Trade anxiety in land of the rising yen
History shows us that as a country develops to the point of assuming a dominant role in the world economy, the composition of its balance of payments changes. Great Britain had large payments surpluses until the 1930s, and America's surpluses continued into the 1960s. The 1970s saw Japan's international payments move solidly into the black. That is how Japan's powerful Ministry of International Trade and Industry (MITI) sees the world in its 1986 White Paper on International Trade, which it released last week.Skip to next paragraph
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But that is also the kind of statement that, no matter how true it may be, confirms the suspicions of much of the rest of the industrial world that Japan does indeed aim at ``dominating'' the world economy.
The word is right there in the report.
``Why do they have to say that?'' asked a slightly vexed official with another branch of the Japanese government after he was told of the statement in the MITI white paper.
Most Japanese bankers, economists, and government officials contend that, MITI's bold pronouncement notwithstanding, Japan's role as a world economic leader was thrust upon it almost by default as a result of policies enacted on the other side of the world. Specifically: policies enacted in Washington in the first term of the Reagan administration.
As Takashi Ohta, the executive director of the Bank of Japan, this nation's central bank, put it in an interview with the Monitor last week, it was the Reagan administration's ``strong-dollar, strong-America'' goal that set in motion a chain of events that vastly expanded Japan's exports to the United States and led to the huge trade surpluses that have kindled such controversy in Congress and in US business and labor circles today.
Still, Mr. Ohta and other government officials say they do recognize that whatever the genesis of the strong-dollar, weak-yen era, the result was that international trade got out of whack.
There was the hurried attempt to rebalance the system last fall, when the Group of Five (G-5) industrial nations (the US, Britain, France, West Germany, and Japan) set out to devalue the US dollar. Differences in life styles noted
Since then, the dollar has fallen some 35 percent against the yen, driving up the prices of Japanese goods in the US and, in theory at least, making US goods cheaper in Japan, thereby reducing the US trade deficit with Japan. Still, for the moment, the trade deficit is actually worsening, because while Japan's export volume is falling, the value of its exports is rising.
Mr. Ohta and other Japanese officials say they support the dollar devaluation, as wrenching for its economy as it may be. And they praise Treasury Secretary James Baker III for leading the US back to the kind of international policy coordination that was largely neglected when Donald Regan headed the Treasury in Reagan's first term.
But Japanese officials still complain that the US seems to want things to change overnight -- to reverse the effects of four years of strong dollar in only nine months.
Such quick change is extremely disruptive for Japan. One hears predictions of deindustrialization, bankruptcies, recession, and, possibly, of resentment of the US building up among Japanese workers.
That would, of course, be the mirror image of what happened to much of US basic industry in the early '80s as it lost out to the Japanese and as ``Japan-bashing'' came into vogue.
``Yes, we are rich today,'' says a Harvard-educated government official, speaking off the record. ``But the average Japanese does not feel very rich. He lives in what is often called a rabbit warren. There is not much difference in how an office worker lives and a laborer.''
His message is that, while Japanese companies may be wealthy and Japanese workers may have large amounts of personal savings, when compared with the trappings and comforts that most Americans enjoy the Japanese life style is quite a way behind.
And tougher times loom ahead.
``To be very honest, at 242 yen to the dollar,'' Mr. Ohta concedes, ``everybody was smiling.''
But that level was last seen Sept. 20, two days before the G-5 meeting.
``At 200 yen, everybody was still comfortable,'' he continues.
``And at 180, it was still OK. But at 160, everybody was crying. I mean really crying.'' Impact of the strong currency weighed
Central banker Ohta says the road down to 180 was ``man made'' by G-5, but between 180 and 160, market forces and such events as falling oil prices took over.
Since late May, rates have climbed somewhat, but only to between 165 and 170. And the devalued dollar has begun to work its magic -- or do its damage, according to your perspective.
Japanese goods are fast becoming pricey in the US. Toyota, Honda, Mazda, and many other companies have upped their US prices four or five times since the first of the year because of the 35 percent rise in the yen.