Japan

by Edwin Reischauer

  In local elections in April 1975 Minobe was reelected governor of Tokyo, and progressives came to hold the governorships of three of the four most populous prefectures, but on the whole the local elections were a victory for the LDP and their allied independent conservatives. A new political upheaval, however, was brewing. At hearings at a Senate subcommittee in Washington in February 1976, it was revealed that the American Lockheed Corporation, in connection with sales of military aircraft to Japan the previous year, had passed several million dollars to certain Japanese politicians through a dubious right-wing activist and supposed power broker named Kodama Yoshio. The allegation stirred up great indignation among the Japanese people, who are very sensitive to issues of political corruption and financial scandals. Tanaka and other LDP politicians, as well as the great trading firm of Marubeni, were implicated. In March Kodama was indicted, and Tanaka was briefly arrested in July and formally indicted the following month. All this political excitement delayed for the first time the passage of the annual budget beyond the usual date of the end of March. In June Kono Yohei, the son of a former LDP leader, deserted the party with five colleagues to found the New Liberal Club, which sought to create a young and fresher image than that of the older party leaders, and in August Fukuda and Ohira, joined by 70 percent of the LDP Dietmen, called for Miki’s resignation.

  The coup de grace for Miki was the lower house election held on December 5, 1976. In large part because of the desertion of the New Liberal Club, which elected seventeen members on a little over 4 percent of the vote, the LDP share of the vote fell 7 percentage points from 48.86 to 41.78, and its seats declined to less than a majority for the first time, though a slim majority was soon restored by the usual joining of the party by a group of independents. Ironically, Tanaka and most of the other implicated politicians were reelected by their loyal home followings. In the face of this election defeat, Miki resigned and on December 24 was followed as prime minister by Fukuda, who as a former finance ministry bureaucrat was cast in the same mold as the earlier LDP leaders.

  In the House of Councillors election of July 10, 1977, the LDP majority in the house slipped even further from seven to four, and control of nine out of the main fifteen committees in the house passed to the opposition. This together with the 41.78 percent vote for the LDP in the lower house election of 1976 marked the low point to date of the party’s parliamentary strength. A substantial reshuffling of power in the Diet was widely expected at the time of the next election. Although no one assumed a take-over by the badly divided opposition parties, a breakup of the LDP seemed possible, and a larger role for the centrist opposition parties—the Democratic Socialists and the Komeito—seemed likely.

  Japan had undergone many vicissitudes since 1965, and a stormy future seemed predictable. The vastly expanded size and complexity of the economy were producing difficult new problems. Japan had become economically so large that it was being forced out from the safe haven of its own isolated waters into the open seas of world turmoil, and it was encountering rougher going than it was accustomed to. Neither Japanese nor foreigners were at all sure of its ability to master the transition. The surrounding world was decidedly menacing; relations with the United States seemed much less stable and friendly than in earlier years; the financial costs of dealing with pollution and providing greater social benefits were huge; and the domestic political situation seemed downright shaky. For all its extraordinary achievements since the war, Japan’s future appeared to be by no means secure.

  17

  THE ECONOMIC GIANT

  Despite Japan’s many problems, one thing was clear as it entered the 1980s: The country was a resounding economic success. Surprise at its ability to restore its shattered economy during the early postwar years had given place to a half-condescending admiration of the Japanese economic “miracle” and this in turn to a realization that the country was indeed becoming a major economic force. As it continued to grow rapidly through the eighties, it increasingly came to be regarded as an economic superpower—a veritable economic giant—comparable in its field of strength to the United States and Soviet Union as military giants, or China and India as giants in population.

  But what did it mean to be an economic superpower? To Japanese it was a gratifying concept that made them more self-confident and sometimes a little arrogant. It made the United States and Japan’s other allies expect from it a much greater contribution to world peace; it made the poorer nations count on it for more aid; and it made the Japanese themselves nervous about all these expectations and puzzled as to what their role in the world should be. Western commentators, joined by some Japanese, pointed out that in the past there had never been an economic great power that had not also been a major military and political power. Japan’s position as an economic giant that maintained a low political profile and eschewed major military might, they argued, was an anomaly. But the thought that Japan would inevitably become a military superpower made the other world powers uneasy and frankly frightened its neighbors. Japan seemed to be creating through economic strength the Greater East Asia Co-Prosperity Sphere that it had failed to achieve by arms during the war. Such ideas breathed new life into the old controversy in Japan over the Self-Defense Forces and the military relationship with the United States. The decade of the eighties, while establishing Japan firmly as an economic superpower, left it and the world still uncertain about its future. More questions seemed to be raised than were answered.

  Japan had not become an economic giant overnight but had achieved this status only through long, steady growth decade after decade. The magnitude of its trade disturbed old and familiar economic patterns and caused new frictions and anxieties. Whereas Japan’s foreign trade after the war had at first been overwhelmingly with the United States, it grew to embrace virtually the whole world. By the early seventies Japan was the first or second largest trading partner of every nation, communist or capitalist, in East and Southeast Asia, in some cases accounting for about 40 percent of a country’s total foreign trade. In the noncommunist countries Japanese goods flooded the stores, Japanese neon signs dominated the skylines of the cities, Japanese corporate affiliates sprang up like mushrooms, Japanese tourists marched in well-ordered ranks through the tourist attractions, and Japanese businessmen wandered everywhere. South Koreans feared that Japanese money was spreading corruption in their country and that Japanese economic imperialism might take the place of the old colonial domination; Thai students stirred up boycotts against Japanese goods; and Indonesians fulminated against the exploitation of their forests and other natural resources by unprincipled Japanese businessmen. Japanese grants in aid, loans, and investments were becoming crucial to the countries of the area, but there was a general feeling that Japan provided these on less favorable terms than did other advanced countries and that they were focused exclusively on Japanese rather than local interests. Communication with the Japanese was difficult because of their inadequate command of English, the usual language of contact. As fellow Asians, their strong clannish nature was resented more than the clannishness of Americans or Europeans.

  The Japanese were aware of their poor image in neighboring lands and the many frictions produced by their dominant economic role. They realized that, as a leading economic power, they must learn to think of their impact on the less developed countries and not exclusively of their own economic needs. They understood that they must treat these poorer countries with greater generosity and be more careful about local sensitivities. But it was easier to comprehend such matters intellectually than to change the attitudes and habits of the average Japanese businessman. The size of the problem was shockingly underlined for the Japanese as early as January 1974, when Tanaka made a goodwill tour of Southeast Asia and encountered anti-Japanese demonstrations in almost every country, including massive rioting in Indonesia.

  Martine Franck/Magnum Photos

  An earnest Japanese tourist group having the myste
ries of Notre Dame in Paris explained to it.

  Japan’s remarkable growth brought even more severe strains in its relations with the industrialized countries, particularly the United States. The GNP of Japan rose on average 10 percent per year until 1973, and after that, though proceeding at a slower pace, climbed at a considerably more rapid rate than in the United States and the other industrialized countries. Up until 1973 Japan doubled its GNP every seven years. This meant that a small and resource-poor country like Japan had to double its foreign trade every five years. The result was a rapid increase in Japan’s share of world trade, largely at the expense of the West. Its share had been only 2 percent in 1960 but had risen to 9 percent by 1973. The larger the Japanese economy grew, the more disruptive was its rate of growth for the other industrialized countries. The pressures created by Japan’s soaring industrial rise could be seen most clearly in the changing balance in international trade and payments. In the early postwar years Japan had run serious deficits, but in 1965 it began at times to enjoy favorable balances, and by the 1980s Japanese surpluses were huge.

  The growth of Japan’s balance of trade was so constant and massive that it completely unbalanced the trade between it and the other industrialized countries, particularly the United States, bringing down a storm of criticism on its head for endangering the whole system of world trade. The tremendous increase in Japan’s exports was at first ascribed to the nation’s low wages, but as the economy surged ahead and wages rose, it became clear that this was not the reason. Pay scales mounted rapidly and almost without interruption, until finally in 1988 the drastic fall in the value of the dollar pushed them above American wages, in monetary terms if not in buying power.

  A more plausible explanation was that Japan’s faster rise in exports was the result in large part of tariff and quota barriers created to protect its once-weak industries from the American economy, which had been overwhelmingly powerful in the early postwar years. At that time, quotas and high tariffs virtually excluded many American manufactured goods and limited American exports to Japan largely to goods that the Japanese themselves could not provide in adequate quantity, such as raw materials (coal, lumber, scrap iron, and cotton), foodstuffs (soybeans, wheat, and feed grains), and some complex machinery and scientific goods that the Japanese could not yet manufacture in sufficient supply. The Japanese, on the other hand, exported technically advanced manufactured goods to the United States and the rest of the West. It was a pattern like that between a metropolitan country and its colonies, with the United States playing the role of colony as the supplier of raw materials and Japan the role of colonizer by providing more advanced manufactured goods.

  There had been good reason for this situation at first, but as Japan recovered industrially, it became less justifiable. Japanese manufactured goods began to inundate the American market. Whole areas of American industry were drowned out by a flood of Japanese imports, helping to create what was called the “rust belt” in the industrial Northeast. Japanese could no longer expect free economic access to the markets of the rest of the world while denying others access to theirs. American and European discontent with the situation mounted steadily, and there were constant demands for the Japanese to “liberalize” their trade practices. The industrialized countries kept prodding Japan, which responded slowly and reluctantly, commonly opening up a field to Western imports only after Japanese production had become strong enough to keep out most foreign goods.

  Even the Japanese eventually realized that these conditions could not be allowed to continue. They gradually got rid of their tariff barriers and quotas, other than those on farm products, which many Western countries also maintain. Japanese tariff limitations, in fact, became among the lowest in the OECD community of industrialized nations. But Japanese trade surpluses continued to skyrocket. The countries of the West then shifted to blaming this largely on “unfair” Japanese practices that created a playing field for trade they claimed was not level. They attributed the chief cause for this situation to close cooperation in Japan between government and industry, which Westerners labeled “Japan, Inc.” The Japanese government, it was claimed, maintained hidden barriers against imports, consisting of a complex system of red tape and arcane and unreasonable regulations on foreign trade, enforced by MITI and other branches of the government.

  This charge against Japan was in part true, though the Japanese were also correct in arguing that many of these regulations were merely long-established, routine economic practices. A more accurate description of the situation would have been to say that Japanese were accustomed to dealing with old and trusted associates to the exclusion of other companies, Japanese or foreign, and that they laid great store on personal relationships, which outside companies usually lacked.

  The Japanese also pointed out that the problem of insufficient industrial imports into Japan was to be blamed in part on Americans and other Westerners for not trying as hard as Japanese did to sell abroad. Westerners usually failed to learn the Japanese language, to master Japanese marketing practices, or to produce goods specifically designed for sale in Japan. As Japanese liked to say, they themselves would not have gotten very far in developing markets in the United States if they had not learned the English language, how Americans did business, and what American preferences were. Westerners simply had been too lazy and arrogant in expecting that there would automatically be a demand for their goods in Japan even though the Japanese were capable of producing at comparable prices goods of equal or superior quality, fitted to their own specific needs. Why should Japanese buy American refrigerators that were too large to fit into their tiny kitchens or American right-hand-drive cars for their left-hand roads?

  Another American complaint was that Japanese dumped excess production abroad at prices lower than cost in order to secure a share in foreign markets. However, actual cases of alleged dumping, when examined, usually turned out to be hard to prove. Americans also criticized Japan for securing an unfair economic advantage by taking a “free ride” in defense at the American taxpayer’s expense, but the Japanese responded that the American defense posture in the western Pacific was the product of American wishes and for American purposes, not Japanese, and that, in any case, Japan was contributing its share to defense through providing bases and 1 percent of its GNP for its defense budget.

  Both sides had some valid arguments, but the Japanese, realizing their greater dependence on the United States, slowly gave way to many American demands, eliminating most of the red tape and detailed regulations to which the United States objected. But Japanese trade surpluses still continued to soar. In the second half of the eighties they grew to staggering sums, amounting to more than $100 billion annually, of which over $50 billion was with the United States alone. Japanese goods flooded one field after another—textiles as early as the late fifties, then cameras, motorcycles, steel, electric goods, and various types of machinery, followed by television sets, cars, and all sorts of electronic devices, and finally the products of high technology of all kinds. Japan had reached the front cutting edge of science and industry.

  Already by 1980 four of the top ten automotive producers in the world were Japanese. In 1982 Dentsu became the world’s largest advertising agency, and the next year four out of the top ten non-American companies in the world were Japanese. In 1988 the ten largest banks in the world and four of the top ten security houses were all Japanese. Japanese companies set up in the United States numerous ventures with their American counterparts in order to avoid tariffs and quotas, should these be placed on their products made in Japan. Factories owned and operated by Japanese began to dot the United States, Europe, East and Southeast Asia, and other areas throughout the world that were suitable for advanced manufacturing. Japanese also bought a great deal of real estate in the United States—hotels, office buildings, and choice resort areas, especially in Hawaii, to the dismay of the local population. The names of the great Japanese firms, such as Mi
tsui, Mitsubishi, Toyota, Nissan, Matsushita, Toshiba, Hitachi, and Fujitsu, became as familiar to Americans as Ford, Exxon, and IBM. It was a veritable economic invasion, and Americans responded with a mixture of enthusiasm, admiration, puzzlement, indignation, and fear.

  The imbalance of Japan’s trade, not just with the United States but with the whole world, was clearly no mere product of chance or certain unfair regulations. It was the outgrowth of a structural problem in the world’s economy and as such was much more dangerous and difficult to correct. The fundamental problem was that Japan’s industrial economy was simply becoming more efficient and dynamic than those of North America, Europe, or Australia.

  The Japanese had several advantages, some of which have already been discussed. Virtually all of Japan’s industry had relatively new and up-to-date facilities. Government and business were effectively meshed together in a system that permitted an abundance of stimulating free competition but also provided overall guidance toward desirable national objectives. Management and labor cooperated harmoniously together in a system that created loyalty to the company on the part of both groups and encouraged initiative and pride in achievement among workers as well as executives. Relatively few working days were lost to strikes, and the working week was only beginning to decline from five and a half to five days. Big business was financed largely by banking capital rather than stocks and therefore could expect stable leadership and set its eyes on long-range goals. As a result, Japanese businessmen did not need to be constantly mindful of quarterly bottom lines but could concentrate their attention on areas of long-term growth.

  Another important factor was that educational standards were extraordinarily high, giving Japan perhaps the best educated work force in the world. Around 95 percent of young people completed the extremely rigorous twelve years of elementary and secondary schooling, and about 40 percent of these continued on for at least some higher education. As a consequence, Japanese were well prepared for complicated technical and scientific jobs, and factories could easily be modernized with sophisticated equipment. For example, the Japanese early became the leaders in the world in the use of robots. The efficiency of the whole economic system was enhanced by a surrounding society that was largely free of crime and drugs and emphasized the virtues of hard work and good order.