Debtor US seeks to offset creditor Japan
Many people know that this year the United States will become the largest debtor nation in the world, owing more than Brazil or Mexico. Fewer may be aware that Japan could become the globe's biggest creditor nation by the end of this year.Skip to next paragraph
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The foreign money earned from Japan's huge trade surplus, approaching $50 billion this year, is not just stuffed in piggy banks.
It is invested around the world, with the biggest chunk of it going to the US.
So far there has been little alarm in the US over these ``Nippondollars.'' Attention has focused rather on the flood of Japanese imports and the massive trade deficit with Japan. But if history offers any precedent, concern about Japanese investment could increase.
In the 1960s, many in Western Europe were deeply concerned about a rush of American investment. Some nations, such as France, imposed limitations on foreign investment.
During the 1970s, a massive flow of ``petrodollars'' prompted considerable anxiety in this country over Arabs buying up farmland or companies of strategic interest. That concern abated as most OPEC nations lost their international payments surpluses.
By the early 1980s, Saudi Arabia had built up international monetary reserves approaching $150 billion. Since then, because oil production has plummeted, the desert kingdom has been forced to use perhaps $50 billion of those reserves to pay its bills.
In the meantime, Japan has been piling up external assets that could reach $120 billion by the end of this year.
Rep. John Bryant (D) of Texas has introduced legislation aimed partly at Japanese investment. It would require full public disclosure of foreign investments in this country of $100,000 or more, or 5 percent of equity ownership, and the interests behind them. The bill also demands investment reciprocity.
New foreign investments here would be allowed only if the investor's home country permitted Americans to make similar investments there on equivalent terms.
Japan limits foreign investment to no more than 25 percent of any ``technologically innovative'' company. So under the Bryant bill, it would find its investments in American high-tech companies similarly restricted.
``They drain us of our technology while denying us access to theirs,'' Mr. Bryant charges.
Such proposals attract strong opposition from Robert D. Hormats, a former State Department economist now with the investment banking firm Goldman, Sachs & Co.
``It would be an enormous mistake to restrict foreign investment in the United States in any way,'' he says. ``Japanese investment here is not only welcome but necessary. It is very helpful in creating jobs, and, in the medium term, it is one way of reducing trade imbalances.''
Many Japanese-owned companies in the US produce goods that would otherwise be exported from Japan.
Japanese direct investment in plant and equipment abroad has gone up from $4.6 billion in fiscal year 1980 to $10.1 billion in the Japanese fiscal year 1984, ending March 31, 1985.
At that time, Japan's cumulative foreign direct investment amounted to $71.4 billion, about twice as much as it was only four years earlier.
That's a fantastic rate of growth.