Investment Tsunami Ebbs Away in Japan

BOOKS on why Japan has failed to mesh gears with the rest of the world have been popular since Commodore Matthew Perry's ``Black Ships'' broke the country's feudal isolation in 1853. One of the latest is by Economist magazine editor Bill Emmott, who assesses Japan's unprecedented investment wave in Europe and the United States in the late 1980s.

Emmott presents examples of dubious Japanese investments, backing those up with a survey of 150 Japanese-affiliated firms and spicing his arguments with the usual polemical dash that makes Economist writing sound convincing.

Japan's first encounters with the outside world were its wars against the big powers, starting in the late 19th century with China, then Russia, and finally the US. Since then, it has shed its militarism and built an economic juggernaut under the wing of American nuclear protection and the benefit of open US markets.

Emmott focuses on the late 1980s when Japanese companies became so powerful that they began to bite back at America. Japan's sudden wealth was partly built, ironically, on a US-led appreciation of the yen after 1985.

Japanese firms snatched up such cultural icons as Rockefeller Center and Columbia Pictures. A new breed of multinationals from Tokyo and Osaka built Japanese-style factories in the US, bought promising high-tech firms, and purchased a large chunk of US Treasury bonds. The most visible symptom of this onslaught was a trade imbalance that peaked at $87 billion in 1987 and remains high today.

Europe and Asia also saw billions of yen pour in. Japan's overseas direct investments equaled the entire economies of India, Brazil, and Australia. ``Are we all to become, one way or another, subjects of corporate Japan's new worldwide empire?'' the author asks. He answers no.

As the Economist's writer in Tokyo during the late 1980s, Emmott witnessed the crest of Japan's investment tsunami. He gained fame for forecasting in his first book on Japan, ``The Sun Also Sets,'' that the ``bubble'' economy would burst, as it did in 1991. In this new book, he sets out to counter fears of Japanese investment by highlighting its positive aspects and its failures. He particularly criticizes the 1992 novel ``Rising Sun,'' by Michael Crichton, for leaving an impression that the Japanese do not play fair in global business.

Emmott advocates that Japanese investors be allowed to come and go as they please, ``as long as they abide by the rules set for all businesses.'' This approach ignores the fact that Japan and the US have different rules of business, and these differences are a key source of trade friction and negative impressions. Japan still allows price-fixing cartels and often tries to limit competition.

Crichton, in his novel, and a group of intellectuals, mainly American, argue that Japan is too different, too mercantile, and too unaccountable to ever fit into Western-style capitalism.

Emmott acknowledges that an unspecified number of Japanese firms fit the ``negative view of a sprawling, megarich Japanese conglomerate, using profits from its protected Japanese sales to subsidize its investments overseas....''

But he claims Japanese practices are ``nothing new under the sun'' and that American investments in Europe during the 1960s raised the same fears. Japan has merely taken its superior manufacturing techniques abroad, as have American firms, to exploit various local advantages or to avoid trade sanctions.

Emmott's most compelling argument is that fear of Japanese multinationals has diverted Americans from the ``true'' causes of their own economic weakness. But he fails to acknowledge that one of those ``weaknesses'' is that many American goods and services are still not allowed to compete in the Japanese market. As Commodore Perry discovered 140 years ago, when Japan opens to the world, it's usually a one-way street.

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