tempo-
rQrily slackened ofP, but a chorus of voices calling Yor a buildup is expected
�o start up again. In order for Japan to fulfill its responsibility as a major
economic power, it is necessary to go along with this to e certain extent. The
problem is the speed and scale of the buildup. However, as was pointed out by
Saburo Oki and Yonosuke Nagai, Japan ahould melce a patient effort toward
controlling military expansion in eddition to the short-term buildup of its
defense capability.
Also, it should be added tha,t it is abnorffial for Japan to decide whether to
examine its natione,l security in accordance with directives from the United
States. We have reached the point where Japan should decide what to do for
itself af'ter considering the requests oP the United States. Chief Cabinet
Secretary Miyazawa has stated strongly that "it is wrong for Japan to deter-
mine its defense capability on the basis of American requests." That is true,
but Pven so, it will not do to leave them out of consideration altogether.
It will take money to increase foreign aid and defense capability, but Japanese
finances are stra3ned. Still, Japan is better off than Europe and the United
States. As pointed out by Hiroshi Kato, administrative reform will probably
be necessary in order to squeeze out the money. Administrative reform needs
to be carried out irrespective of overseas preasure. If this is not done,
sooner or later Japan will lose its energy as a nation. If the pressure from
overseas creates an opportunity for administrative reform, that may be our
good fortune. The bureaucrats should stop opposing this from their nQrrow
viewpoint.
The third suggestion is to improve the function of the Foreign Ministry. The
responsibility of the Foreign Ministry for allowing the tensions between the
United States and Je,pan to come to the:~surface is evident. Almost everyone
interviewed criticized the Foreign Ministry. Even Mr Johnson, who is pro-
Je,panese, has said that there wsa a deficiency in public relations. It is
impossible to defend the Foreign Minietry, no matter how hard Jo Hashimoto
tries. At this juncture, the Foreign Ministry should meke a ma,jor effort to
improve its information-gathering funation. Furthermore, this ahould not be
left entirely up to the Foreign Miniatry. There is a need for the entire
nation to keep a aharp lookout and for all valuable information to be gathered
in one place. This problem is also related to administrative reform.
- Fourth is the opening of the Japanese ma,rket. Everyone has difYerent things
to say in reply to the United States. However, the insularity of the Japenese
market is something that is recognized by everyone to a greater or lesser
extent. The only issue is how much it should be opened. The problem is what
"dramatic" measures to take. Just ae Jo Hashimoto said, there are some areas
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in which JapQn can make concessions and some in which it cannot. If this
explanation is "comrincing to the world," the problem can be solved in no
time. As Takashi Hosomi emphasized, the bureaucrats must strictly refrain
from deceptive stopgap measures designed to protect their prerogatives. At
the same time, Japan must be forthright in stating its position to the United
States. The problem can never be solved if Japan does not succeed in making
the United States understand its special circumstances. As Haxuo Suzuki and
many others pointed out with respect to the issue of opening the market, for
the time being Japan should liberalize symbolic items such as tobacco as fast
as possible. As Koichi Kato suggested, Japan is the country which stands to
gain the most from free trade. If that is true, Japan should take the lead
over other countries as a champion of free trade and make an active effort
to open its market.
Toshihiro Tajima and Hei Yoshii emphasized the point that the U.S. demand for
liberalization of the Japanese market is gradually coming to focus on the
service industries. As Toshihiro Tajima atated, the great issue;,now is whether
the idea oP an open financial system in Japan must be defended no matter what.
Certainly, it is natural for the financial system of a country to be peculiar
to that country. It is nonsensicel for the United States to demand that Japan
make its financial system the same as that of the United States.
- However, since the Japanese econom,y is advancing internationally, it is wrong
for foreign companies to have difficulty issuing bonds on the Japanese'market
even if Japanese companies are placed under the same conditions. Whatever
ma,y be said about complete liberalization of the financial market, the Ministry
of Finance should make an ePfort to gradually liberalize the Tokyo me.rket and
internationalize the yen. Also, excessive administrative guidance should be
eliminated sooner or latter.
The fifth suggestion is that Japan undertake a shift in foreign policy which
combines the four aree,s mentioned above. In other words, it should shift from
its traditionally passive foreign policy to a more active approach. Haruo
Suzuki and others pointed out that the U.S.-Japan tensions were a problem of
perception. However, it is a fact that although Japan commands 10 percent of
t::e world's GNP, it is making no international contribution as a great economic
power. This has caused not only the United States, but the whole world, to
see Japan as a"peculiar, selfish country." In order to change this perception
of Japan in a fundamental way, it will be necessary to bree,k away from a
passive style of foreign relations. As Jiro Tokuya,ma said, it is necessary to
create a"grand design" and take positive action as we move into the uncertain
future.
However, as Jiro Toku}rama emphasized, how can the "cowaxdly" Japanese bureau-
crats comeup with such a design? As Taksshi Hosomi and many others stated, the
establishment of political leadership wil'_ be necessary. In this respect, it
is a gcod thing that some politicians have "taken blows" over this problem.
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Only on the besis of such aggressive diplomacy can Je,pan secure a position
from which to state its ease properly to the United States and other countries.
As lono, as Japan xemains pasaive and self-centered, it cannot say what it has
to say. The U.S. Pears about Japan in the area of high technology pointed out
by Atsuyoshi Ouchi are certainly self-centered on the part of America, and the
there are other probletns in the American clQims which were pointed out by
others. However, if Japsn does not ma.ke any effort to establish a clear posi-
tion for itself in international society, its complaints will be seen as aelf-
centered sophistry.
At the same time, we should be aware of the danger involved in more active
Japanese foreign relations. There is no tradition in Japan for the "construc-
tive, positive diplomacy" spoken o!' ",J; Nagayo Honma [a professor of the Univer-
sity of Tokyo]. We have sufficient experience with the way in which aggressive
forei.gn relations can be connected to warped nationalistic emotions. However,
Japan is no longer.the kind of "small presence" which can afford to rely on
passive foreign relations. In view oi this, a more e,ctive foreign policy is
imperative. The only way to insure the survival oP Japan is to work steadily
and patiently at building the Youndations of a"new diplomacy."
COPYRIGHT: The"Shokun 1982
9651
cso: k1o5/95
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AMERICAN LEFT-HAND DRIVE SYNDROME
Tokyo SHOKUN in Japanese Apr 82 pp 168-179
[Article by Keitaro Hasegwa, international economiat]
[Excerpts] America Has Neglected Industrial Effort and Has No Right to
Criticize Japan
Is a Real EfPort Being Made?
The "left-hand drive syndrome" is e phrase used in Americen companies in
Japan. What.d4es it mean? It is a phrase that makes ftiin of the mQrketing
efforts of U.S. auto malters in Japan. In 1981, American auto manufacturers
sold 7,742 cars in Japsn. This is only 20 percent of the imported caxs sold
in Japan. In contrast, Japanese auto makers sold 1.8 million cars in the U.S.
market in the same year. The reason American cars do not sell in Japan is that they do not have the
steering wheel on the right to suit the Japanese prQCtice of driving on the
left side of the road. Like the British, the Japanese drive on the left-hand
side of the street, so al] Japanese cars have right-he,nd drive. In America
where cars are driven on the right side of the road, the steering wheel is on
the left. The U.S. auto makers ignore these road regulations and attempt to
sell their cars in Japan with the steering wheel on the left, so how can they
expect them to sell? Atnerican businessmen who are succeeding in the Japanese
market laugh at this stubborn marketing policy of the auto makers, calling
it the "left-hand drive syadrome."
In response to this, the U.S. auto makers argue that "because of the small
volume of sales to Japan, there would be no proPit even if we made the effort
to move the steering wheel to the left." But the successful Americans laugh
at the auto makers. "So what did the Japanese auto makers do? They began to
manufacture cars with the steering wheel on the left the moment they began to
market them in the iJnited 3tates." 90
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Plainly stated, the American auto makers have no intention oP making a serious
marketing effort until the Japanese adopt the American system of driving on
the right-hand side of the road, so American businessmen say that they have no
right to talk about the insularity oP the Japanese market.
Contempt for the Japanese
~ The U. S. auto mekers do not
Brite,in, which also ass the
There is even a Peeling that
show the "left-hand drive syndrome" in Great
system of driving on the left side of the road.
this shows thQt they look down on the Japanese.
In contrast to the strictness of Japanese industry's attitude towaxd quality,
U.S. industry is much more tolerant. As a result, "more than half of the
U.S. companies operating in the Japanese market cannot deliver products with
the quality necessary to satisfy Japanese standards." For example, a U.S.
semiconductor manufacturer delivered an IC which did not meet the Japanese
customer's requirements for perPormance under high temperature. When the U.S.
head office was asked to explain the cause of the defective performance, it
took 3 months to reply. As BtI3INESS WEEI{ put it : "It is not surprisiug that
this company lost customers."
It is oPten pointed out that there are mary csees of U.S. companies in Japan
with poor management. This will also be seen in the examples oP Americe,n
banks in Japan, which will be referred to later. One influential U.S. semi-
conductor manuPacturer weis completely fooled by the Japanese person who was
head of its Japan branch. The company sold its semiconductors to the dealer-
ship which he established at cost Qnd the dealership delivered them to Japanese
customers at a huge profit. As such examples demonstrate, U.S. companies have
continued to operate very carelessly in the Japanese market.
U.S. companies either fail to study the JQpanese market and discover the
trends oP Japanese demand, leaving everything up to loce.l employees, or they
repeatedly interfere in every sma11 detail. It seems that they axe unable
to use anything but an extreme management policy: either laissez-faire oi
excessive interference. This fact is closely related to the lack of ration-
ality in the strategies oP U.S. industry for doing business in Japan.
Successful U,S. businessmen know that "do as the Romana do" is an inflexible
rule of businese and that following this rule is the onny secret of success
in doing business in Je;pe,n. Looking down on the Japanese or even treating
them as an inferior race is out of the question.
If U.S. companies would take this rational attitude, they could succeed in
expanding their business in J'apan.
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What About Banking?
Recently, the United Statea hss been making a big issue of the imbalance in
finance, insurance, and other services as well as the imbalance in ordinary
trade. The United States is making an especially big issue of the Japanese
treatment of banks. How are foreign banks operating in Japan?
The author has referred to the fact that the share of foreign banks in the
Japanese market is diminishing. The operations of foreign banks became greatly
liberalized by the revision of the Foreign Exchange Control Law in December
1980. In spite of this, the assets of Poreign banks as of the end oP March
1981 were 10,372,600,000,000 yen, just 4.3 percent of the 239,069,000,000,000
yen total for all banks in Japan during the same period.
une year ago, their assets were 9,272,100,000,000 yen, 4.1 percent of the
222,320,100,000,000 yen held by all banks in Japan, so there has been some
growth in ass ets.
However, this is not true of lending. At the end of Me,rch 1981, there was
4.68 trillion yen in loans from Japanese branches of foreign banks, 3.4 per-
cent of the total for all benks in Japan. The amount in the previous year was
4,449,200,000,000 yen and the percentage of the market was just the same, 3.4
percent.
Since the Foreign Exchange Control Law was revised in the direction of
liberalization, the activities dP foreign banks should have expanded greatly,
but they heve not increased their share at all.
The Je,panese fine,ncial market is aeen by most observers as having the greatest
capacity for growth in the world. However, the foreign banks here do not
seem to be increasing their growth capacity at all.
The reason for this is clear. Foreign banks are making no e,ttempt to "do as
the Roma.ns" in Japan. This is the long and ahort of it. In 1950, three
American banks which had been in Jnpan since the occupation, Citicorp, Bank of
America, and Chase Ma,nhattan; two British banks, the Hong Kong and Shanghai
Bank and the Chartered Bank; the Deustch Bank; and three Asian banka including
the International Commercial Bank of China, were given approval to establish
branches in Japan. They already have a history of 32 years�
In spite of this, they are still not firmly establiahed in the Japanese
financial market. Even the largest CitibQnk, has only 973.3 billion yen in
assete. This scale does not compete with everi the medium-size regional banks,
let alone the city banks, in Jape,n.
A particular weakness of foreign banks is deposits. Their balance of deposits
at the end of Mar ch 1981 was only 1,318,200,000,000, only 0.13 percent of
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total assets.. For the same period, Japanese banks had 157,795.600,000,000
yen in deposits, 66.0 percent of total assets, so the diYference is tremendous.
Foreign banks lack the ability to gather deposits in Japan, so their main
eources of hinds for use in Japan.are Japanese yen obtained on the Japanese
call market and Poreign currencies obtained overseas and converted to yen.
Not Following Local Czstoms
In such a stQte of affairs, there is no stnbility iri bank operations. In 1980
Citibank hed the best income of ar~y foreign branch in Japsn with 8.3 billion
yen. However, this was only 0.84 perceat of the total assets of 987.3 billion
yen. Sumitomo aank, the top earner among JapQnese banka, had an opere,ting
profit of 29.2 billion yen during the same period. Its totsl assets are
16,721,500,000,000 yen, so the rate of proPit was only 0.17 percent, an
example of the extremely alim profits of Japaness banks.
The top foreign bank had depoeits of 294.4 billion yen, only 30.2 percent of
total assets. The amount of lending xas also smell, 544.3 billion yen or 55.9
percent of tote,l assets.
Even these top class foreign banks with their 32-year history cannot compare
with the better savings and loan banks Qnd credit asaocie,tions, to say nothing
of the regional banks, in terms of the amount of deposits. There a,re even
some of the lower ranking foreign banks, such as the large 3wiss bank,
Credize Suisse, with as little as 364 million yen in deposita.
Wl~y is this? Pbreign banks do'not work desperately like the Japanese banks
to get deposits. The foreign banker cioes not have phreses like "work day and
night" in his dictionary. Even if the Japanese employees suggest to the branch
manager Prom the head office that the bank teke an aggressine operating policy
similar to that of Japanese banks, he would proba,bly ,just ste,re e,nd.phake his
head. Japanese practicea are completely different from those of other coun-
triea.
There are 69 foreign banks Srith 94 oPPices in Japan. In addition, t'iere are
101 other representative offices. So the Tokyo finencial market ie counted as
one of the most important financial centers in the world. However, almost
none of the foreign banks operating in Japan attempt to "do as the Romans do."
For example, the branch manager of a11 branches of foreign banks is, without
exception, sent Prom the head ofPice. Almost a11 of them never even try to
learn Japanese after taking their posts. Also, they seldom go out to make
sales efforts in Japanese companies. Even iP a diacussion with the Ministry
of FYnance becomes necessary, they usually have a Japanese employee go'.in
their place.
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They live in luxurious apartments in the city with high rents of 500,000 or
700 ,000 ;yen a month which conies from bank operating expenses. They have a
car with chaufPeur to come to work in the morning, During the morning, they
look over documents prepared by the Japanese employees and meet with one or
two customers from their own country. Then they have lunch at a city hotel
or expensive restaurant. Then they do about the same thing in the afternoon
- and go home exactly at the appointed time. On Saturday and Sunday, they play
golf or spend time with their families.
They go back to their own country after 2 or 3 years, but when they arrive at
their posts in Japan, they have already done a big favor to the person in
charge of personnel at the head office. There are no executives who want to
go to a"strange land" like Japan, and the personnel officer has a haxd time
making the appointment. Therefore, just by te,king the post of Japan branch
manager, they make the personnel officer greatly indebted to him. What will I
have to do in Tokyo? There is nothing to do. Just sit there until yvur time
is up.
- This is the actual att3tude of most branch managers of foreign banks in Japan.
Their only hope is that no problems occur while they are serving here. These
- branch mana,gers lack incentive and ne,turally have no intention of conducting
aggressive operations.
It is inevitable that the foreign banks will gradually lose out in the tough
competition in the Tokyo financial market. Also, in recent years, money has
become more available and good Japanese companies are being very caxeful in
selecting financial institutions.
The era for this lordly way of doing business of the foreign banks has passed.
- However, there are almost no people in charge of the Japanese operations of
foreign banks who are aware of this. The resident branch managers in Japan,
who are their source of information, have little comprehension of the actual
situation in Japan, so it cannot be helped if their view of Japan is warped.
What Is Trade Friction?
The United States has made harsh demands on Japan to open its doors, but real
- trade problems involving the United States center on Europe and the developing
- countries more than Japan.
For example, the top U.S. steel maker, U.S. Steel, has made a claim to the
Department of Commerce, with 3 million pages of supporting documents, that 43
companies in 11 foreign countries are dumping steel in the United States.
~ However, no Japanese steel manufacturers were on the list. There he,ve been
serious tensions over steel between Japan and the United States sinca the
early 1970's.
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In 1977, the so-called trigger price system Went into effect and the lower
limit of the import price was set on the basis of Japa:zese steel manufacturers'
production coste. When the import price went below this standard, the DepQrt-
ment of Commerce would investigQte for dumping.
The Je,panese accepted this trigger price system. Beginning around 1968, steel
~ was a maJor source of friction in U.S.-Japan trade. There wex�e repeated
discussione between the United States and Japanese steel industries, and self-
- restraints on exports to the United States were used from 1968 on.
The Japanese steel makers were e.ble to raise the export price of steel to the
United States mexket with the inatitution oY the trigger system and to raiae
the export price to other ma,rketa because there were prospects of maintaining
sufficient profits even when operating at 70 percent cape,city in the receasion
following the first oil shock:
The reason for this was that Japanese steel makers' production costs were
reduced far be'Low thoae of their American competitors because of thorcligh-
going ratione,lization. For example,.as a result of Japanese manuPacturers'
efforts at conserving energy, the energy conaumed per ton of steel wae reduced
to half that used in the United States.
With thi_s difference in cost, the JapQnese were actually able to maintain
stable profits because of the trigger price system. The establishment of the
trigger price system was a big plus for the Japanese. 'I'herefore, the Japanese
felt that it was very much in their interest to observe the trigger price
system. Naturally, the mein focus of trede tensions moved to E~.iropean,
Korean, and South African steel znanufacturers. Japan succeeded in eliminating
trade tensions with the United S+.ates. As far es steel was concerned, Japan
- overcame the problem Qf trade tension.
With respect to cars, the United States was hit with a severe gasoli.ne panic
due to the second oil shock. American consumers suddenly began turning to
small Japanese cars with good fuel economy, and this soon dealt a serious blow
to the AmericQn auto industry. In 1978, 12.9 million caxs were produced, but
this dropped to 11.48 million in 1979, 8 million in 1980, and 6 million in
1981.
Japanese auto production, on the other hand, grew from 9.27 million cars in
1978 to 9.63 million in 1979, 11.04 million in 1980, and 12 million in 1991.
There was a total reverse,l of the U.S. and Japanese positions. The U.S. auto
industry, with the cooperation of the United Auto Workers, made e, strong
appeal to President Carter and an agreement was made with the Japanese in May
- 1981. The Japanese agreed to voluntarily restrain exports to the United States
below a level of 1..68 million care per year. Now the view is growing in the
United States that the Japanese export effort is not a direct cause of the U.S.
recession.
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The U.S. auto industry is going through the worst recession in 50 years and
is beginaing to advocate a total ban on imported automobiles. However, the
unprecedented recession itself is the cause of the slump in the auto industry.
And a growing number of observers are saying that the lack of efPort by both
management and labor to raise productivity was a more long-term cause of the
alump. Just as in the case of television, the Jape.nese auto industry is likely
to be able to avoid friction as long�-as it observes the voluntary export
restraints which were determined by'Nissan, Honda, and then Toyota.
The United States is also being severely criticized as a source of trade
friction in certain industries, and these are becoming ser.ious problems in
Japan, too. They are petrochemicals e:1d synthetic fibers. Because of the
second oil shock, the price of naphtha, an important raw material for the
petrochemical industry, leaped drame,tically. This createcl a tremendous cost
advantage in the United States where natural gas is used as tne raw material.
According to the Loiidon ECONOMIST, the price difference for ethylene, an
intermediate product in the petrochemical industry, is three to one. With the
weapon of low material costs, the U.S. petrochemical industry launched a
tremendous export effort and quickly dealt a fatal blow Ju-o its competitors in
Europe.
- In the accounting for 1981, Imperial Ctienical Industry, the largest private
comi,any in Great Britain, show�d.a loss for thc Pirst time in 50 years, and
- there was a change in management. Mary' other European petpochemical andsyn-
thetic fiber companies are operating in the red, and critical eyes are being
turned on tY:e advance of U.S. exports.
- In Japan also, the petrochemical industry is counten as a"structural reces-
sion industry," and it has completely lost its traditional markets such as
those in Southee,st Asia to the advance of Arierican exports.
No Appeal Fram Aluminum
Alumir.um refining is one oP the most troubled industries of the "structural
recerssion ii:dustries" in Japan. In 1977, 1.31 million tons of raw aluminum
were produced, but this fell to 1.11 million tons in 198e and 800,000 tons in
1981. It is expected to fall below 400,000 tons in 1982. The refining
capacity, which was 1.4 million tons in 1980, is scheduled to be cut to under
600,000 tons. .
The�production costs of the Je,panese aluminum refining industry are approxi-
mately a dollar per pound, almost double the American cost of 50 or 60 cents.
Because of this, there is a big difference between the domestic price of
450,000 yen per ton for r�aw aluzainum compared to the import price of -170,000
yen.
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The import volume of aluminum ingots was 460,000 �tors in 1977, 680,000 tons
in 1979, 940,000 tons in 1980, and more than 1.1 mil'iion tons in 1981. The
cumulative debt of the Japanese aluminum refining industry is running above
1 trillion yen.
American aluminum exparts were 107,432 tons in 1979. In 1980, they tripled to
326,557 tons. In spite of this, the Japanese aluminum industry made no appeal
for import restraints against the United States. The alumin-am-related labor
unions cc:nplained of their difficult circumstances to the U.S. labor unions.
However, they were treated very coldly. The American side did not listen to
their complaint. Their response was: "That is no concern of ours."
It is a little-known fact that Japan is the only advanced industrial country
which has not concluded a mutual fiber arrangement (MFA) to restrict imports
of fiber products.
I+, is well known that the United States concluded a fiber export agreement with
Japan in 1972. It was an agreement forced on Japan by the Nixcn administra-
tion in connection with the reversion of Okinawa. However, since 1978, Japan
has had a huge trade deficit in fiber products and raw materials. The United
States still has not followed the example of Europe in carrying out the mutual
fiber arrangement. It is notable that the industry has not called for pro-
tectionist trade policies, and even the labor union has not asked for import
- restrictions.
Japanese industry is making an effort to maintain free trade in terms of
actual policies, not just as a pretense.
Even when an industry such as aluminum is badly hurt, it maintains a policy of
�tkeeping the comliany alive even if it means eliminating plants," and actively
moves into overseas operations in order to survive. The same thing can be
said for the fiber industry.
This is a consistent pattern in Japanese industry, and it differs greatly from
the attempt of the U.S. auto industry to use protectioniam to cover over its
mistakes in operating strategy sucY: as the long-term neglect of rationalization,
the failure to introduce robots, and the failure to perr_eive the consumer
shift from large to small cars. This is a strong statement, but I do not
think it is excessive. Nontariff Barriers and the Bureaucracy
The government has taken az; active position in abolishing nontariff barriers,
- adopting 67 specific measures such as simplification of import procedures by
the end of January and the acceptance of test results from foreign countries.
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The LDP established a special study committee Yor international economic
measures with Maswni Ezaki as chairma,n. It has gathered specific examples of
nonte,riff be,rriers from related industries and made a strong appeal to the
government to take the present measures. Ordinaxily, separate proposals are
circulated from the bottom up through the bureaucratic system, requiring
approval at each level ard final approval by the cabinet minister before being
caxried out. This time, the proposal went straight from the top to the execu-
tion stage. Such measures would be unthinkable under a tight bureaucratic
system.
The Special Study Committee for Ir.ternational Economic Measures is considering
- 90 items in all. The 69 items are only those which are clearly irrational and
do not require extensive revision of laws and regulations. However, there
are 20 differen+ laws involved and it will still take quite a bit of time
- befare the necessary rtavisions are paased.
In any case, the effort made by the government was quite extraordinary. Prime
Minister Suzuki himse?f gave directions for "formulation of improvement
measures to simplify import inspection procedures by the end of January."
Unfortunately, this government action is scarcely recognized abroada U.S.
Secretary of Commerce Baldridge said that it "eliminated $200 million of a
$20 billion trade deficit with Japan." The only praise was little better than
~ no ne at a11.
That is to be expected. The real intent of the United States and Europe in
demanding the opening of' the Japanese market is to get the great est effect
with the least effort. Iti is only natural that their reaction would be the
_ opposite of that expected by the Japanese.
For example, with almost no exceptions, the barriers which made operations
- difficult for import dealers in Japan have been eliminated. The improvements
extend t o representative nontariff barriers such as inspection stan3ards for
- cosmetics, designation of damestic sporting goods, and the customs inspection
system.
Actually, most of these nc,ntariff barriers were the result of the conservatism
of the bureaucrats, who attempted to preserve old rules which had fe,iled to
keep up with technologice,l progress. Japanese impcrters had been hindered oy
this bureaucratic resistance for some time.
One example is double labeling with the metric system and the yard and pound
system. In 1961 MITI made it obligatory to put labels on imported products
which show the cantents in i,erms of the metric system. It gave directions to
~ the prefectures and metropoZitan areas to paint ove; the parts of the label
- not using the metric system. Therefore, import dealers had to t ake the time
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to irik out parts of labels and paste on metric system labels on each imported
product which was labeled in ounces or inches. Of course, this increased the
- cost and raised the domestic price oP imported goods. The image of "expensive
foreign goods" was created in large paxt by such excessive costs which were
unrelated to quality.
At a time when there was a large difference in quality between Yoreign and
domestic products, imported products sold well because people thought that
they were high in qualitjr as well as price. Now that the competition in the
Japanese market has become tougher anci the quality of domestic products has
risen to equal or surpass that of imported pro ducts, it is only natural that
sales of imported goods have fallen off.
= Now import dealers are forced to work desperately to cut costs in any way
possible. One example of this is that labels without the use of the metric
system are becoming more common with the "tacit approval" of local government
offices.
~ MITI actually decidPd in 1968 to accept '_abels without the metric system
measurements or double labeling, but this decision was only given verbally.
So it is qui.te vague in comparison to the p.rohibition of double labeling
~ which was announced in an afficial notificati.on document. This immediately
led to confusion in local government offices which handle these matters
- (ASAHI SHIMBUN of 21 January).
~ The prohibition of double labeling was..an administrative measure to insure
the establishment of the metric system. However, now that the metric system
' is firmly established, it is meaningless to blacls out labels which do not
use the metric systera. This is certainly a reason for criticizing "government
practice" for applying old rules to new situations.
- The Problem Is With the TJnited States
This sort of "goverr.meut practice" exists a11 over Japan. We can understand
the anger of Americans, who think of government officials as "civil servants"
' working for the public good, when they cane into contact with a legalistic
"government practice" which conceives of the funetion of agovernment official
as "faithful application of the law." The Japanese people feel the same way.
However, let us think about this, Japan is an independent country. The
government officials of developing co-antries which have recently gained
independence are incredibly arrogant. In all of these countries, the customs
office is obnoxious. Ordinary travelers as well as businessmen are given a
great deal of trouble when passing through customs even when they have no
intention of smuggling. The difference with Japan is the intent of the
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officials in being so particular. In many cases, the reason for making an
excessive s earch is, if not to obtain a bribe, to get a tip or gift. This is
not true in Japan. Here the reason Por obnoxious behavior is an attempt to
faithfully uphold the law. That is a big difference.
Paying a bribe makes things easier, so businessmen can simply count it as
part of their costs. And they can justifyr it by saying: "After all, it's an
undeveloped country." However, this is not possible when trosblesome require-
ments are made on the be,sis of law. It is impossible for private individuals
to change the laws, so they must "respect" troublesome laws. This is much
more expensive than bribing a customs official to keep his eyes closed to
something. The nontariff barriers have become a big problem because of a
delay in�correcting laws and regulations to fit reality. These corrections
will make it easier to do business domestically also and will be a big plus for
- the Japanese econon~y.
1iowever, there are problems with the claim the,t the abolishment of nontariff
barriers o n the Japanese side will lead to'improvement in the trade balance
and import expansion. As I have stated, the reason for the 3elay in foreign
participat ion in the Japanese market is the "left-hand drive syndrome," the
fact that U.S. and European manufe.cturers have ignored the actual circum-
stances of the Japanese market. Etiren if the Japanese eliminate the nontariff
bs,rriers, it wi-ll not have the effect of expanding imports unless the manu-
facturers make more of a marketing effort. But in spite of this fact, the
Japanese will probably receive the usual criticism of "lipservice only" if
they announce the elimination of nontariff barriers with great fanfare as
part of an import expansion policy.
The Japanese approach is not the problem. In the midst of a world recession,
- U.S. and European manufacturers are searching for every possible way of
expanding s ales. However, they dislike going to any trouble and there is
little hope that they will stir themselves into action. United St ates Lagging Behind
Trade tensions between the United States and Japan began with textiles in the
1960's and continued with steel, television, and automobiles. There has been
a problem with the U.S. demand to open the market to agricultural products, but
Japan has b een able to avoid further serious difficulty with advanced tech-
nology ind�zstries such as semiconductors ar.d optical communications up to now.
The United States did not create any problems in the 1960's and 1970's when it
iad absolu-:
: .e superiority in the IC and LSI fields.
There was a brief "U.S.-Japan semiconductor-war" but it cooled down at the
beginning of the 1980's. The reason for this development is that companies
from both the United States and Japan are establishing facilities in the other
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country. Ierge U.S. manufacturers such as Texas Instruments and PQotorola have
established plants in Japan and major Japanese companies such as Nippon
Electric and Toshiba have done the same in the United States. With such
mutual extensions of business, there is no other course but to maintain free
t rade.
However, tlie Japanese side has rapidil-y built up force and is beginning to put
pressure on the U.S. market. For example, the Japanese have been able to
take over 70 percent of the U.S. market for the 64K RAM (random access memory)
intearated circuit which is thought of as a first-generation VISI (very large
scale integrated circuit).
The Japanese mass-production system is moving ahead quickly with the second
generation circuit, the 256K RAM. A production cape,city of 5.5 million chips
per mont'.: ib scheduled to be in operation by 1982. The U.S. production
capacity is only 700,000 per month, so s huge difference of one to eight
has developed in the relative strength of the United States and Japan. Japa,n
is planning to start mass production on the third-generation megabit RAM in
_ 1984, and the U.S. lag is becoming even more evident.
- When Japan goes into large-scale mass production, the market price of these
VLSI's will drop e,bruptly. At one time the 64K RAM cost 20,000 yen per chip,
but the price dropped to one-tenth of that very quickly. Because competitive-
ness is supported by cost reductions achieved through mass production, manu-
facturers which are slow in starting me,ss production wiLl eventually be left
out of the competition.
Japanese semiconductor manufacturers are all general manufacturers, so if
they decide on semiconductors as a strategic division, they can use the profit
earned in other divisions to move into mass production. However, in the
United States, most of the manus'acturers are specielized, so they are seriously
hurt 'by price reductions which result from mass production.
In 1981, because of thE combination of price reductions and the worst recession
in 50 years, Texas Instruments' profits were cut in half and Mctorola showed
a decline of 70 percent. Once applauded as growth industries, they have
deteriora'ued rapidly.
Recause VLSI's are very important as essential parts
U.S. Government is very concerned over this decline
is beginning to provide sctive cooperation to suppor
~ technological devPlopment. Vow it has taken the app
cost imports from Japan, and the Japanese side is sh
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in moc'Azrn weaponry, the
f U.S. manufacturers. It
the steady advance of
oach o.� restricting low-
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There are many different types of integrated circuits. There is not a large
- number of specific products which are used on a large scale, but the elec-
tronics industry needs many different varieties of semiconductors. In terms
of making a proPit, it is impossible for any manufe,cturer to ]~.roduce all of
them, so a horizontal division of labor develops naturally.
This horizontal division of labor also rules the semiconductor trade between
the United States and Japan. Both the United States and Japan exporti a laxge
volume of semiconductors and integrated circuits; there is no onesided excess
of imports or exports. Also, because of rapid automation in the prodaction of
integrated circuits, it is behind the times to rely on low-cost labor in the
- assembly process. The U.S. manufacturers which had built assembly plants in
the countries of Southeast Asia are now building plants in Japan where there is
a work force with high technical skills, and corporate strategies are being
adopted which focus on production in Japan. Therefore, indiscriminate
restriction of Japanese-made products would seriously hurt these U.S. ventures
in Japan.
It would also mean protection for Japanese companies in the United States, and
they would inevitably come to dominate U.S. compe.nies in the domestic maxket
just as they did in color television. An attempt to protect American inciustry
woizld backfire and give extra, benefits to Japanese industry.
Here we can see the effects of reciprocal business ventures. There will
probably be no abrupt move to restrict imports in the semiconduator industry
for some time.
World Recession and the Japanese Response
The wor].d is in a serious recession. There are more than 10 million unemployed
in the United States and the EC. If it continues at this rate, the unemploy-
ment will be greater than that in the early 1930's. It is rapidly becoming
the worst recession in 50 years.
There are trade tensions throughout the world over such items of general use as
steel, petrochemicals, synthetic fibers, and fiber products. Objectively
speaking, it is not too much to say that Japan is graduelly moving away from
the center of tension.
Right now world trade is shrinking. The volume of trade in 1980 was 0.4 per-
cent less than that of the previous year. A reduction of 1.3 to 1.5 percent is
estimated for 1981, and a greater shrinkage is inevitable in 1982.
Internationalization grew in the 1960's and the 1970's and there was an
increase in mutual interdependence between all countries. As the tendency
toward reduction in world trade takes definite form, it may be inevitable for
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al_1 countries to break away frnm interdependent relationships. Duringus~eas
' Great Depression of the 1930's, there was a reduction in world trade ~
there is now. Most nations took protectionist trade measures, and the results
of this led to World War II. Th--*s bitter experience is still fresh. It would
be very wrong for all the nations of the world to implement protectionist tra!j.a
measures at the same time.
There are certain conditions that make Japan an easy tar aluminum, Japanion.
I~s is evident from the cases of fibers, petrochemica~.sy And reat sacrifices.
is a country which will maintain free trade even while making g
Therefore, other countries, especially the United StQtes, can rest on the
assumption that no matter how nLuch Japan is attacked, it will never resist
strongly and shut out the products of other countries.
-
I'n other words, Japan's hands are tied by the principle of free trade. It is
t;he only country that is not expected to fight back no matter how much it is
k:icked around. Therefore, even though there are other countries with which
there are greater trade problems on speci_fic products, it is still possible to
make Japan the target of criticism.
ELl.so, Japan has an amazing capacity for response which is never seen in other
countries. In the case of color television, when exports to the United States
were restricted, Japanese companies established facilities
United States and took over the market. The same thing can be exPect
automobiles. From previous experience, it is natural to draw the conclusion
that simple import restrictions cannot suppress the vitaliluy of Japanese
industry.
The United States is now demanding that Japan open its market to agricultural
products which is considered impossible for domestic political reasons. Even
in the area of agricultural products, the United States is actually having
worse trade problems with the EC. The EC had a$13 billion surplus of imports
f,om the United States in 1981� If retaliatoryameasuresgfrom1theaECproducts
becomes worse, there is a danger of
Japan has an $18 billion surplus of exports to the Uniiedo tbeef, aand re wellnese
agricultural
faod prices, withon eHowever, famous
~,bove other world levels
products on a large scale, the United States would soon be in trouble. For
example, if citrus fruits were complat$oon liberalized,
OUt byecitrusafruitefromat
American oranges and gre,pefruit woul
lsrael and Africa where production costs are lower.
'1'he same thing can be sai.cl for beef. U.S. consumption of ed e and s plelwith
declining because of the terrible recesaion. The unemploy PeoP
reduced incomes are swi.'cching to chicken and pork rather than beef in order to
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tv,l d down their living expenses. The U.S. livestock industry is attempting
to escape from a difPicult situation by expanding exports to Japan. However,
if libere.lization is forcefully carried out, it is very likely that U.S. beef
will be dominated by cheaper beef from Australia and Argentina.
Also, if the Japanese livestock industry is destroyed by import liberalization,
it wa.ll be a serious blow to U.S. farmers who export feed grain to Japan. In
spite of this, the United States is demanding liberalization of beef and
orange imports to Japan because it is aware that Japan cannot implement this
liberalization because of domestic political concerns, and it can use this as
basis for obtaining Japanese concessions in other areas.
Nontariff barriers are spoken of, but in reality, they do not exist. It is
undeniable that there are some bureaucratic practices which cling unnecessarily
to old rules, but this is not.the whole problem. The main prob lem is the
presence or lack of incentive. The main cause of trade friction is the dif-
ference in vitality between Japan and other countries.
COPYRIGHT: The Shokun 1982
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ANERICAN WAY OF BUSINESS
Tokyo ASAHI JANARU in Japanese 26 Mar 82 pp 18-23
[Article by Funitoshi Takahashi, reporter from the ASAHI SHI14BUN economics
department]
[Excerpts] The U.S.-Japan economic war that surfaced conapicuously in the
eaxly 1970's has been called "a wax with no declaxation of war" from the
Japanese side; However, it has become clesr in the recent demands on Japan
that it is an attack on Japanese culture, traditions, and language--in short,
a.n attack on "the Japanese being Japanese." In Japan, "people walk on the
right and cars are driven on the lePt," so the steering wheel is on the right
side of the car. The present demands are like asking us to change the rules
of the road so that American cars with the steering wheel on the left can be
used just as they are. They are a gross insult to a sovereign state. In
addition, Japan is threatened with becoming an orphan among the nations of the
world if it does not comply.
However, the "strong America" policies advocated by the Reagan administration
have also created problems with its allies among the free nations of Europe.
Is it not America which is creating a feeling of alienation among the members
of the "tripartite alliance" of the United States, Europe, and Japan2
The basic problem is the failure of the Reagan economic policies. We must not
react to the American provocation and repeat the mistakes of Pearl Harbor.
It is a common political practice to find a scapegoat on which to shift atten-
tion when a weakness appears in one's own country. There is the additional
factor of off-year elections this fall in the United States. Therefore, we
must be careful to avoid mistakes and take a completely rational approach.
Working level consuTtations between the United S-tates and Japan, in lhich dis-
cussions are held between bureau chiefs of the various government mi.nistries
and agencies, are held fairly frequently, and ordinarily they do not e.ttract
much attention. However, the third meeting of the U.S.-Japan Trade Committee
held on 9 and 10 March in Kasumigaseki, Tokyo, attracted a great deal of
attention from the political and business sectors in Japan.
.
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- 'P}ie leader of the U.S. contin,gent, lleputy U.S. 'Prsde Representative McDonald,
ca].led together a group of Japanese reporters Just before his visit to Japan.
I[e told them: "The United States side will show a list at the trade committee
meeting of demands to remove nontariff barriers which will lead to several
billions;of dollars in increased exports to Japan." He took a very high-
pressure attitude. The Suzuki government wants to resolve the trade tensions
between the United States and Japan before the Versailles summit (eighth summit
meeting between the major advanced nations) to be held in the beginning of
June, so it placed a great deal of importance on this meeting of the trade
committee as a forum for understanding the specific demands of the United
States.
However, contrary to plan, the United States did not present a list of demands.
It simply askedfor "a decisive opening of the market befitting a great
economic power.t, It never used an expression such as "some dramatic measures."
Of course, after the meeting, the United States representative voiced his usual
criticism before returning home. "As usual, the Jape.nese are trying to get by
with a minimum of concessions and no continuous effort at opening th.a market
could be seen."
The fact that the United States did not take the tough approach expected
probably showe the use of a diplomatic technique of alternating he,rd e,nd soft
approaches. Before the McDone.ld group came to Japan, a series of tough state-
ments by Congressmen and government ofPicials had already stirred up the
Japanese media so part of the U.S. objective had been accomplished. However,
there mey have been some concern that the flood of anti-Japanese criticism from
Washington, which extended to unique Japanese syst exs and practices such as
administrative guide,nce, the election system, and the pi.ctice of retired
bureaucrats taking influential business positions, had stirred up anti-Americsn
feeling in Japan. In other words, they may have hQd second thoughts about an
excessive manipulation of information in the informe.tion society of which we
are a part and pulled back a little.
Just as the Japanese effort to open its market is underrated, the American
pressure on Japari has been amplified beyond the reality. A false image exists
on both sides. The danger is that this i.ilse image may take on an independent
existence and the reality may be lost from view. And until a decisive juncture
is reached, everyone may forget that the image is false.
The Cause of Tension Is the Reagan Militaxy Expansion Policy
The greatest reason for increased trade tensions is that Japan's economic
position has risen, while that of the United States and Europe has shown a
relative decline. For this reason, tensions between Japan and the United
States and the EC (European Community) pecame evident, especially :.n the latter
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part of the 1970's. However, looking back, we notice a pattern of temporary
relaxation of tension after 197$ followed by another flareup. The yen rate
rose to 180 yen to the dollar for a short time, and this led to a decrease in
exports. Now, however, the change in the exchange rate that should occur
; ttith a surplus of exports from Japan has not appeared.
.
Simply put, the mistaken Reagan economic policy which e,ims at military expan-
sion has accelerated a domestic recession and growing unemployment, and this
has l.ed to a large Japanese trade surplus with the United States.
Some time has passed since the American economy began to decline and lost its
_ power to protect the world economy, but now America has become the cause of
agitation in the free world. Because of high interest rates in the United
States, the countries of Europe have lost the possibility of using lowered
interest rates as a means of overcoming their economic difficulties.
Chancellor Schmidt of Weat Gsrmar~y has pointed out that the Reagan economic
policies have led to a world economic crisis and has warned that the European
countries are in danger of falling into political and sociel instability.
There are already 2 million unemployed in West Germany and France and 3 million
in Great Britain. And because unemployment is especially severe among young
people, there has been an increase in terrorist incidents.
This is not a11. When the European countries criticize the high interest rates
and government deficit in the United States, the United States chaxges that the
European countries are weak in implementing economic sanctions against the
Soviet Union and Poland. Trade tensions have :occurrea not only between the
United States and Japan. The U.S. steel industry has charged the EC with
dumping, and problems have appeared between the United Ste,tes and Europe also.
~ The failure of the Reagan economic policy is causing a rift in the alliance
- between the United States and Japan and between the United Ste,tes and Europe.
The Danger of Denying Identity
The result of all this is the propaganda which holds Japan to blame for every-
tY:ing. While the Europeans point to the errors of Reagan economic policy,
they go along With the United States in treating Japan as the bad guy. As a
result, everything from Japanese customs procedures, inspection standards,
administrative guidance and the distribution system, recession cartels, and
the government moncpoly corporations to problems of the "weighting of votes"
of Japanese voters, the integration of the lowest social class, and the use
of retired bureaucrats in business have been held up as causes of the shutting
out of foreign goods.
Certainly, if the Japanese changed to the American system of driving on the
right side of the road, it would be much easier to sell Atnerice.n cars with the
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steering wheel on the left in Japan. Japanese manuYacturers build cars with
the steering wheel on the right for domestic use, but they also build cars *aith
the steering wheel.on the left to fit the customs of the country to which they
axe to be exported, The Japanese think that it is natural for the purpose of
export to adapt the product to the consumers of the country of destination.
But the American attitude is: "It's strange to use right-hand drive, so
change:"
The actual occasion for the renewed flareup in U.S.-Japan trade problems was
- the visit to Japan of Secretary of Commerce Baldridge in October of last year
when he pointed to the increasing Japanese trade surplus with the United 5tates
and asked for the elimination of nontariff barriers. When he returned to
Washington, he made a statement to the effect that the problem was the struc-
ture of che Japanese economy and Japanese culture, traditions, and language.
This comes down to a matter of him not liking the Japanese themselves and
their language. Of course, the Japanese Government protested and the statement
was withdrawn, but judging from the recent statement in a Congressional heari-ng
by Under Secretary of Commerce Olmer, this is the true position of the depart-
ment.
To hold up the culture and customs of an allied country to ridicule in this
way is to deny the identity of that country. This is the great danger.
With respect to the reciprocity bill which has repeatedly appeared in the
U.S. Congress, the Reage,n administration says: 11The problem lies in the Japanese market which has touched off thinking about reciprocity." However,
the present U.S.-Japan trade problems cannot be solved simply through conces-
sions by Japan. - The decline in the vitality of the U.S. economy and the rise in Japanese
strength became cleax to everyone in the early 1970's. Since then, trade
tensions have occurred over a number of products, the main ones being textiles,
- steel, color television, automobiles, and now semiconductors. The Americans
have decided that no progress can be made on specific products, so they are
asking Japan to do something about the chronic trade imbalance (Japanese
surplus and American deficit). They are demanding that Japan take corrective
measures, but that "Japan should decide what to do:" However, although the
American balanee of trade shows a deficit with Japan, it shows a surplus with
Furope. Since the EC has protectionist measures in place against the agricul-
tural products which America is eager to sell, it does not make an issue of
the deficit with the United States. Therefore, the United States has adopted
the strategy of one-sidedly attacking Japan. The EC, however, has taken a
clear position against the U.S. reciprocity proposal.
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(,'hronic Pressure To "Strengthen Defense Capability"
The U.S.-Japan trade imbalance has become rigidly structured. It is no longer
the kind of problem that can be solved by a little effort from both sides. It
is the same sort of problem as the chronic Japanese deficit with the oil-
producing countries of the Middle East and resource-rich Australia. Even
- though Japan buys oil and raw materials from these countries, the amount that
Japan can export to them is limited. T'nere is no way to fill in the gap and
there will always be a deficit. This is set off by the surplus in trade with
Europe and the United States. Also, American consumers hs,ve come to rely on
Japanese products.
Secretary of Comtnerce Baldridge has said: "If Japan completely opens its
market, the deficit with Japan will be reduced by $8-15 billion in 5 years."
This is no more than $3 billion a year. However, the deficit for last year
- alone was $18 billion. Since in reality a debt of more than $10 billion per
year has become permanent,opening the Japanese market will have little effect.
The attempt to adjust a trade balance bilaterally is itself inappropriate among
advanced industrial countries, but the United States does not seem to think
so. However, it is clear by now that the U.S. trade deficit with Japan would
not disappear even if Japan opened its mp--kF.t c-)mr7 Pt-1y. That means a .
pattern in which America continuously puts pressure -n Japan. This is why
Japanese concessions give rise to more pressure from the United States.
On the other hand, since there is no immediate prospect of eliminating the
trade deficit with Japan, the pressure on Japan to strengthen its defense
capability will also become chron,ic. Japan made a large increase in defense
spending in the 1982 budget, but this did not make any difference in,the trade
imbalance. It is no use complaining about this, because it was clear from the
- start that this is what would happen. We cannot choose between the defense
problem and trade prohlems. America must have concessions in both areas.
And now that the trade deficit with Japan has become permanent, it is taking
the position that it is a natural right to demand both. In fact, while the
U.S.-Japan Trade Committee was meeting in Tukyo, on 9 Ma.rch, an extraordinary
special debE.te on the Japanese defense problem was held in the U.S. House of
Representatives and the insufficiency of the Japanese defense effort was
criticized. It is doubtful that the U.S. pressure on Japan to strengthen its
defense capability will weaken with the 1983 budget or even after that.
` Equal emphasis on the demands for "an open market befitting a, great economic
power" and "a defense effort commensurate with economic strength" will continue
� to create a disturbance in Japan.
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F3F:form 3lnould Be Undertaken by the Japanese Themselves, iVot Under Outside
Pr.essure
What arnroach is best under these circumstanr_es? First we must make changes
in a diplomacy that has been like an extension of domestic relationships ar,c3
develop a foreign policy that corresponds to the rapid changes that have taken
place in Japan.
Ten years ago, at the time of the U.S.-Japan textile negotiations, the Japanese
textile industry as well as public opinion did not have an objective awareness
of Japanese economic strength. However, at the time of the auto export
restrictions last year, the difference in international competitiveness
between the U.S. and Japanese auto industries was recognized, and we ultimd.tely
agreed to voluntary restrictions. Some tension with foreign countries may be
the fate of th2 Japanese economy, but our basic awareness has switched 180
degrees in the last 10 years. If we continue to hold back what we want to say
and say something inoffensive and use a lot of energy to keep things going
well, we cannot maintain friendly relations in any real sense. Tt is the
proper function of foreign relations to frankly discuss potentially explosive
situations building up inside our respective countries and eliminate problems
before they reach the crisis stage.
For this, political leadership is necessary. Because of the involvement with
economic policy, there has recently been an evident rivalry among the Mi,nistry
of Finance, MCTI, and other bureaucratic organs as well as with the Foreign
Ministry. As a result, a difference of opinion has emerged within the govern-
ment. In addition, it is the usual practice for a bureaucrat not to deal with
aproblem unless it is placed on his desk. With this approach, there will be
a repeat of failures like the mission to the United States headed by Mas�mi
Ezaki, the chairman of the LDP Special Study Committee for Inter.national
Economic Measures. Although he went to present the 2-year speedup of tariff
reduction and the abolishment cf 69 nontariff barriers as gifts to the United
St,ates, he ended up failing to.get credit for the effort and being subjected
to new demands for concessions.
Second, we must reform the "Japan Incorporated" system by ourselves. It is a
fact that the Japanese business world, which distinguishes between "insiders"
and "outsiders" and is based on he,rmony and loyalty only between the people
inside, is not an open society. For this reason, behind-the-scenes consulta-
tions are the lubricating oil of the business world. Such consultations have
the function of "directing the traffic of complicated business talks and
'fairly' distributing contracts to bidders."
The practice of hiring retired bureaucrats Por important pa:,itions in business
leads to a cozy relationship between business and the bureaucracy which has
the authority to grant approvals and licenses. It is a fact that foreign
enterprises cannot enter into such relaluionships.
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- Behind-the-scenes business consultations and the hiring of bureaucrats in
business are practices WMch are continuelly being criticized among the
Japanese themselves as a domestic problem unrelated to trade friction. Even
the "weighting of votes" which was pointed out by the United States is some-
thing that we ourselves consider illogical. It is incidental, but a fact,
that the present electoral system provide-- support for maintaining the 22
restricted import categories of agricultvral products. It should be reformed
to create greater fairness for the voi;ers ratner than for the purpose of
eliminatii.g trade friction.
_ Third, an effort must be made to raise our standard of living. The average
wages of Japanese workers have surpassed those of Bxitain and France and have
drawn even with West Germany. They are still a step below those of the United
States. However, when we consider the systems of paid vacations and 5-day
work week, it is undeniable that Japan is behind these other countries. It is
- also necessary to improve the overall living environment including housing,
pESrks, and sewage. This will cause the cost of Japanese products to rise, and
naturally, the internatlonal competitiveness of Japan will not be as great as
it is now. In both tangible and intQngible forms, the gairs should outweigh
the losses.
If these reforms axe all achieved cne way or another, before we know it we
should d'isrover ourselves living withiii a framework of international harmony
without creating a disturbance. I am advocating a new kind of "expel the
barbarians" concept. The Japanese themselves should make reforms, not because
~ they are demanded by foreign countries but for the benePit of Japan.
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F'IGURE APPENDIX
(2~` - - - - _ t6, ~ 11 (.r1 %gq)
~
3"~ ~
;71 7 ~
C C� Pa9 0 1
~ M7, io
tA~ ~E(7#~
(5) ~ ~
~o ~ ~ ~ ~
hn ? 7'X J hm~~~ ~ ~ ~
10
~ ' 6
� rr~ �
~ 4
40 ~
20 . '2
p _ 0
-20
-40 (i2)
_ _ F0 ( ii~otj~ e~ .
= J
-VO
...100
, ; ' � � 5_'~- ' _ , 5-_-T
1970 1971 ti972 1973 1974 1975 1976 1977 1978 1979 ' 1980(4)
Fluctuations in the U.S. Economy an3 U.S.-Japan Relations
Key: 1. Trade balance (in hundred million dollars)
2. Dumping srbitration against Japanese television sets
3. Conclusion of intergovernment agreement on textiles
4. Second voluntary restraints on steel exports to the United States
5. U.S. unemployment
6. Agreement to maintain order in color television exports
'7. Implementation of steel trigger price system
8. Provisional signing of Tokyo round agreement
9. Ushiba-Strauss joint statement
10. Unemployment rate
11. Total
12. With Japan
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(2) 200
(10~~f,~~=)L)
10

.
~ . 250
.
.
.

(s) �
8 ~
.
' + � 300
.
.
~ . (4) (F3)
� c i ; � ~r�
a
. .
:
.
.
.
. ~
.
4
~(5)
ll Ib ly tlU nl (s~)(6)
Japanese Trade with Americs and the Yen Exchange Rate
Key: 1. (billion dollars)
2. Yen exchange rate
3. Exports to America
4. (yen)
5. Imports from Americe,
6, (year)
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150

100
(3)50
~
-50
~
-100
-150
_ 'I'he U.S. Balance of Trade (.from U.S. Department of Commerce statistics)
Key: l.
2,
3.
4.
5.
6.
(hundred million dollars)
With the EC
Surplus
Deficit
(year)
With Japan
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20
15
(100 h8) to
12 5
11 0
i
%
U
4
!Y
Market Share of J'apanese Autos and Color Television Sets
in the United States
(from the 1981 Economic White Paper)
Key: 1. (million vehicles)
2. Jape,nese automObiles sOld
Total automobiles sold
3. Market share
4. Total automobiles sola
5. Japanese television sets sold
Total television sets sold
6. (million sets)
7. Market share
8. Total television sets sold
COPYRIGHT: Asahi Shimbunsha 1982
955t
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(7)ii P
(5) _
~~L %!0 ~
~t ~
(t0ofi 10
�
10 X
g
8
. ~Fll
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U.S.-JAPAN ECONOMIC FRICTIONS
Tokyo KOGYO SHIMUN in Japanese 10 Me,r 82 p 3
[Interview with Yoshizane Iwass, chairman of the Keidanren Foreign Relations
Committee; interviewed by Akio Ma,tsumoto, member of the editorial staff]
[Text] Explanation of "Steady EEfort"; Flexible Response Necessary
[Question] Because of the huge U.S. trade deficit with Japan, trade tensions
have flared up again between the United States and Japan. In particular,
protectionist trade legislation has repeatedly been presented in the U.S.
Congress in the iaame of reciprocity. How do you view the stormy state of
U.S.-Japan relations?
[Iwasa ] The irritation and Prustration felt by the United States toward
_ Japan is quite severe. I have been working for dialogue and haxmony in U.S.-
Japan economy from the standpoint of the private economy for the last 20 years,
and the present situation closely resembles the tension between the United
States and Japan in the 1970's. I am now in the process of reviewing the
minutes of ineetings between U.S. and Japanese businessmen in the early 1970's.
The present attitude of U.S. businessmen and government officie.ls towaxd Japan
= is no different from that 10 years ago.
In the early 1970's, President Nixon was having difficulty in handling the
end of the Vietnam War. The afterefPects of the Vietnam War weighed heavily
- on America. Corporations had lost faith in the future and the entire country
felt frustrated. The heavy burden of war expenses had resulted in a loss of
confidence in the dollar, and the deficit in international trade was getting
worse. There were disturbances in the universities and increased drug use.
It was a time of apprehension and confusion. In the midst of these conditions,
the Japanese trade surplus with the United States reached a peak of $4.2
billion in 1971. The people of the United States were already frustrated by
the effects of the Vietnam War and this rubbed them the wrong way. In terms
of the overall scale of trade at the time, this was the equivalent of $10
billion now, so the effect of the imbalance was severe.
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In the present situation as well, the Americans are showimg increasing
frustration at e, combination oP unfavorable circumstances. In addition to a
huge trade deficit with Jape,n last yeax of $18 billion, there is recession and
mass unemployment and a slump in major industries.
The reciprocity bill submitted in Congress is the response of politicians
facing elections in November who are sensitive to the problems and Peelings of
- people in their electoral districts. We could say that Prustration directed
at Japan has resulted in a political explosion.
[Question] Washington responded sternly to the LDP Ezaki mission (headed by
~ Masumi Ezaki, former minister of international trade and industry) which
visited the United States representing the prime minister. Secretary of
Commerce Baldridge threatened: "There is no time left. If you do not take
some dramatic reasures quickly, it will be impossible to prevent passage of a
reciprocity bill."
[Iwasa] 2 heard the phrase "Japan should take dramatic measures" ffiany ti.mes
during the period of U.S.-Japan trade friction 10 yeaxs ago. Japan should not
panic or put up emotional resistance in response to this pressure. We should
take it calmly and take dePinite action in response. In contrast to the
situation 10 years ago, the remaining import restrictions he,ve been cut down
to 27 categories. With the exception of agricultural products and two or
three special areas of industrial products, there are almost no restrictions
left. Because tariff rate reductions have been carried out 2 years ahead of
schedule, Japanese tariff rates are smong the lowest in the world. The
schedule for capital liberalization he.s also been moved up, and there are no
business categories which are off limits to investment. Our defense spending
has been criticized in terms oP a"free ride,".but a great effort is being
made in this area also in spite of difficulties in administrative reform and
_ criticism from the opposition paxties of excessive military buildup. Of
course we axe implementing self-imposed restraints on auto exports following
similax action in textiles and steel. This continuing steady effort should be
clearly explained.
[Question] When the government implemented improtiements in 69 nontariff
barriers, it felt like it was the same as ta,king a leap from the platform of
Kiyomizu Temple, but the United States said that this was insufficient and did
not approve at a11. Also, the list of Japa,nese trade barriers presented to a
Congressional hearing on Japan by the administration included such things as
the electoral district system and administrative guidance and other things
which constitute excessive interference in Je,panese internal e,ffairs or items
which have already been taken care of. We seem to be poor at public relations
and it seems that we have failed to make an effective effort at dissolving
misunderstanding.
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[Iwasa] Perhaps it is the Japanese or the Japanese mentality or our tradi-
tional Gustoms, but we do not stand up for ourselves enough. We are very
poor at advertising our own efforts and strong points. Since ancient times,
We have been good at importing culture from overseas and adapting it to Japan,
but we have not been skilled at exporting Japanese culture overseas. This
situation cannot be changed overnight.
As you have pointed out, Japan has taken substantial measures such as making
improvements in 69 nontariff barriers, but unfortunately it is not suffi-
ciently recognized. It is a fact that many of the nontariff barrier problems
involved details of procedure such as import inspection procedures and stand-
ards. However, the fact that Japan has responded with small measures and has
been slow in making decisions has given the unfortunate impression that
"Japan is a sneaky, sly country that will not do arything unless you apply
pressure." We need to reflect on the way our approach has increased the mis-
understanding of Japan as a closed society. We should do what we ca.n, but
there are things that we cannot do, and we should not give in to demands that
will destroy or destabilize Japanese so ciety.
[Question] One can understand that maintaining relations with the United
States is essential to Japanese security, but when it comes to negotiating
with the United States, we fall in line totally with Washington. In the
- present U.S. economy, the snow belt in the north anrl east is a very strained
region with mass unemployment and many industries in a structural recession.
This is where there is strong criticism of Japan. In contrast, the sun is
shining on the sun belt region of the s outh and west. There is low unemploy-
ment and great prosperity and a good feeling toward Japan. Looking at this
map of changes in the U.S. economy and society where the south and west are
high and the north and east are low, don't we see the need for a flexible
approach to the t3nited States?
[Iwasa] Certainly, the United States is a large country and it is dangerous
to evaluate and respond to it only in terms of the political power in
Washington and the economic power in New York. The United States is now
going through a period of revolutionar-y historical changes and there are
growing differences of success and failure between regions and industries.
The basic industries of the snow belt, especially the Detroit auto industry,
axe losing their footing and are faced with almost 20 percent unemployment.
In the sun belt of the south and west there is a rush to advanced technology
industries. The region is in a period of prosperity and unemployment is around
5 percent so there is almost flzll employment. If we take measures for Congress
with this regional difference in mind, we will find differences in the degree
of frustration felt by the Congressmen facing elections this fall. In the
sun belt region, Japanese industry has a good reputation. Also, when we appeal
to Americans who are experts on Japan, we must carefully gear our approach to
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the individual. There Qre experts on Japan who are friends of JapQn and
oi.hers who know Japan xell but who are responsible for many anti-Japanese
statements and actions. There are others who do not know JapQn well hut are
friendly to Japan. We must analyze this carefully and make our approach
accordingly.
COPYRIGHT: Nikkan Kogyo Shimbunsha 1982
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NO IbMDIATE REMEDY FOR TRADE FRICTIONS
Tokyo YObffURI SHIMBUN in Japanese 3 Apr 82 p 7
[Article by Rinjiro Sodei, professor at Hosei University]
[Text] In common terms, the present relations between the United States and
Japan are like those of the head of an old merchant house and a chief clerk
who has succeeded with his master's help. America is like an old store with
an established reputation which is declining because of many years of poor
management but cannot give up its paternalistic attitude and pride. Japan, on
the other hand, received help in the beginning, but now it is convinced that
its present prosperity is the result of its own hard work. Because of its
quick rise to success, Japan has the naxrowness of vision and the vulgarity
common to the nouveau riche.
If this analogy were pushed further, we might conclude tha;, the difficulties
in U.S.-Japan relations would likely be solved to a great extent if Japan would only comply with America's requests and repay its obligation. However,
the actual situation is not that simple. The basic cause of the problem is the
decline of the American econoay produced by policies from the great historic
mistake of Vietnam to the present military buildup and other factors such as
high interest rates and a decline in the will to work, which have nothing to
do with Japan.
In spite of this, Japan was singled out as the enemy because it was the
perfect scapegoQt for American politicians. Congressmen who are up for
reelection this fall are in a mood to do ariything to protect their seats in
Congress. When we look under the paternalistic attitude America has taken
toward Japan since the occupation, we find an attitude of racial prejudice
coiled up there.
Therefore, if the Japanese side reacted in the sa,me way by making charges of
a"new yellow peril policy" or a"return of the anti-Japanese sentiment of the
1920's," matters could get out of control. For this reason, there is no other
course but to show understanding of the American position and speak softly.
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.~Dw- i,he causes oi' the problem lie on the American side, there are no
"ciramatic measures" available for Japan to take. It is necessary to implement
the measures such as abolishing import restrictions on agricultural products,
which Americe, is demanding as a way of covering up the real problems, and make
this clear as soon as possible.
The LDP is said to be planning to send Diet members who have confidence in
their linguistic ability tio the United States to explain the Japanese position,
but it is doubtful that this could be effective. Learning to understand
American feelings might be educational for the Diet members, but the Americans
to whom they would be speaking would not be the same as the support committees
in their own electoral districts. There is a good probability that they would
repeat the mistakes of someone like Foreign Minister Sakurauchi who used to
use the puzzling self-introduction: "My name is 'Cherry'." The embassy and
consulates in the United States would have to waste a lot of time taking care
of them. If Japan has something to say, it would be much more effective to
send someone of the caliber of Chief Ga,binet Secretary Miyazawa, who has a real
command of English, and have him make an appeal to the American people on a
morning television news program.
In any event, a last-minute patching up will not work. If has often been
pointed out that Japan has a weak "transmitter" for explaining itself to the
outside world. Japan's public relations with regard to foreign countries are
far inferior when compared with the scale of American activities. There are
U.S. Culture Centers located in all the major Japanese cities to disseminate
information about the United States. An official Japanese Culture Center was
opened in Washington only last year, and it is only recently that 14ITI began
to publish an English-language magazine to explain the actual circumstances
of the Japanese economy.
While there is a flood of information from the United States coming into
Japan, the Japanese system for correctly analyzing this excessive mass of
information and using it to make policy is still quite weak. The system for
receiving information is weak, and the exchange of information between the
vertically organized government ministries and agencies does not go smoothly.
Even though there are more foreign correspondents in Washington from Japan
~ than from ar~y other country, we are still starving for information and for
the analysis of information. -
I believe it is necessary to have observers in Washington from mar~y different
fields, in some other capacity than that of foreign correspondents, who stay
there for 5 or 10 years. Otherwise, we will always have a lot of "current
affairs experts" with uncertain credentials who join with special interest
groups and promote things that the American people do not necessarily want,
such as making the security treaty bilateral or imposing a security tax on
products imported into Japan.
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Fi cially, I understand tha.t there are people in the government who are convinced
ttial; the trade tensions between the United States and Japan can be eliminated
if we: comply with the Rea6an administration's demand for taking an increased
share of the defense burden. This is an extremely dangerous, near sighted
approach. Many people in the United States are charging that the present
administration's plan to expand defense, especially by expanding nuclear
armament, will destroy the American economy. Japan should take the path of
providing economic aid to the developing countries and seeking detente with
the Soviet Union, not that of joining the anti communist movement of the Reagan
administration and buying expensive weaponry. It would ultimately be to the
advantage of U.S.-Japan relations if Japan could cool the ardor of the United
States.
COPXRZGHT: Yomiuri Shimbunsha 1982
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THINKING PROCESS IS ROOT OF FRICTION
Tokyo SHUKAN TOYO KEIZAI in JQpe.nese 20 Ma,r 82 p 11
[Interview with Kiyoshi Sakai, executive director of the Optical Industry and
Technology Promotion Association, by editor]
[Text] The flames of trade tension are burning higher and there is even a
sense that Japan is the subject of persecution. Isn't there something
fundamentally wrong about this situation? When Mr Sakai was serving in MITI,
he was involved in international economics for mar~y years, and he served in
the Japanese consulate in New York for almost 4 years, so he is well versed in
U.S.-Japan trade issues.
[Question] What do you think is the core of the U.S.-Japan trade problem?
[Sakai] I believe a difference in ways of thinking is at the root of the
problem. Americans and Europeans think that anything that is good for them
will go over in ar~y other country. The Japanese have the opposite preconcep-
tion: that foreign countries will always be different from Japan. Therefore,
when the Japanese try to sell something in a foreign country, they make
changes in it. When the Europeans and Americans cannot sell something in
Japan, they think that it is because Japan is doing something suspicious.
This difference in approach has remained the same from the past to the present.
[Question] What should be done?
[Sakai] It is necessary once and for all to clarify the baiancesheet of
responsibility for both sides. If Japan is found to have certain responsi-
bilities on this basisn then it must carry them out. However, as long as we
continue to make small, one-sided concessions, it will be impossible to solve
the overall problem.
- [Question] What is the responsibility of the American side?
[Sakai] It will take time, but the United States must make plant and equip-
ment investment to increase its supply strength both quelitatively and
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quaiititatively,.and make a full effort to increase productivity and improve
labor relations. Etiren if it takes time, there will be no solution to the
problem unless America moves in this direction. The same thing goes for
Europe. There is an even greater need there than in America for increased
productivity. Also, they must make a greater effort in exports.
[Question] What About Japan?
[Sakai] As quick measures for the time being, it is natural that Japan
should voluntarily restrain concentrated outpourings of exports, abolish the
remaining import restrictions, and simplify import procedures in addition to
expanding domestic demand. Also, the foreign exchange rate should be made
more active. If the yen rate increased, it would absorb a large part of the
trade imbalance. Therefore, we should repeatedly press the Japanese position
against American policies which keep the yen from rising.
As long-term measures, we should promote local production abroad to help
expand employment in other countries snd contribute to the world in the areas
of new technology and culture. As Japan grows larger, it is important that
we have the people of the world feel that it has good things to offer.
COPYRIGHT: Shukan Toyokeizai 1982
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DIFFEREIV(ES IN SITUATIONS
Tok,yo JITSUGYO NO NIHON in Japanese 15 Apr 82 pp 82-86
[Article by Jiro Tokuyama, executive managing director &nd president of the
Nomura Me,nagement School]
[Text] American Pressing for Itepayment of Debt.
Everyone knows that the recent tensions over trade and defense have reached
a deplorable state, but be that as it may, this year is marked by an ominous
_ groundswell building up all over the world.
The "household affairs" oP the Soviet bloc countries, Europe, and the develop-
ing countries, as well as the United States and Japan, have become extremely
difficult and complicated and are getting worse. Although there were some
minor conflicts before now, there was still a margin of prosperity in the
world so America's attitude toward Japan was not so severe. Even though it
talked tough, the threats were seldom carried out to the letter. However,
this year the United States is in a recession, and although the fundamentals
of the Japanese econony appear to be a11 right with just a glance at the
domestic situation, there is a creeping recession that is not so benign as it
seems.
Previously, the American negotiation tactic with Japan was to talk tough in
the beginning and later to work out some sort of compromise. This year, there
was a total change. Of course, the United 5tates has mar~y misunderstandings
and misconceptions about Japa,n, but it un.derstands Japa,n mkch better than does
Europe. However, this time the United States is taking & firm position of not
allowing "selfishness" on the part of Japan. It seems to be demanding
immediate repayment of all prior debts.
As always, both sides have reasons for their positions. However, before Japa,n
attacks its opponent, it needs to reflect on its own past actions. First of
all, it is a fact that Japan is not making a contribution to the world befit-
ting a great economic power.
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;;inc(~ the United States is in Qn election .year, there are people making
strongly political statements, and the present situation is characterized by
the large number of frustrated people among the general populace. Japan must
take appxopriate action with sufficient attention to timing.
Time for the Prime Minister To Ma,ke a Decision
Certainly, Japan has moved up the schedule of promised tariff reductions and
has made improvements in 69 nontariff barriers. And it is announcing that it
will make further efforts. However, I do not believe that this alone will
satisfy the United States. The U.S. market is taking 25 percent of Japanese
_ imports and it is supplying a large amount of Japan's food and livestock feed,
as well as protecting Japan under the terms of the Mutual 5ecurity Treaty,
- especially by providing a nuclear umbrella. It is clear that Japan could not
go on ip any of these things were cut off.
The United States is having diYficulty with the problem of relative militai-y
superiority with regard to the Soviet Union, and its economic recession is
getting worse. It cannot afPord to be as indulgent toward Japan as it has
been in the past.
Regardless of the position oP the administration, the U.S. Congress will not
be satisfied unless Japan takes the "dramatic" action called for by the United
States. In other words, Japan must do something about the quota system for
- oranges and beef, the symbols of the closed Japanese market, as well as a wide
range of items including tobacco, advanced technology fields, finance,
insurance, distribution, and data communications.
Japanese consumers cannot understand why they must eat beef, rice, and wheat
which costs several times the price on international markets. They cannot
agree with something that is so wound up with vested political interests.
Up to now the Japanese Government har taken only stopgap measures which put
- off the problem a day at a ti.me. Naw it is necessary to take more drastic
measures. This cannot be done with the bureaucrats' usual time-consuming
consensus system of making decisions in which the decision is built accumula-
tively through a strict process from the bottom up. Also, nothing can be done
if it is obstructed by the group ego of a few roliticians. i''he only solution
is for the pri.me minister to make bold decisions in a"top down" manner on the
basis of strategic thinking from a broad point of view.
= Unfortunately, however, I do not believe that.it is possible to expect
"dramatic" action from Japan's top leadership. At ar~y rate, it is necessary,
for better c: worse, to ask why- a dramatic "opening of the country" is not
possible for Japan. We should put a spotlight on the realities of the
Japanese society and economy and deepen-our own understanding.
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"pecial Japanese Underst$nding oP Peace
First let us consi3er why Je,pe,n. has become so insu].ar. Although the discus-
sion may be somewhat roundabout, let us reflect on the reasons for the total
sygtem in Japan being that way.
First, after being defeated in the war, the Japanese promised the world that
- they wnuld renounce war, cease to attempt expe,nding their territory through
war, and live in peace within their island country. I believe that was fine
as far as it went.
Hokever,the problem now is the diPficulty of defining "fairness." If the
- United States and Japan both had the same land area, population, and resources,
it would be easy to define fairness.
However, the United States has twice the populQtion of Japan but 27 times
the land area. Also, it is rich in resources. If the U.S. ratio of popula-
tion to land area were applied to Japan, only 8 million people could.live in
this island country. However, almost 120 million Japanese live here. In
other words, the given conditions are much worse for Japan in comparison with
the United States right from the stert. Japan and the United States did not
line up at tne same starting line and begin running with a shout of "Ready,
set, go:"
I am afraid that many Americans are not aware of this difference in the given
conditions and unconsciously act on the assumption that the iTnited States and
Japan both sterted under the same conditions. There are probably mar~y
different views of Japan. Be that as it may, modern Japan built up its unique
system after the war'by thinking up ways to live in harmony under the strained
conditions of a train filled to capacity.
Undsr conditions of a lack oP opportunity and ways for losers in society to
make a comeback, "packages" were created within the total system of Japan
such as the National Railwayrs fami.ly, the MITI fa.mily, and the Mitsubishi,
Mitsui, and Sumitomo groups. Mutual tacit agreements that "we will not touch
your territory" wer.e made, and the Japanese were samehow able to function
harmoniously.
Also, the u'apanese are not the kind oP people who could lie under the palm
trees in the Soutn Pacific, eating bananas and taking it easy. They like to
work and are bright and energetic. Therefore, if the type of competition
found y^ che United States and Etizrope were suddenly implemented in Japan, a
fight would break out in the "crowded train" that would lead to bloodshed. If
we started.he,ving open duels like the Americans do, there would be mar~y
casualties.
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Therefore., the Japa.nese prize peace Qnd hesitate to interPere in each other's
territory. The laxge companies use the syetem oY lifetime employment, so the
employees work together and_make sure tha.t no one gets off the train until
they get to the destination. These groups naturally consolidate and become
str'onger while at the same time they become insular and exclusive.
J
The Japanese are accused of being unable to say "yes" or "no" clearly and of
making decisions which are "irridescent." However, this is a logicel method
of avoiding P�riction built up from the living wisdaQn oP mary years. Fram
outside Japan, it seems very irrational, but is very sensible under Jape,nese
conditions.
Japan on the Verge of Sinking
When Japanese leaders speak, they always urge their employees to become inter-
national or to have international awa,reness. However, when these employees of
the top companies go overseas, they preside over workers who are clearly dis-
criminated against in status as "loce.l hires." They work with their eyes on
Tokyo and do not adapt to the local societY. 2'hey aend their children back to
- Japan to receirre the education that will equip them for life in Japan's closed
society. If the leaders really want Japan to become more open, rather.than
using words they should take action on the system under their own Peet.
However, this entire system is based on Japanese-style logic and designed -
for functioning without trouble under the strained conditions Japan he,s been
under. Now that international relationships have become more closely inter-
dependent, this Japanese system has become a problem, and the situation is not
as simple as before. It cannot be entirely changed overnight, but to begin
with, it is at least necessary for us to become aware that we are living in
this kind of Japanzse system.
The Jape,nese elite go from college to certain government offices and large
- corporations. They spend their whole lives in the same group, competing with
and comforting their Pellows, so they never know what it is to be alienated.
_ Although they may have a conceptuel understanding of the feelings oP people
who are alienated or outsiders, they have no real understanding of them at all.
Therefore,the. Japanese elite can proudly and ingenuously say that Jape,n is
making great progress in liberalization and is no longer cloged at all.
Group solidarity and insularity cQn be seen in the strength of group solidarity
among veterans of the old army and navy, the abnormal practice in the univer-
sities of exoluding foreign professors, and the insulsrity of bureaucratic and
~ political cliques. Group solidarity and insularity are two sides of the same
coin. To put it in extreme fashion, the.JQpanese groups not only exclude
foreigners, they also exclude each other.
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- I have already stated that this propensity is ths result.oP th.e particularly
J desperate conditions found in Japan. If this is correct, our measures for
internationalization and the shift to a mor.e open system which America is
demanding cannot be undertaken impetuously. These changes wiil require quite
a bit of time.
Although it may be an exaggeration, we can say that Japan is on the verge of
sinking. But in spite of this, most of Japan's political leaders have their
attention taken up with d"omestic matters and.do not understand the importance
of Japan's position in international society.
Aim at International Constituency
Probably what I have said is vaguely agreed upon by most sensible Japanese.
We are placed in difficult conditions. However, we cannot change the trend
toward internationalization, so some action must be taken.
There are probably many methods which could be used. For example, in order to
get free from Je.pan's strained conditions, Japanese politicians should have
long-range vision and, forgetting the national boundaries of Japan, cultivate
a"Japanese constituency" in other countries, including at least Australia
and New Zealand, the Anglo-Sexon countries which have the most vitality of an}r
countries on the Pacific perimeter; Mexico, which has a population of 70
million people, is beginning to produce oil, and is interested in Japanese
technology and business methods; the ASEAN countries, the semideveloped
countries of Asia; the United States and Canada. If the politicians can
spend as much money and efFort as they do in their domestic electoral dis-
tricts, they should be able to make an effort to build a consti.tuency in the
arena of international politics. Ewen though Japan has become the second
largest economic power in the world, it does not now seem to have any bargain-
ing power or power of persuasion.
In an election for a temporary seat on the United National Security Council,
Japan is even defeated by countries like Bangladesh. When Nagoya was a
candidate for the site of the Olympic games, there was not one country which
voted for Japan.
If we think of this in terms of the relationship between executives and their
subordinates in a companV, the problem is quite clear. Unless you have some
authority yourself it does no good to argue with your boss. If you are a
computer expert and feel that "the company computer system could not function
- without me" you me,y have some bargaining power. If you are not too arrogant,
your opinion ma.y have some effect in the company.
Japan may have certain opinions about the eme~gence of trade tensions, but the
other side has its own views, so it comes dovn to the matter of bargaining
power.
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Even though it is necessary for Japan to build an i,nternational constituency,
it is not necessary to do so 3n fe,r away and hard-to-understand places such as
Af rica and the Middle East, poor countries like India, Pakistan, and Bangladesh
or the countries oP South America where there is extreme inflation and frequent
changes of government. Yy "Pacific perimeter thesis" holds that this can be
do ne best among the Pacific nations with which we axe most familiar. However,
I do not advocate joining together with the Asian nations alone.
A "Living" Sense of DePense
There have also been tensions over defense, and it has been chaxge.d that
Japan's defense effort is not commensurate with its economic power when com-
pa.red with the anti-Soviet military buildup of the United States. However,
this argument depends on diPferences in viewpoint on the Soviet threat.
- In both Japan and Europe, there is an antiwar philosophy and a strong dislike
for war. However, European experts on Japan say that, compared to the move-
m ent in Europe, the antiwar movement in Japan is still on a sentimental level.
Japan was bombed by 8-291 s and atomic bombs, but it did not have the same
"bloody" experience of war as Europe. In Europe, many people had the experi-
ence of seeing enerqy soldiers tramp into their own homes, rape their wives and
kill their daughters with a bayonet. The horror of places like Auschwitz
staggers the imagination.
Japan, however, surrendered unconditionally, and although there have been a
number of little spats since the occupation, Japan has prospered greatly since
the war ended. Some people say sarcastically that it was a good thing that we
lost to America. There axe even some people who have forgotten the hardships
of the war. If northeastern Japan and Hokkaido had been occupied by the Soviet
Union, Japan would probably have the same concern wi�?7 defense as West Germa,r~y.
The Japanese who were taken prisoner in Siberia and "prayed to the dawn" are
very serious about defense. Those Japanese who had bitter war experiences
feel the necessity of defense very strongly.
I do not know the Soviet people well. However, both Kissinger and Brezinski,
even though they do not get along well personally, said that Secretary of
State Haig should not have talks with Foreign Minister Gromyko at this point.
They have a strong distrust of the Soviet Union. When I see the sincere con-
cern of these two men, I feel that there is something extraordinary in the
American fear and distrust of the Soviet Union.
The Japanese are surrounded by the four seas and did not have a raw, bloody
experience oY Kar, so it is natural that they do not feel the same feaxful
threat as the Anericans in their view of the Soviet Union. Also, it is said
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that the sea around Japan is the equivalent oP 40 army divisions, and the
Japanese do not unrierstand ths Yeax felt by West Germany, which is adjacent to
the Soviet bloc m land.
In considering Japanese armament, the potential enemy should be identified,
but just like the recent Diet debate over a 1 trillion yen tax cut, it is
considered sensible for domestic reasons not to make this clear. As long as
the Socialist Party continues to advocate the position, rare in today's world,
of unarmed neutrality, it will be difficult to clearly uniPy domestic opinion.
Obtain a Commitment from America
I make this explanation to Americans: "Please remember the Vietnam War when
the soldiers on the front could not fight efPectively because public opinion
was divided in the United States. At least 40 percent oP the Japanese, those
who support the opposition parties, have different views on defense Pram those
- in the ruling party. Therefore, even if we had a greater military capacity,
we could not use it effectively." However, recently, they have taken this as
nothing but an excuse.
From the American point of view, when a U.S. aircraft carrier is patrolling
the Indian Ocean,Japanese tankers pass through those waters one after another,
almost no ships but the Japanese. So they say that they wonder who they are
doing this for. Then when they come into port at Yokusuka, they are greeted
with "Yankee, go home:"
Now an oil pipeline is being constructed and the United States and Ezrape will
no longer need to pass through the Holmes Straits. From their point of view,
it will no longer be necessary to protect the Holmes Straits. If worse comes
to worst, just what is Japan going to do?
Another very important thing is that Prime Minister Suzuki recently met with
President tteagan and promised to make a greater defense effort, using the
words "greater effort." The next day in a speech at the Washington Press Qub,
he said that Japan would protect the sea lanes within 1,000 nautical miles of
Japan. These two statements by the prime minister constitute a public com-
mitment.
In foreign relations, credibility is of absolute importance. The free nations
want the United States to be strong, but do they desire a strength that is
mostly military? Of course, according to America, strong mi.litary power is
necessary to back up diplomacy. But from our point of view, the credibility
of American diplomacy is the most important thing, and we are troubled when
American foreign policy changes or when Secretary o:f State Haig and Secretaxy
of Defense Weinberger make differing statements. For example, the United
- States at one time showed clear 3ispleasure at Japan moving closer to Beijing.
Then, one day, Nixon and Kissinger suddenly shook hands with Beijing. This
was a bitter experience.
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Now the United States is asking Japan to huild up its defense. If the United
5tates and the Soviet Union suddenly decide to undertake arms reduction
because oP economic diYficulties in their "household affairs," we wonder just
what position Japan will be left in. Trustworthiness is important in foreign
;':21ations. I believe that it is important for Japanese and American leaders
to discuss this matter with intellectual courage, ootain co2mmitments from
each other, and make a record of the agreement.
We cannot stand for our leaders continuing to go to America and pleading
- "please t ake care of this matter" as if they were coming from a local to a
national government office to lobby for some concern. We would like them to
have serious discussions and make judgments on the situation based on a sound
understanding of the international situation and a sense of history. We can-
not stand for diplomacy which is like the singsong reading of documents
prepared by "the staPf" which often occurs in the Diet.
Proposal for "Dramatic Action"
I have stated a number of views on trade and defense aspects of U.S.-Japan
relations. As a concluding opinion, in terms oP a specific strategy for
Japanese survival, I believe that "dramatic action" must be taken in all these
areas even if it means extensive domestic sacrifice in Japan.
Working-level trade discussions were held between U.S. and Japanese officials
on 9 and 10 March. As a result, the Foreign Ministry decided that separate
reports would be made to the chief cabinet secretary by June rather than a
comprehensive propose,l. I believe that it is necessary to reflect on the
effect on the usual practice up to this point of acting in small increments.
In past history, Plenipotentiary Jutaro Komura (foreign minister) concluded a
peace treaty with the Soviet Union even though he was called a traitor by the
people of Japan. Etiren before World War II, Prince Saionji and other brave
patriots counselled avoiding trouble with the United States and Great Britain,
even though they were attacked by young reformist bureaucrats and restless
young army officers, because -they were concerned about national survival.
Recently, PaTI Councilor Amaya (serving at the time) concluded negotiation with
the United States over automobile exports in line with the nationa,l interest
although he was sharply criticized by certain people.
Emotional views are usue,lly well received, but in spite of this, I believe
that we should make s rational, caUn assessment of Japan's pos�ition in the
world and its actual power, and take bold mea,sures to insure our national
survival.
In the present situation, can Japan survive if it makes enemies of the United
States and Great Britain? It is time to consider carefully whether it would
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be good for Japan to take tIie isolationist path again. The matter of beef and
oranges has hecarne Q laxge symbolic proble,m. Why not take drastic measures to
eliminate this problem in consideration oP the national interest? Of course,
the maximum aid should be given to those people in Japan who would be hurt by
sueh measures. Positive measures should also be taken in tlie fields of
fina.nce, insurance, and data comunications.
COPYRIGHT: Jitsugyosha no Nihonsha 1982
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NEED FOR JAPANESE SELF CONFIDENCE
Tokyo THE JAPAN EcONOMLC JOURNAL in English 23 Mar 82 p 20
[Interview with Toshihiro Tomabechi, president of Mitsubishi International
Corp and concurrently president of the Japan G'hamber of Coffinerce of New York,
Inc by NIHON KEIZAI SHIMBUN's senior staff writer Akira Kojima, who until
recently was a correspondent in New York]
[Question] What do you think of the protectionist moves in the United States
from the viewpoint oP a man actually doing business in America?
[Tomabechi] For a man living in the United States for a long time, the
current protectionist moves in America feel highly abnormal to say the least.
The situation is completely different from that in 1971, when frictions
developed over textile products and the,t in 1978 when color TVs, steel products
-and motor vehicles got involved in trade disputes. In those times, trade
frictions were caused by specific commodities and both the Japanese Government
and private circles were able to pinpoint their problems and take measures
specifically designed to solvf: them. At present, however, Japan has to deal
- not with any specific problems, but with an imponderable sentiment that "Japan
is unfair." Any stopgap measures under the circumstances will be of no use.
When some Americans talk about the closed nature of Japanese markets, they are
, guided not only by si.mple misunderstanding but by perverse willingness to
_ embrace distorted views.
[Question] What do you think are the reasons for the rapid ballooning of
anti-Japanese feelings in the United States?
[Tomabechi] It is only two years since former President Jiaany Carter called
Japan the closest of his country's allies. The speed with which the Americans'
sentiments toward Japan have changed is simpl}r staggering. Some of the most
conspicuous reasons�for the drastic change are: 1) election year politics in
strong need oP a handy scapegoat for the country's ills, 2) huge unemployment
running up to.9.5 million, 3) $18 billion deficit in trade with Japan, and
4) growing misgiving about the Reagan Administration's economic policies.
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Iiceprr tiown, the Mu�ricttnu rtre tnw YirmlY cotlvinaed I.htsL, .[n urdrr ta) ft,ruv
_ Japai to change its policy, they have to tighten their pressure more strin.-
gently than ever. Another reason obviously is the Japanese people's notorious
sense of amae (dependence). Iiaving been helped to their feet by the United
Stktes in the immediate post war years, the Japanes.e unconsciously consider
the Americans their big brothers or teachers. So, they often tend to depend on
the United States, thereby unwittingly touching oPf the belief among the Ameri-
cans that "Japan is a free rider."
[Question] Are "Japan hands" also riding on the crest of protectionism?
i
[Tomabechi] That certainly is a problem. Although they personally sympathize
with Japan's predicament, many "Japan hands" are unwilling to express their
true feelings in the face of the powerf`ul anti-Japanese feelings whirling in
the United State,s. At a meeting in Washington, D.C. an American scholax deeply
versed in Japanese affairs told me that the Americans and the Japanese are now
in two completely different mentsl states: the former, frustrated and angry
from mounting troubles both within and without the country, are getting so
hysterical that they are losing their reason, while the latter, still largely
complacent and self-centered, are paying too little attention to others'
troubles. The dominant feeling in 'Uhe United States is that, if Japan does not
properly respond to the Americans' distress signels, it will have to willy-
nilly follow the road to retaliation by way of the reciprocity principle and
isolationism. The trouble is that such a sentiment is by no means limited to
Washington but is rapidly spreading all over the United States.
[Question] How should Japan cope with the United States if it is really
losing its reason?
[Tomabechi] Japan should first of all shed all the vestiges of its sense of
dependence on the United States. It should have strong confidence in itself.
It is be,cause of the lack of confidence that Japan often fails to act swiftly
and positively, thereby giving the impression to foreign observers that Japan,
in spite of its economic superpower status, refuses to take responsibility and
a leadership position in world affairs. True confidence in itself leads a
nation to become relaxed, enabling it to make candid statements of its position
rather than to make poor attempts at self-justification.
[Question] What concrete measures do you propose?
[Tomabechi] I have been in the United States for many years and in the recent
year and a half, I have observed a strong and rapidly expanding mood among
leading Japanese corporations to seriously plan for co-prosperity with the
United States from a long-range point of view. Short-term ecorlomic frictions
between Japan and the United States are bound to crop up one after the other.
If the two countries go into truly long-term relationships based on close
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businPss cooperation, joint ventures and technological exr.hanges, however,
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