Japan's miracle turns sour
Michael Becket
Neither Britain nor the rest of the developed world will get much comfort, or any extra trade, from Japan's latest desultory trade liberalisation since the new Policies are intended simply to conceal what IS still a massive inertia. To be fair, though, the Japanese are a little bewildered — they thought the road to international prestige was through efficient industry, wealth and command of technology yet now they find themselves universally attacked for their success.
It is this confusion that is causing the discrepancy between words and action; they are trying to maintain their wealth but at the same time are talking about liberalising trade. As a result, the Japanese government IS going through yet another cosmetic exercise to reassure the world and its domestic voters. Beset by criticism at home for failing to control the economy, and attacked abroad for the gross trade surpluses, prime Minister Takeo Fukuda has shuffled his cabinet of nonentities and has issued some Important' statements. But he has no intention of doing anything very much.
The tariff cuts announced with a fine fan fare will make very little difference, since the tariffs are not startlingly high in any case, and because the goods affected are of little international significance, being items like colour film (to please the Americans) and agricultural products (which should Please Japanese consumers though not the farmers). This is the umpteenth time the
Japanese government has announced action but its sincerity has become increasingly suspect. The previous measures achieved nothing; and, recently, the Bank Of Japan has been exerting itself mightily to Prevent the yen appreciating (though a higher yen might of itself solve the problem); once again, the talk is of stockpiling Oil and uranium to reduce the trade surplus. Such stockpiles may change one set of figures but do little about the underlying situation.
The Japanese government, of course, is caught in the trap created by the very zeal that has made Japan so successful. It is findlag it very difficult to reflate the economy as fast as the opposition keeps demanding, because high savings in Japan mean that tax cuts have relatively little effect on con!timer spending. In Britain a reduction of income tax immediately appears as greater Spending which quickly stimulates the economy — and increases imports. In Japan reduced tax merely increases savings, and What extra spending it does generate seems ro reduce the unit cost of production and hence make Japanese exports yet more competitive. So instead of creating imports,
as it would in Britain, it increases the Japanese trade surplus still further.
Just as important is the fact that Japanese society is founded on obligation, called on. If anyone does you a favour, you incur an on which means you must repay in an equivalent form, and the longer you leave it the more interest the obligation incurs: and the obligation as a result of being given employment is continuous. The on is repaid by employees through dedication, loyalty and efficiency, and the company in turn is obliged to take a correspondingly responsible attitude to employees. This is one of the reasons why Japanese workers are more efficient than their UK counterparts. But the system also means that a web of obligation is spread through Japanese industry and commerce. If an old chum has been kind, or bought you presents, or helped you out in the past, you do not lightly sever business connections. So try as UK car part makers will, existing suppliers to Toyota, Nissan, Mazda etc will go on supplying.
So the barriers.to change are formidable. In addition, the opposition wants growth over the 6.7 per cent government target, though Kiichi Kageyama, assistant director of the international economic affairs department of the Keidanren (Japan's CBI) believes 6 per cent is a more likely outturn for the current year. And he also doubts official forecasts that the trade surplus will be reduced from the projected 7,500 million yen to 6,500 million yen. The government has privately admitted its disappointment at failing to get the Japanese economy to respond, and an opinion poll showed that over half the country had lost faith in the government's economic policies. This is probably what prompted the recent cabinet reshuffle.
But despite these obstacles, changes will be made if only because a large number of influential people are beginning to press for them. For one explanation of Japan's behaviour over the past hundred years is its overwhelming desire to be well thought of. This pervades social life and national life equally. After the country was opened up to the West, in the middle of the last century, the government changed. In the effort to transform a feudal tyranny into a modern industrial state, they revamped the constitution, and sent a senior statesman to consult the English philosopher Herbert Spencer about its possible structure. The change was, in fact, prompted by the awareness that the existing great powers considered the country backward and ignorant. So the Japanese looked round for what was highly regarded, and then adopted it. One theory even attributes Japan's militarism to the high regard for military success that Western culture had until the last war.
And so the Japanese, having failed to gain prestige through war, and having seen that prosperity brought America power, turned to trade. But although it has certainly given the country some significance in the world, it appears to have failed to produce admiration or liking. And the antipathy now generated threatens the very prosperity so long desired. The Keidanren realises both factors and has been foremost in trying to persuade the government to take seriously the mounting foreign opposition to the Japanese way of business.
So gradually a web of protective regulations and practices built up over thirty years is being dismantled. It is a long and painful process but the movement has started. Officials at the Ministry of International Trade and Industry reckon that the most recent simplification of trade procedures will take six to nine months to start showing effects, and John Morgan, managing director of Leyland Japan, says that though the conditions for importing have been made simpler, the bureaucracy is still hard to cope with. An interesting side effect of this is the changing attitude of senior Japanese businessmen. Many of them reckon the era of cheap energy and high growth are over for good and so are chary about enlarging capacity or investment.
The inevitable consequence will be the growing trend to instal plants nearer the markets, to export technology and to invest overseas in the low-wage-content part of sub-assembly. To some extent that should change the pattern of Japanese trade, reducing the trade surplus but increasing invisible exports. But that is the longer term. In the short term the only way to get greater genuine liberalisation of trade — which means smoothing complex procedures and changing attitudes rather than just tariff reductions — is by constant armtwisting by industrialised countries. The Japanese government has domestic problems, with electors complaining of unemployment and growing bankruptcies, so the changes will be gradual and unspectacular. Although there is little sign of it in the government's latest package, persistent pressure and the evidence of continuing world displeasure will eventually produce the change.
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