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From: buzy@quads.uchicago.edu (Len Buzyna)
Subject: Does America say Yes to Japan
Message-ID: <1992Dec5.023139.16824@midway.uchicago.edu>
Date: Sat, 5 Dec 1992 02:31:39 GMT
Organization: University of Chicago Computing Organizations
Lines: 822
This has been an immensely popular and requested paper about Japan at my
(and many other) sites. A new edition has come out which you may find
interesting. -Len
-----------------------------------
(JAPANYES; From Internet FTP: monu6.cc.monash.edu.au in: pub/nihongo)
(This contains both sections concatenated.)
Japanyes; THE SECOND EDITION;
The following article, JAPANYES, (2nd edition) comes from FTP site
monu6.cc.monash.edu.au. The most recent version is in pub/nihongo.
This paper was written by: Louis Leclerc; lleclerc@nyx.cs.du.edu
Please send him any corrections or additions to this paper.
NOTE: This is a rather long but fascinating paper on how Japan Inc. functions.
For a former free-trader like myself, it has shaken some of my beliefs to the
very core. It will open your eyes a little, it will disturb you, and it will
quite possibly lead you to ask some serious questions about the future of the
United States of America as a world-leader. Reading this, IMHO, is well worth
the effort.
The level of detail and the overall gist is documented in many well-known,
albeit difficult to read, books (see appendix). The author's prime service to
us is the distillation of this information into a (relatively) brief synopsis.
Tom Mathes tom-mathes@email.sps.mot.com
---------------
In the 2nd edition, typographical and content errors/omissions were corrected,
sections re-organized for better flow and less relevant sections were
deleted/condensed to make room for new material (the entire file must be under
100K to fit through email gateways). Japanese names were removed to protect
their anonymity.
Sections significantly expanded/added in the 2nd edition:
DISCRIMINATION
TRUE, BUT ONLY ON THE SURFACE
IT'S NOT ALL JAPAN'S FAULT
CONCLUSION
COMPANY LISTING (many new names)
Sections deleted/condensed in the 2nd edition:
WHERE IT ALL BEGINS (combined with BUSINESS IS WAR)
DEBT, AMERICA'S SUPERWEAPON OF SELF DESTRUCTION (important, but less relevant)
-------------------------------------------------------------------------
(ed112992)
Second Edition
D O E S A M E R I C A S A Y Y E S T O J A P A N ?
(A M E R I C A W A N I H O N N I "H A I" T O I U K A)
There are many misconceptions about Japan and its miraculous success in
the post-war era. While staying in Japan in mid 1992, I tried to look at
Japan's seemingly miraculous success with the hope to understand it so that
maybe we could apply some of their plan in our own country. "What makes Japan
so good?", "How did they get from a third world country to be the richest in
the world so quickly?" are common questions asked in America. Today, I will try
to answer with examples, at least partially, these questions.
Going to Japan, I expected to see a very efficient country from which
America could learn in order to regain her former prosperity. During my trip,
the reality began to sink in that what is really happening was quite different
from expectations and in some ways quite disturbing. The Japanese have a very
different approach to doing business than we do. This paper will elaborate,
justify and try to show what is happening and why it is important that this be
understood here in America.
Don't be afraid to question what you read here as I am confident that if
you research the points yourself (hopefully by going to Japan to see for
yourself or reading materials on the topic), you will find the points made in
this paper to be truthful.
THE "JAPAN PROBLEM":
Some claims echoed in America which are commonly dismissed as "Japan
Bashing" statements, surprisingly turn out to be true upon investigation. The
following statements may seem brash right now, but their meanings will become
clearer in the explanations and examples that follow.
It seems that Japan is in some kind of economic war against us. Their
objective is for them to win and for us to lose. Through the use of cartels,
price fixing, government-corporate 'anti-foreigner' tactics as well as
adversarial trade and predation strategies, Japan is destroying much of
America's strategic industries, standard of living and military strength. These
actions are also destroying the jobs of ordinary American people. As a result,
the greatest transfer of wealth in the history of the world from one country
to an other is happening right now, from the United States, to Japan. As well,
Japan is today, the largest holder of net foreign assets in the world.
Those who study these types of topics know that economic wars can be even
more devastating to a country's long term future than conventional wars. Japan
is organized to fight, uses a tactical strategy and has a fundamental plan.
America's economic strategy is in disarray and there is no plan. As a result,
America is losing the economic war by default.
IN THE BEGINNING, THE TV CARTEL:
A very famous example of Japanese national government and corporate
coordination to take over a foreign industry is that of the Japanese TV cartel,
first set up in the 1960's. This is how Japan took the free-world TV industry
away from the United States. PBS Frontline did an excellent documentary on this
called "Coming From Japan", (see Appendix for how to get transcript via
Internet).
In the 1960's, the Matsushita Industrial Electric Company, Sanyo, Toshiba
and others formed a TV cartel in Japan. They got US TV technology from the
giants in the industry (Zenith, RCA, Quasar) in the following way. The Japanese
government prohibited US made TVs from being sold in Japan. Instead, they
insisted that the technology be licensed to Japanese manufacturing companies
rather than importing (still often the case today in Japan). The US companies
thinking they could still make money this way, agreed to these terms which
enabled the Japanese companies to acquire the technology on how to build TVs.
The above Japanese companies, with tacit approval from the Japanese
government, set up a cartel to inflate TV prices in Japan in order to turn
around and use the money to sell below cost TVs in America. This was to drive
US makers out of the American and world markets. US TV makers went bankrupt or
left the industry as they could no longer fund research to continue making
improved and high quality TVs. They could not compete with the artificially low
Japanese TV prices in America and were forbidden to enter the Japanese market
to take advantage of the high prices there. Hence, the US makers could not make
money. Furthermore, secret deals, illegal under US trade law, were set up by
Japanese TV makers and US retailers such as Sears and Woolworths to sell the
TVs under store brand names. As a result, once famous brands such as Sylvania,
Quasar, Admiral, Philco and RCA have vanished or are foreign/Japanese owned.
Zenith is the only remaining US TV maker today. No US companies make VCRs
although they were an American invention.
In the 1980's the Japanese applied this same strategy to the machine tool
industry and now completely dominate that industry as well (a point well made
at a machine tool exhibition I visited in Tokyo). Before that was motorcycles
and computer memory chips (the US tried to retaliate but failed as our
companies couldn't organize with each other during the now famous 'dram
shortages' a few years ago). It will be happening again with major and smaller
kitchen/washing appliances and telecommunications equipment during the 1990s.
It has already happened with liquid crystal computer displays where the
Japanese today have 100% market share (these were also invented in the USA).
DISPELLING SOME STATISTICS:
Several misleading claims are made in the media about how the trade
situation today with Japan is fine. These will now be dispelled. One claim
states that Japan is opening its market because it has increased imports by 9%
in 1986-87 and 18% in 1988. This is a half truth because Japanese exports
during the same period increased by much more than that. In other words, the
trade gap got bigger, not smaller between Japan and its trading partners.
An other false claim, most often made by Japanese trade representatives,
states that it is naturally expected and ok that Japan has a trade surplus with
America. This is because if every Japanese bought $100 of goods from America,
and every American bought $100 worth of goods from Japan, an imbalance would
occur in Japan's favor as there are twice as many Americans as Japanese in the
world.
In the real world though, this is not ok, and cannot happen for very long
without serious consequences. To see more clearly this picture, imagine a world
with 2 countries, one with 100 citizens, and an other with 1 citizen, you. Each
person has $200 to their name. Every year you buy $100 of goods from the other
country, and each of their citizens buys $100 of goods from your country. If
you work out this example, you will see that in a little over 2 years, you will
have accumulated all of the money in the world and the other country will be
penniless. This is the current state of affairs between Japan and its trading
partners. Although things are actually occurring more slowly, this is the
trend.
POLITENESS AND CODED LANGUAGES, A BACKGROUND:
Japanese communicate with each other and the outside world a bit
differently than we do. This is often a cause for misunderstanding between our
two peoples, so it will be clarified below.
Because Japan was a communal society, a way of speaking in a way not to
directly offend the other person (who they still had to live close to after a
discussion had finished) has developed over time. There is even a Japanese
word, called 'Tatemae,' which refers to this kind of phrase. These kinds of
phrases are a type of 'lie' in order to be polite. Often, when Japanese use
words like 'goal' or 'difficult' in reference to a request you make, this is
tatemae.
Some recent examples from the evening news will make this point clear.
Recently, George Bush went to Japan to open the Japanese market to US goods and
to get the Japanese to use more US made car parts in the cars they sell to
America. After he left, the Japanese Prime Minister said the agreement they
reached was 'a difficult goal'. This is Tatemae code for 'we have no intention
of meeting your demand'. But of course, the Japanese PM would not say this
directly to George Bush, who is president of America. This would be extremely
impolite and Mr. Miyazawa could never say such a thing directly to an
individual of such prestige. The Japanese PM is thus in a difficult position.
This is an occasion for Tatemae. Foreigners (especially Americans) who aren't
used to Tatemae have extreme difficulty to understand its usage. Later, when
the 'promise' is broken, Americans often end up thinking they were lied to by
the Japanese when this was never the case. Really, the Americans were supposed
to pick up on the Japanese polite refusal, but failed to because they took what
the Japanese said literally.
As an other example, an agreement was reached where Japan would allow more
US made computer chips to be sold in Japanese products. Recently, the Japanese
have said this goal would be 'difficult' to reach. This is code for 'we will
renege on the agreement'. If you know about Tatemae, it is much easier to know
what the Japanese really plan on doing when faced with a politically difficult
position as well as what they might be trying to say when they talk on
television.
Finally, a claim is often made by cornered Japanese officials that "Japan
is at a crossroads" and the problems described in this article are being
resolved today. "The Japanese market is opening, but it takes time and
Americans must be patient for Japan to succeed at this difficult task." Japan
has been saying this for the last 20 years.
SHAME AND HONOR IN BUSINESS:
Japanese people operate on a system of shame and honor (or the appearance
of it anyways). This developed due to the fact that so many people must live
peacefully in crowded conditions. When something does go wrong, there is a lot
of shame on the individual responsible. If the failure was bad enough, he may
commit suicide (a practice dating back to when Samurai committed suicide in
front of their superiors when they were responsible for a major failure). Some
major public figure commits suicide out of shame at least once a year in Tokyo.
For example, while I was there, the CEO of Toyo Rubber (they operate as
B.F. Goodrich here in America) committed suicide by jumping in front of the
train because company profits were poor this year. A couple years back, after
a train wreck in which some people died, the manager responsible for the whole
affair also committed suicide.
An interesting side note to this case is the existence of laws
discouraging suicide by jumping in front of trains in Japan. These demonstrate
the 'group' orientation of this society. The government has laws to fine the
jumper's surviving family members based on how much disruption to service was
caused by the suicide of the now dead family member. Apparently, the intent of
the laws is to force the jumper to think about the harm they will do to their
family by choosing the train as a means of suicide, hoping they will instead
choose other means to end their life and minimize service disruptions. In
practice though, these fines are hardly ever enforced.
DISCRIMINATION:
Although the Japanese are individually are very polite people, Japan is
a very racist country, maybe even more so than we are. The common name for
foreigners is 'gaijin' in Japan. This is a racial slur somewhat in the way
'nigger' refers to a black person in America. There is however a polite form
of this word, 'gaikokujin', which means literally 'outsider country person'.
When you enter a rental agency to rent an apartment (the only way to get
an apartment in Tokyo), some of the rental books say on the cover 'no gaijin'.
If you are a gaijin, you cannot rent anything in these books. This type of
practice seems to be very widespread.
As an example of how deeply this goes, one may look at the now famous
Konishiki affair of last summer. Konishiki was the best sumo wrestler in all
of Japan. However, he was an American (Hawaiian). The overseers of Japanese
sumo continuously denied him the title of 'Yokozuna' (sort of an entry into the
Japanese sumo Hall of Fame for grand champions like Konishiki). Konishiki won
title after title, but was still refused. When pressed, the overseers claimed
that the holder of the Yokozuna title must possess 'hinkaku', a special kind
of 'Japanese grace'. They also claimed that it was impossible for a non
Japanese to be capable of possessing hinkaku. As a result, Konishiki was
refused the honor of the Yokozuna title. In the end, he never became Yokozuna
(and neither has any other foreigner in the history of the sport).
Discrimination does not extend only to foreigners. Looking through any
major newspaper, you will see ads which ask for Japanese only (no foreigners),
men only, young women only, or people of a certain age. Discrimination doesn't
seem to be illegal in Japan. A law does exist however stating that it is a
Japanese 'goal' not to have discrimination (hint:this is Tatemae). This 'anti-
discrimination' goal/law does not seem to be enforced in any way. Races are
ranked in a kind of social order in Japan, first are Japanese, then white
people, other asians, then all other races besides black people, who are last.
The government is sometimes a partner in racism and discrimination. There
exists an 'unclean' sect of Japanese society who are referred to as
'Burakumin'. They are a particular sect who's ancestors had an 'unclean'
religious history. A small square on the top corner of the Japanese birth
certificate is filled in if a person is a Burakumin, or is blank if they are
not. This is used by the government and the companies to deny Burakumin people
good jobs and advancement during their careers.
There exists an other dark side to government sponsored racism, dating
from World War II, which exists even to this day. During the war, many Koreans
were forcibly taken to Japan, made 'Japanese citizens' and enslaved, or forced
to serve in the Japanese Imperial Army. Upon the end of the war, Japan revoked
Japanese citizenship from these people and their children. Unlike other
Japanese, they lost all rights to military pensions and healthcare (even for
injuries suffered while fighting for Japan in the war). As a result, today
these people live in Japan, but are stateless, have no passport and cannot
travel outside of Japan. The Japanese government considers these people (and
even their descendants who were in fact born in Japan) to be foreigners. It is
'difficult' for many of these people to get Japanese citizenship as Japan has
no diplomatic ties with North Korea. One requirement is that they must abandon
their real names and choose Japanese sounding ones (a requirement made on most
people seeking Japanese citizenship). Needless to say, the number of people
accepted as Japanese citizens or as immigrants to Japan is very very small in
number each year. Some claim that Japan sees it as an advantage to maintain a
racially pure society as it is less 'disruptive' to social order.
THE DISTRIBUTION SYSTEM, WHY FOREIGNERS ARE SET UP TO FAIL IN JAPAN:
An extensive hierarchy of small distributers and shops exists in Japan
which hinders the distribution of foreign goods. When Americans say the
Japanese distribution system is 'difficult', 'byzantine' or 'complex', this is
what they are referring to. In reality, the Japanese distribution system is
fixed. This is why it is so difficult and complicated for the foreigner to
succeed in.
Japan, being a communal society, follows a strict code of loyalty.
Shopkeepers have loyalty to their suppliers and customers. They all have
loyalty to the nation, Japan. Undoing this arrangement that brought the country
and its companies so much wealth and power via the entry of foreign goods would
be disruptive to this system of loyalty. This is one reason it is so difficult
for a foreigner to enter the Japanese market. There are higher forces at work
too though:
How important this was became very clear when I befriended a Japanese
government worker. He explained to me how the system worked and why a foreigner
cannot usually circumvent it. I suggested the following proposal as an example.
The discussion went something like this:
I can sell high quality made in USA GE refrigerators and Hoover vacuums
at a much cheaper price in Japan that Toshiba and Sanyo can (this is in fact
true). I want to start a business. I go to Japan, but no store will carry my
products because I am a 'gaijin' (foreigner), and my products are foreign.
Doing so would anger the domestic suppliers of these distributers who may hold
some of the shop's loans or offer them favorable payment plans.
I decide then, I will set up my own company in Japan, open a shop and sell
the appliances myself since no Japanese store will do so for me. The government
worker said 'You can't because you are a foreigner. Foreigners cannot own
companies in Japan'. This is in fact true. It is this government practice which
keeps foreign business ventures in the control of the Japanese (and hence why
they tend not to succeed). It is also the reason there are so many 'joint
ventures' between a Japanese company and a foreign one to enter the Japanese
market. Otherwise, the foreigner is forbidden to enter, or later set up to
fail.
So, anyway to get around this law, I told him that I will open the
business in my Japanese wife's name, so now a Japanese owns the company. He
said 'you will still fail because as you find success in the market with your
inexpensive American goods, the other vendors will get angry at you. They will
politely ask you to raise your prices to that of the Japanese made goods so the
system doesn't get disrupted'. I, of course, replied that I would refuse to do
this as its not in the interest of my customers. He replied 'then the vendors
and the Japanese companies (such as Toshiba, Mitsubishi and other appliance
makers) will complain to the government. The government will then prevent you
(subtly though as free competition is 'the law' in Japan) from operating your
business successfully or profitably. New building permits for your stores will
be delayed for months for no reason. Business license paperwork will get
misfiled or lost without explanation causing you legal hardship. Goods will be
delayed unloading off your ships for 'too busy customs officials' or 'lost
somewhere on the pier for 6 weeks' making you miss delivery deadlines and
angering your customers...' Such 'subtle' persuasion is how you are brought
into line in Japan.
True-life examples of this abound. Here are a few:
This is exactly what was done when a foreign garment manufacturer tried
to sell their clothing in that country (threatening the domestic garment
industry). Customs delayed unloading of the goods until enough of the summer
season had passed making the summer fashion clothing unsaleable. Making foreign
farm produce which competes against domestic Japanese produce wait on ships
long enough to rot or not be appetizing to the consumer is an other practice.
The Feb 10, 1992 of Time Magazine describes how a US lamp manufacturing
company encountered also exactly this problem. It took them 9 months to get
lamps off the ship sitting in the harbor and into retail stores in Japan after
customs, and other government agencies stalled and stalled (which cost this
particular company lots of money).
Many anti-foreign goods laws are often written in the form of 'protection'
to the consumer. These are applied discretionarily and are really written to
prevent or make it expensive/slow/impossible for foreign goods to enter the
Japanese market. For example, one well known Japanese tactic is the use of only
one or two 'inspectors' who are responsible for 'inspecting' every single one
of an importer's products entering Japan (ie. bicycles or cars). As every item
must be individually 'inspected' (ie. ridden or driven) very carefully and one
at a time, this takes very very long to do (one never knows how long). This
causes enormous delays and costs the importer lots of money as well as
preventing timely delivery to the customer. Competing Japanese domestic goods
are often exempted from these 'consumer protection' laws as inspection is 'done
at the factory by the manufacturer'.
Of some other more famous 'consumer protection 'laws, one for many years
banned US beef from Japan because 'Japanese intestines were the wrong length
and couldn't digest US beef which is too hard'. An other banned european skiis
because the snow in Japan was 'different'. US made towels were banned because
the fibers were 'too rough' for Japanese ears, which are 'softer' than ours.
All foreign rice is banned for 'national security'. Rice in Japan as a
consequence, is the most expensive in the world.
Finally, as an example of the no-foreign ownership rule, the recent
baseball team fiasco comes to mind: Nintendo recently bought the Seattle
Mariners Pro Baseball team. It is in great irony that it is illegal under
Japanese law for an American to buy (very lucrative) Japanese Pro baseball
teams (from ABC News Nightline).
THE BUSINESS CARTEL, KEIRETSU:
Let us go now to a primer on Japanese business organization. Almost all
the significant companies in Japan are aligned into one of about 6 keiretsu or
business 'groupings'. These are loosely linked 'super-corporations' for lack
of a better term. Most of the Japanese companies whose brands we know and love
here in North America are in these keK;netsus. These keiretsus have been around
a very long time (before WWII) dating back to feudal-like family run trading
houses. Mitsubishi and Mitsui are two of the more famous ones. Famous companies
like Nissan, Toshiba, Sumitomo Bank are all in keiretsus. The keiretsus were
disbanded by U.S. forces during the occupation because it was feared they could
one day be dangerous to America. However, upon departure of U.S. occupying
troops from Japan, the ex-member companies rejoined each other to reconstitute
the keiretsus which had previously been disbanded.
Here is why this is so important. Each of these keiretsus have under them,
member companies who operate in each of the major critical business areas.
These are: banking, distribution, steel making, heavy manufacturing and
electronics. Mitsubishi Bank, Mitsubishi Electric Corp, Mitsubishi Heavy
Industries and a wide array of other Mitsubishi companies (several hundred)
making all kinds of other things are in a keiretsu. (Mitsubishi is unusual as
most of their operations have the same name). Each of the companies in the
keiretsu are independent and very specialized in what they do in all senses of
the word except for loyalty. Imagine a keiretsu is something like a college
fraternity, but for companies. Their individual independence is what keeps
things from getting too big and out of control, yet they can make a united
front for issues important to the national or keiretsu effort.
To make the point, a car company and electronics company in the same
keiretsu have a long term relationship to help each other, for example to make
a really fancy computer control system for cars, or to make special
lift-loaders for the computer company's factory. If you walk into a Japanese
transplant auto assembly plant in the United States, you will find that the
equipment from the stamping presses to the forklifts are Japanese brands, even
if it is more expensive (in the short run) to do this. This is national and
keiretsu loyalty at work.
Every Keiretsu has a bank. This is the heart of the keiretsu. The bank is
like a national central bank, but for the keiretsu. The bank takes money from
winning operations and gives it to new ventures in the keiretsu without the red
tape that a bank would usually give before lending to a new start up venture.
Having a bank who is in fact a part of your company means they will be fiercely
loyal, understand your business and not call your loans for silly reasons like
US banks do. This is much more efficient than the way America does banking and
lets companies join forces to use their capital much more effectively than the
US can.
This is also why buying a Japanese product may put buyers of that product
out of a job, even if they work in a different industry. They take the profits
from the product that person bought, shift it through the keiretsu bank to
develop, invest in and dump products into the industry or market that person
now works in, and put them out of a job. See the telecommunications example at
the end of this paper for how this works in practice.
COMMAND AND CONTROL:
Japan's business effort is directed by the powerful Ministry of
International Technology and Industry (MITI). It decides national strategic
industrial policy and determines with the corporations, which industries to
target, enter, exit, take over...etc. This is where Japan's 'united front' when
entering a market is co-ordinated from. This is also why you often see several
Japanese companies entering a particular market at the same time (ie. TVs, and
more recently, luxury cars). By acting in unison, the companies, banks and
government can attack and overrun a foreign industry with a much bigger 'punch'
then had they done so separately. It also enables strategic moves which
countries like America cannot do as American business efforts are not
co-ordinated in any kind of way.
In fact, such moves are illegal for US companies under antitrust laws from
the 1930s. This puts us at an enormous disadvantage against US Japanese rivals
as it is legal for example for Ford and Mazda to join forces, but not for Ford
and GM to do so. The US antitrust laws were written at a time when US companies
were the most powerful in the world. This is not true anymore and hurts America
greatly as US firms struggle in the world marketplace against large foreign
firms who are able to join their forces to defeat America's companies.
THE PROTECTED HOME MARKET...JAPAN'S LAUNCH PAD TO THE WORLD:
Japan has a protected home market which serves a very important purpose
to the country and the national business effort. The home market is for trying
out new products, copying and improving foreign designs, getting capital
(through price gouging) without fear of foreign companies entering and ruining
the game.
An unwritten rule is that there is no real competition in the Japanese
home market between Japanese companies which are also strategic exporters. Real
competition occurs in foreign markets outside Japan. The home market is a
'safe' market where these companies can experiment with their products, improve
upon them, and fix problems with out fear of any real foreign competition
capitalizing on their blunders (a luxury our own companies do not have in
America). For example, SONY and Mazda did or had done this frequently within
Japan. The scheme works as follows and is the critical reason why a Japanese
company can enter almost any world market or industry from scratch and overrun
it so quickly:
Imagine Sony comes out with a new type cassette player which is very
small. It breaks often because the small plastic gears inside are of low
quality and wear out (this was true, actually). This machine though, is only
sold within Japan. Only in the future when it is perfected will it be sold to
the outside world. Now lets imagine GE is the dominant manufacturer in this
market worldwide. They want to sell their player in Japan (which is better than
SONY's) but can't because they are forbidden for all the reasons mentioned in
this article. Sony fixes their gear problems, tests it in the home market (this
is one reason why the latest Japanese products hit the Japanese market at least
6 months before anywhere else) and later exports it abroad. Sony maintains its
good reputation in America as their player works well (the US customer never
got a machine with the defective gears). Sony sells this player at 3/4's the
cost to make it in order to increase their market share and drive GE out of the
cassette player business. Sony doesn't go bankrupt doing this because they can
sell players in Japan at twice the cost to make them and hence cover their
losses in America. Because GE is forbidden to sell in Japan, and can't make
money at home in America because Japanese players sold there are too cheap,
they surrender and lose market share. GE asks the US government for help but
is refused. Later when this is exposed, GE is accused of 'whining' and 'not
trying hard enough to enter the Japanese market' by the Japanese Prime
Minister.
Now, imagine the reverse situation. GE also makes a machine that is poor
quality in its home market of America (this was also true). The Japanese then
enter unimpeded, dump their perfected goods here and drive GE out of the
market. As you can see, whenever a US company makes a mistake in the home
market, it suffers greatly, but when a Japanese company does in their home
market, they don't suffer so much. Hence, even if the American company is more
efficient and generally of higher quality, the Japanese companies will
ultimately defeat the US competition. This is true even if the US companies
make fewer and smaller mistakes over the same period of time because the US
company gets hurt for a mistake in the home market, but the Japanese one does
not. For example, Japanese car companies have also come out with disasters
comparable to the 'exploding Ford Pinto'. But by using their protected market
for experimentation and improvement, they are able to resolve problems like
this before they arrive on our shores. Our car companies have no such luxury
and hence suffer the consequences each time they make a mistake. This is an
other reason why the Japanese protected/non competitive home market is so
important to their success.
The non-competitive home market serves an other important function to
Japanese industry. Smaller/weaker Japanese companies are allowed to survive
because it is possible they may some day have a 'winner' which would be good
for Japan (this actually happened to Mazda with the Miata and other recent
offerings in their foreign markets). If the company were bankrupt though, they
could not come up with 'winners' sometime in the future. Its better to let the
weak competitors survive in Japanese market in the hopes they become strong
someday. Because of laws restricting foreign ownership as well as
'cross-holding' agreements between the Japanese companies, there is very little
risk a non-Japanese company could take over these weaker players and enter the
Japanese market. Unfortunately, the same protection is not bestowed among
America's promising small companies who are easily taken over by major Japanese
players who want their technology.
The no-home-competition point is ironic, because some newspaper reporters
who don't understand the Japanese economy write quotes like "there are 7 car
companies in Japan (a country with 1/2 the population of America) therefore the
car industry must be extremely competitive in Japan". The truth is that there
are 7 car companies in Japan because there is almost *NO* competition in the
home market. This is why their market shares in Japan are stable. They are
basically fixed. If there were competition, the strong players like Toyota and
Nissan would have absorbed or bankrupted their less powerful rivals like Mazda
and Daihatsu long ago.
WHAT IS DUMPING AND WHY IS IT BAD:
A New York Times writer last year wrote in his commentary that Japanese
companies are foolish because they practice 'dumping' (selling their products
here for a price lower than it costs to make them), and that he hopes they
continue as it benefits the American consumer. His article is misguided and
shows why it is so difficult to understand why Japanese business practices are
so dangerous to America.
Some Americans think buying dumped products is good. This happens because
they don't see the real costs to themselves which are not on the low sticker
price. These costs turn out to be higher to the buyer than the savings on the
product price (otherwise the Japanese would not be dumping... ...there's no
such thing as the deal that's too good to be true). The key is that this cost
is indirect but very real nevertheless. It turns up somewhere else than at the
checkout counter and is how Japan profits by 'dumping'.
The cost to America (and the benefit to Japan) turns up in the long term.
This is why it is not seen so easily. It turns up in America as unemployment,
closed factories and reduced national strength as US companies cannot compete
against this practice. Japan's factories run, their people get jobs and later
on Japan makes much more profit than it originally cost to do the dumping.
Japan can do dumping by raising prices in the home Japanese market to pay for
dumping in America. US companies don't have this luxury as the US market is
open to the outside world and prices cannot be artificially raised to pay for
dumping elsewhere.
ECONOMIC STRATEGY, WHAT IT ALL MEANS:
Many people ask, what is a national industrial strategy. Some people claim
it is a form of socialism or communism. Nothing could be further from the
truth. Again, the best explanation is by example.
A few years ago Japanese industry co-ordinated a successful attack to take
over the entire world commercial supply of LCD computer screens by selling them
at 1/3 the price to make them, (PBS Frontline, "Losing the war with Japan") and
waiting for the small US upstarts who invented them to go bankrupt. As a
result, today all LCD screens in any non military computer in the world are
made in Japan. This is a very strategic component because it will be used in
portable computers, medical imaging equipment, videophones, HDTV, touch
sensitive visual programmable refrigerators and stereos..etc.
If you are a non Japanese maker of any of the above items, this is very
bad for you, because you will have to go to the Japanese to buy these screens
to put into your product (say a portable PC computer). However, the Japanese
companies also want to make these products too (entering your industry is part
of their long term strategic plan (which is 200 years long)). As a result, they
want to make you uncompetitive. They do this by selling these screens to you
at a price higher than they sell the same screens to Japanese PC makers (which
might even be the same company as the screen maker). They can do this because
they have destroyed the US competition. You are forced to go to them if you
want these screens.
You need these screens though so your PCs can compete with the Japanese
PCs which will be on the market soon, so you must buy them as there is no other
supply. This means though, that your PCs are more expensive then the Japanese
ones because you are paying more for your critical components than the Japanese
companies are paying. ...You lose...
Besides offering to sell you the screen at some ridiculously high price,
the Japanese will often offer to manufacture your entire product at a
reasonable price and put your name on it. For example, some of the Mac
Powerbook portable computers are not Macs at all, but really SONYs. Most
portable PC computers today are made in Japan for the above reasons (even if
they have American brand names on them).
This type of deal is really nice for Japan because it gives the Japanese
companies the rest of the technology to make your product (besides the
strategic component). This also makes you dependant on them for all your
manufacturing (because your factory is now closed, your workers unemployed and
new ones too hard to train quickly). Finally, your Japanese supplier can bypass
you entirely at a future date and sell the computers they make for you, but
with their own name on them. They do this in the factory your sales helped them
to build in the first place. Mitsubishi did this to Chrysler with cars, first
it was the Eagle Talon, then later the Mitsubishi Eclipse....both cars are
identical, but really Mitsubishi's.
The LCD screen monopoly is what enables Japanese companies to have such
a large market share in portable PCs which use these screens yet almost no
market share in desktop PC computers (which don't need these screens). Japan
hasn't been able to take over the desktop PC market because its still advancing
too quickly and they have no monopoly on any critical components in these
machines. As a result, this industry can still belong to America. America is
able to hold on rapidly advancing industries through innovation, but Japan
cannot. This is because by the time Japan copies a foreign design, it is
already obsolete. Japan has poor luck trying to hit a moving industrial target
and will usually miss. So long as an industry moves fast enough, and the
Japanese don't succeed in taking hold of some critical component of that
industry, the US will be able to hang on to it until it slows down or matures,
then the Japanese can successfully take it over.
By focusing on taking over markets like LCD screens, critical computer
chips, high precision machining, and auto manufacturing, Japan has
significantly reduced America's ability to make these things in time of
national need. Japan lost World War II because they had a poor manufacturing
base (they had to stockpile for 4 years before starting World War II). They
have learned very well from that mistake, which now America is making.
This example shows why something like LCD screens are a strategic
component and why Japan needs to dominate this industry. This is what is meant
by a famous Japanese phrase: 'Business is War'. Key markets overlooking
industries are like peaks overlooking cities. The strategy in a business war
and economic war is the same, and the outcome is the same. Domestic factories
are gone because the industry has been killed economically (rather than being
bombed), workers are out of a job, and the target country has much less power
and safety in the world. It is like a real war, but less bloody.
THE ECONOMIC WAR, A SUMMARY OF THE GLOBAL PLAN:
Free world trade is a good thing for all countries. Generally, countries
raising protectionist barriers against each other is very bad. This in fact,
helped cause the 1929 depression. What is happening now though is worse.
Although some will tell you that the US and Japan are practicing free bilateral
trade, this is not true. Today, Japan and America have basically a one-way
trade relationship. Japan closes their market towards us, but we don't towards
them.
Some say that Japan has a national strategy to control economically, what
it could not get militarily 50 years ago. An impulsive claim perhaps. But,
today, I am not so sure.
Some may think that only America is having trade problems with Japan
right now. This is not true. Most other industrial countries in the world are
in the same predicament. Today, Japan has a huge trade surplus not only with
America, but with almost every other country in the world it trades with. This
happens when Japan buys less in products from other countries than the other
countries buy from Japan. This is bad because it means Japan takes money out
of America's economy and uses it for their own purposes (such as buying our
real estate, or companies).
Japan's trade surplus is no accident. It is not the result of Japanese
efficiency, American laziness or anything else the Japanese government
officials may tell you on the TV. The real cause is this: Japan trade patterns
are not bi-directional in the common sense where two countries buy each others
exports and a happy state of affairs results. Japanese policy is to
intentionally use foreign cash profits not to buy a foreign country's
exportable products, but rather its capital assets like companies, real-estate
and art, while preventing the other countries from doing the same thing in
Japan. This enables Japan to get wealthy and powerful extremely quickly while
still being more inefficient and averse to business risk than its trading
partners. When 'whiners and Japan bashers' claim Japan is 'cheating', the
following is what they are trying to say. Here is an explanation of how it
works.
-->Defense:
There is a three tier economic defense which the Japanese use. First is
a set of laws which severely restrict/prevent foreign ownership and control of
Japanese companies and assets in Japan. As a consequence, GM must sell their
cars through Isuzu and Ford through Mazda. Chrysler doesn't sell many cars in
Japan. Long ago Ford used to have a large market share in Japan but the
government closed their operations and forced them out of the country. Today,
foreigners typically cannot own Japanese companies, especially those in
strategic industries such as manufacturing and technology. It is because of
these laws and regulations that you hear about so many 'joint' ventures between
US and Japanese companies, where the venture is intended to help the US company
penetrate the 'difficult' Japanese market. These joint ventures really enable
the Japanese companies to get foreign technology without having to invent it
themselves. The foreign company gets only a token market share in the Japanese
market in return.
It was in this way Japan learned from the US companies how to make TV's
in the 1960's. More recently, the Japanese government recently forced Texas
Instruments to join a venture with SONY, where SONY got technology in exchange
for TI being able to sell some of their products in Japan.
The second defense mechanism is the wide 'cross holding' of stock shares
between the companies in Japan. This basically works by having the Japanese
companies print up lots of shares and exchanging equal values of these shares
with other Japanese companies. This is very cheap for the companies there to
do. As these shares are never given up or sold, they are effectively taken out
of circulation. Because companies own such a large percentage of each others
shares, it is impossible for a foreign firm or individual to accumulate enough
shares (51%) to take over a Japanese company. As a result, a foreign takeover
of a major Japanese company has never occured.
A side note of all this is that Japanese companies are able to think long
term because they don't have to answer to stock holders at the annual
shareholders meeting. Because so many shares are cross held, private
shareholders tend to be not so significant in number and hence not a threat to
the board. This is why US companies must worry about short term performance so
much, often at the expense of wiser long term decisions. Japanese companies do
not have to worry about this, so they tend to invest much more in the future
than we do and hence are much more successful.
The final defense system is a well set up structure of government laws,
behaviour and corporate co-operation which prevent foreign companies who get
around the first defense system from succeeding to make money by selling
products in Japan. The government delays foreign entry of goods through lots
of intentional customs and other regulatory snafu's as well as red tape
designed to hinder a foreign company to the point it becomes non competitive
in the Japanese market place.
-->Offense:
The offensive strategy is also a three tiered system. Firstly, government
(through the powerful Ministry of International Technology and Industry) and
corporations co-ordinate and select targeted strategic industries which they
want to enter, or take over.
Secondly, they obtain the basic technology (often from the current foreign
firms in the industry), then copy and improve upon it. They do trials, have
failures and make further improvements in the Japanese home market which is
protected against encroachment by foreign firms which may be already
established in the rest of the world within that particular industry.
The final and most critical stage in the offensive system is the practice
of product dumping in order to gain market share overseas. Japanese companies
will initially export a product overseas at a price usually lower than it costs
to make it. The same product is usually sold in Japan at a higher price so the
Japanese company doesn't go bankrupt. This lets the Japanese companies increase
their marketshare as foreign buyers tend to buy the lowest price quality
product. This places stress on non-Japanese competition. Sometimes the foreign
competition is a well deserved target (ie. poor quality US autos), but more
often they are not. Once the foreign competition has given up, or has been
sufficiently weakened and the Japanese dominate that industry, they bring the
prices to a level reflecting cost of manufacture and development and move on
to the next market they want to take over. Using this technique, the Japanese
can enter and take over in a short while, almost any industry they choose no
matter how unrelated (which they have done). Their system is virtually
foolproof as long as you have trading partners and individual consumers who
tolerate or don't understand the dynamics of what's really happening.
It should be noted that raising the price of a good within Japan in order
to pay for dumping in the foreign country is becoming less and less prevalent
as the Japanese companies today have enough cash to finance dumping in the
foreign country strictly from cash reserves. Once they have wiped out the
foreign competition, the profits start to roll in.
In some ways this is America's fault as Japan has taken advantage of the
open US market, as well as America's tolerance to Japan's closed market in
order to help them rebuild their country after WWII. Ironically, America's best
scientists and engineers are working for military projects, whereas Japan's are
working on commercial ventures, where the war is actually being waged.
SUCCESS DOESN'T ALWAYS COME THE FIRST TIME:
Sometimes, the Japanese will fail at first to enter a market. For example,
the Japanese auto companies entered, and retreated from the US auto market
several times before making their successful onslaught. During the intervals
that they were not so active in the US market, they were learning from their
mistakes, improving, refining and testing their products in their protected
home market, preparing to enter the US market again at a later time, which
ultimately they did.
This strategy is still used today. For example, recently the Hitachi
company, a major Japanese telecommunications maker announced it was withdrawing
from the US telephone switching market (large specialized computers used by
telephone companies to make your phones work). It would be foolish on the part
of the US telecommunications makers to believe that they have defeated Hitachi
(some actually believe they have) because telecommunications is a Japanese
government designated target strategic industry and Hitachi will most certainly
be in it in the future (as they have for 40 years). As happened in the auto
industry, Hitachi is at home right now refining and improving their products
based on what they learned from their last campaign in America. They will be
back stronger than before. I know this because I saw some of their new and
upcoming products when I was Japan. Once their improvements are complete and
proven in the home market, they will re-enter the US market, possibly
surprising America's domestic makers.
INNOVATION:
A serious problem, which the Japanese themselves have acknowledged, is the
lack of originality and innovation. This is quite notable when you look at
their companies' histories. The Toshiba company in Tokyo has a big science
center with a time line of its history on a wall. On it were its achievements.
It read something like 'transistor imported into Japan 1950, manufactured here
in 1953', 'teletype imported 1931, manufactured here 1935'...etc. There were
no inventions, only refinements. Hitachi, NTT (the telephone company), Nissan
and Matsushita had similar 'timelines' in their centers with quotes like above.
This happens because inventing means failure (for a time at least) and no
guarantee of success. Because the Japanese cannot be seen to fail (this is
shameful and very bad in Japan), they do not invent. As their companies become
more powerful, I wondered who would be around to make the discoveries like
xerography, the transistor and LCD TV (all invented in USA). I found two
Japanese government sponsored organizations in Japan with the task of short
circuiting this problem.
One, the Technology Transfer Institute, specializes in finding small
companies around the world with new technology and helping Japanese firms buy
the technology. If the Japanese firm wants it but can't buy it, they sometimes
steal it by patenting similar items copied from the foreign company's original
and then intimidating/bankrupting the small company through a blizzard of legal
action. If the company is publicly traded, or the owner wants to sell, the
company is bought outright by the Japanese. America, unlike Japan, makes no
effort to protect its strategic companies from foreign takeover. Imagine your
small company and its patents versus the attorney war chest of Mitsubishi
Industrial Company.
This is actually what happened to Fusion Systems, a small American firm
which invented and patented a new way to get spray paint to stick on pop cans
(PBS Frontline, "American Game, Japanese Rules"). Mitsubishi bought one of this
firm's machines and came out a few months later with one of their own. The
small firm sued. Mitsubishi then made many small modifications to the machine
(not improvements, just voluminous iterative changes), patented all of them and
sued the US company many times over (for each patent). Mitsubishi just waited
for Fusion Systems to run out of money defending them all (and offered to drop
the cases if the small company sold them the rights to the machine).
If Japan can't get technology this way, they get it free from public
foreign research. A Japanese institution exists which is called the 'Japan
Research Foundation'. It actually does no research, but translates foreign
research papers into Japanese for the Japanese companies to use.
A major reason for getting foreign research this way is that Japanese
universities themselves don't do much research. Their equipment is extremely
outdated (in contrast to corporate labs). These schools are literally straight
out of the third world (possibly the last physical part of the third world
still in Japan). University is a place for students to drink and party before
joining a company, often for life. At the University of Tokyo, the most
prestigious university in all of Japan, the buildings are in extreme state of
disrepair. Stench of raw sewage permeates and leaks down the hallways of the
buildings and the (often drunk) students live in extreme squalor. Academics did
not seem to be taken seriously by the students who were too busy drinking or
playing sports. The libraries were almost devoid of students. Some buildings
like the Library for American Studies were very nice, but many others were in
shambles. Half of all the windows in many of the buildings were broken and
glass was strewn about the floors. There were no working safety/fire control
systems. Electricity wires were hanging exposed in hallways and lighting was
not functioning (for many years it seemed) in parts of buildings. Old gas
stoves were running unattended in kitchens with cardboard covering broken
windows. Piles of garbage and wrecked cars were strewn about the campus and
behind buildings. Nothing had been painted or cleaned in about 20 years. The
grass hadn't been cut in a very long time and had reached full height. Cats and
other creatures lived in some of the buildings. The school swimming pool was
a filthy algead mess. If this seems unbelievable, one can get off at
Todai-komaba station in Tokyo and go see for themselves. This is all the more
surprising as the rest of the country is so rich and modern, more so than most
parts of America today.
There is an important reason for all of this. In the world, universities
typically do research to advance learning and science for the world. This is
extremely expensive to fund, and is a lousy way for a country to get the most
value for its money, so Japan does not do this. The Japanese government makes
no effort to seriously support its universities. Furthermore, unlike their US
counterparts, Japanese companies give no money to universities. This does not
mean that Japan does not value basic university research. Quite to the
contrary. It is far cheaper to let the other countries' schools and governments
do and pay for basic research (which is published openly to the world) and to
simply translate and read their papers.
Japanese research money and results stays in the corporate and government
labs, where it may be kept secret from the foreign countries, which are the
enemy in the economic war. Japan does do research (lots of it actually), but
not for public dissemination and world advancement. Research is done to gain
advantage over their rivals. Last year, the Toshiba Company alone spent more
on research than was spent (privately and publicly) in all the country of
Canada. This is the fundamental reason why Japan refuses to fund universities
and diverts it to corporate research instead. It is something we must
understand.
Ironically, it may not be a weakness of theirs that their universities are
so awful. If they know that they can get research from America for free, they
are smart to put their money in their private and company labs instead; where
they can use it against US companies in order to defeat them.
In spite of all this, Japanese workers still get an excellent education.
This is because education up to (but not including) university is very good and
extremely well funded. In great contrast to the universities, the elementary,
secondary and tertiary schools are very well stocked with the best of
equipment, facilities and teachers. They are as nice as anything in America.
Furthermore, highly specialized training programs are provided to newly hired
workers when they join their companies. This makes up for the weakness of the
Japanese university system.
A further point to this, companies do not to give grants to charities (nor
universities). Corporate citizenry doesn't not exist in Japan in the way we
know it here. This is why it is extremely rare to find Japanese corporate run
foundations in Japan or America. This is also why it is extremely unusual to
see for example, a PBS program sponsored by a Japanese company (though
recently, this is changing for the US branches of Japanese firms as they learn
how important Americans relate charity to a company's image).
JAPANESE PEOPLE AND THE MARKET:
The Japanese people are extremely kind and polite, don't go stealing
things out of each other's houses nor do they go shooting each other as much
as Americans do. They are however naive about the forces in their world around
them (a point which probably can also be made about America's own citizens).
There is little individual thought nor questioning of the government and
companies, which is very dangerous. This is compounded by the fact that 1
political party (the LDP) has ruled the country ever since it has had a
democratic constitution. Results of this include the fact that many cartels
operate in the country yet no one seems to notice this occurs. Many Japanese
aren't even aware that foreign countries make the same products that Japanese
companies make. Formally, Japan has laws against cartels, but they are not
enforced. Only one major cartel group has been prosecuted in the last 15 years
(plastic wrap companies), and this was only after a lot of pressure from the
United States. As America's power in the world diminishes, so will its ability
to exert such pressure.
Ordinary Japanese don't have much idea of why they can't buy foreign goods
at reasonable prices in their stores. When I asked Japanese people why they
don't buy American (or other foreign goods), they often say because they can't
find them, or they are much too expensive. This is true.
Foreign goods are often impossible to buy at any price and are usually
very expensive when found. For example, I looked for, but found no Korean
products at all in Japan even though this country is very close to Japan on the
map (1000 miles max distance). Because Korea has little political influence,
it cannot pressure Japan to allow their products in. As a consequence Korea
cannot sell their products in Japan even though they make many of the same
types of high quality electronics and automotive goods the Japanese make, but
at a lower price. US (and other foreign products) which must face a Japanese
domestic maker are also extremely hard to find in Japan. Even the American
flags in the Tokyo-Shinjuku Mitsukoshi department store were made in Japan.
I realized that Japanese people would buy American goods if they could when
I told them the prices of US and Japanese goods in America. I used some of the
examples in this paper to try to explain why there was 'Japan bashing' in
America. I also happened to have a US newspaper, so I showed them product
prices of US and Japanese goods in America. I took them out into their shops
and proved the differences to them. When I finished, they were shocked at what
I had just shown them. Japanese goods are sometimes cheaper in America than in
Japan and non Japanese goods are much more expensive in Japan than they should
be, especially if the goods are in an industry targeted by the Japanese
companies and government.
For example, the major Japanese appliance manufacturers are planning to
enter the US market for appliances (refrigerators, stoves, vacuums) in the
1990's. In a major Hiroshima appliance store (the only store I could find any
foreign appliances), I saw a GE refrigerator selling for $3000 (US). This was
a very low end model you could buy here in America for about $600. The Toshiba
right next to it was a high end model and sold for $2500. It is these Japanese
cartel tactics which lead ordinary Japanese people to believe that US goods are
inferior and overpriced. In America, Japanese made Sears brand refrigerators
similar to the Toshiba sold for about $1000. This didn't seem right to me. The
government and more elite business people I spoke with already knew about these
points and acknowledged that they could see it was a 'problem' for America.
ESCALATOR DOLLS AND OFFICE LADIES:
An escalator doll is a young women in her 20's who stands by the escalator
all day and welcomes you to the floor of the store or office building. She says
goodbye and thank you when you leave. You find these at Mitsukoshi (the
classiest department store I've ever walked into), the Toyota main showroom in
Tokyo, the government offices and the corporation offices (Sony, Toshiba,
Nissan..). Other women serve as temporary labor to bear the bumps generated by
the economic cycle. It is these people (and foreigners) who get laid off in
order to permit a system of lifetime employment for the Japanese males.
Escalator dolls (and their counterparts within corporate offices, 'Office
Ladies') must often sign a contract with the employer stating that they will
quit when they reach the age of 25. The true purpose of these girls (besides
serving tea and welcoming guests) is to be marriage material for the men, who
are at work for such long hours that they have difficulty to find women on
their own.
Young women in Japan are typically expected to marry by 25 years old. A
well known quote in Japan makes the point bluntly: "Single women are like
Christmas cake, after the 25th, useless, so they go for 1/2 price." Marrying
by 25 is important. If a women is nearing 25 and can't find a mate, chances are
she will have a pre-arranged wedding to an eligible bachelor set up by the
parents.
I sometimes wonder how much of a willingness to change the system exists
in Japan, even among the women themselves. While there, I met one Japanese
woman who went to university in America and studied Political Science. I asked
her what she thought of the way Japan treated their women. She didn't see a
problem. In her opinion, women should stay at home as it leads to family
stability and enables the husband to concentrate on his work and not family
affairs. I asked her where she was working. She works at a Japanese company as
a tea server (office lady). 'What would you like to do at your job in the
future', I asked. She replied 'they told me that if I did a good job now, I
could be a secretary in a few years and file things'. This person has a
university degree.
In Japan, the percentage of women who are managers of men is much lower
than in America. Furthermore, women typically don't hold any positions of
importance. They are more like office decoration or marriage material for the
men. It may also surprise you, but almost all women in Japanese companies,
regardless of professional status or level in the organization are required to
prepare and serve tea daily for the men as part of their daily chores.
"BUSINESS IS WAR":
This is a well known quote in Japan. It may be surprising, but this has
more meaning to the Japanese than you may first think. The word 'business man'
in Japanese translates literally into English as 'Company Soldier'. Japanese
businessmen do not have pictures of their family or loved ones at the office
because they 'do not mix family with battle'. When a Japanese man joins a
company, he usually does so for life. His first allegiance and loyalty is to
this company and his team. His family, if he has one, is secondary in
importance. It should be noted that this philosophy does not begin when one
joins a Japanese company. It begins much earlier in life; in elementary school:
While I was in Japan, I went to an elementary school to see Japanese
students participate in their 'Olympic Sports Day'. This event though, was
quite unusual. There were no individual activities, and the theme of the day
was extremely militaristic in nature. There were two main teams, the red and
white teams symbolizing the country's national colors. They had big banners,
taiko (battle) drums which the team leader beat on while chanting the team
slogan. Contests were set up such that if one person made an error in the
competition, the whole team would suffer. Rewards, and failure were shared
among all members of the team. Stress and peer pressure were very high, as they
are for most Japanese throughout their lifetimes. Before the competition,
everyone on the teams sang the school anthem louder and more clearly than I
ever heard any anthem sung here in America. Their diligence and effort were
quite remarkable.
What we call individuality in America is called deviation (be it in
school, or at work) in Japan. It is not tolerated nor tried very much. (In
fact, kids who's hair is not black enough get it dyed so as not to get in
trouble at school by the teacher). Anyone with an 'outsider's' mind is rejected
by the others, even by the teacher. A consequence resulting from this fact
appears when families who have lived outside Japan for a few years return to
the country. These people have a lot of trouble being accepted and integrating
back into Japanese society.
'Peer stresses' in Japan are very strong. Many kids can't take it and
commit suicide before reaching university age. Many Japanese suffer from a wide
variety of stress related nervous ticks and twitches (if you ride the subway
in Tokyo and look at the other riders, you will notice this very readily).
MILITARISM:
In the book 'Japan that can say no! (to America)', by Akio Morita (CEO of
SONY) and Shintaro Ishihara (an influential parliament member), the authors
state that Japan has under development the world's most advanced military jet
because American made planes are not suitable for Japanese terrain, which is
'different' because it has mountains. I also learned about one Japanese who
quit the Fujitsu company partially because they were working on a nuclear
weapons research project and didn't feel a Japanese company should be involved
in such work. In Japan, Fujitsu has built at least 2 nuclear breeder reactors
(such reactors often are used to enrich plutonium for nuclear weapons). The
Japanese claim however, that they are for peaceful purposes. Hopefully this is
so.
The military mindset even extends to city planning. Most streets in Tokyo
have no names in order to 'confuse the enemy' in the event Japan was ever to
be invaded again. The US Army did name many of the streets during the
occupation, but these were removed by the Japanese shortly after US occupying
forces left the country.
There also exists a well funded extremist nationalist movement in Japan
which posts large posters at most major intersections and subway stations in
Tokyo calling for restoration of the emperor as ruler and re-militarization of
the country. Every day in the business and shopping areas of the city, vans
drive around with huge loudspeakers blaring nationalistic music and making the
above demands. Apparently, the older Japanese ignore this, aware of the west's
generosity after the war, but feelings of the younger people who don't have the
memories of Japan's dark past are more uncertain. What is happening today in
Germany may be a foreshadowing of things to come.
This may seem implausible at first, but not after one looks at Japanese
elementary students' textbooks. In the texts, the sections about World War II
are extremely distorted. In these books, Japan is played out as the victim to
world aggression and the atrocities of the Japanese Imperial Army are not
mentioned anywhere. The massive US aid to rebuild Japan after the war is
mentioned on only one line which went "America provided Japan with some help".
Japan's postwar success is credited only to the hardworking values of its
people (partially true), and not to US aid for reconstruction of its industries
(paid for by American tax payers), free access to the US market, and US
tolerance of Japan's closed market. After reading these books, one is lead to
believe that WWII was America's fault. It is hoped that the younger Japanese
learn what really happened before their parents grow old and die, or America
and Japan may face new misunderstanding and confrontation in the future.
EFFICIENCY:
Japan is perceived by the outside world to be an efficient country. In
actuality, Japan is a very inefficient country. The subway people count change
out of tin plates. The valuable intellectual resource of women is wasted by
giving them only the most menial jobs such as 'escalator dolls' and tea
servers. The farming system is one of the most inefficient you will find in the
modern world. Because of this inefficiency, there are a lot of people employed
on the farms who otherwise may not have a job. Although this is an inefficient
use of people and resources, it helps maintain a low unemployment rate. The
protected domestic market keeps all this from collapsing. As a result Japan can
be inefficient, yet still be rich. It is now per-capita, the richest
industrialized country in the world (and is expected to be the richest
absolutely by the year 2000, surpassing America). It may surprise many people,
but the most efficient country in the world is the United States, not Japan.
Japan ranks a bit of the way down. In manufacturing though, they are best in
the world.
TRUE, BUT ONLY ON THE SURFACE:
it is claimed that Japanese transplant factories in the USA are good for
America and create jobs. Although a Japanese transplant factory may be good for
the town which gets it, its bad for the country as a whole. Japanese factories
opened here tend to be only assembly plants. This is important because most of
the value of manufactured products resides in the research and development of
machine tools, plastics, technology as well as the manufacture of parts which
make up that product. There is little value in assembling pre-made parts
together to make a final product. Parts machining and manufacturing (and those
jobs) is typically done in Japan, with the finished parts being shipped to the
US for final assembly. This is true even for Japanese products 'made in USA'
like the famous 'US made Honda Accord'. As a result, when a Japanese auto plant
opens in the US; for every 1 job created, an other 4 are lost (in the parts and
high tech sectors of US industry). Hence, the true consequences are bad for
America as we lose the technology on how to make advanced manufactured
components. Final assembly of Japanese auto parts is pretty low tech and also
doesn't keep money in America. Final assembly only adds about $700 to the price
of a car. This is the only money which stays here when you buy a 'US made'
Japanese car. The costs of paying for welfare and unemployment for unemployed
US engineers and parts maker employees are much much higher and later wind up
on American's tax bills.
An other claim goes that "America is successful in Japan and one only has
to look at Mcdonald's, Disneyland and others to see America's success". These
are not 'American successes' in Japan because in reality, these are Japanese
owned franchise companies. Their appearance is American, but their ownership,
production and management is Japanese. A very small token number of foreign
companies are allowed to have a presence in Japan (ie. Toys-R-Us, P&G, BMW,
Kodak, IBM), but their overall market share is kept quite small via the means
described in this paper.
EXAMPLE, HOW ALL THIS WORKS TOGETHER:
Buying a Japanese product, even in an industry unrelated to yours can
cause you to lose your job! This is much more likely than one may think. Many
otherwise smart people do not understand this so I will explain it with the
following true example:
AT&T is a large US telecommunications manufacturer that is well placed in
the world market and hence pays its employees very well. Many of them like to
buy Hondas, Acuras, Mitsubishis and Toyotas. Most of these Japanese companies
are in one of the 6 or so keiretsus in Japan.
MITI and Japanese industry have publicly declared the world
telecommunications manufacturing industry to be a Japanese national priority
(target). As a result, they have planned and are starting to execute a strategy
to enter and to become the major player (today, they are a very minor force)
in the telecommunications industry during the 1990s. In fact, they have a plan
to wire every house in Japan with fiber optic cable within the next 10-15 years
in order to perfect making fiber and its associated communications hardware.
Japan will have to spend money to research and develop their new
telecommunications equipment. This will be very expensive and they will need
the help of the keiretsu banks to do it. Where do the banks get this money?
From their biggest export of course, automobile sales. This means that although
AT&T managers and engineers only bought cars, they are helping fund Toshiba's,
NEC's, Hitachi's and Matsushita's effort to put them out of a job.
Imagine one of AT&T's engineers recently bought a new Honda automobile.
One day, that engineer loses his job due to fierce Japanese competition in the
telecommunications industry, get into his Honda, go home, yet never ever equate
the two events!
Let's continue this example a little further to summarize this paper The
Japanese want to enter a new industry, telecommunications. Based on previous
experience, this is how they are likely to do it.
Firstly, telecommunications in the future will be based on something
called digital technology. This will enable those picture-phones you used to
see on Star-Trek to be a reality. Fiber optic cable and data transmission are
very important to do this too. This is why they want to get good at making
fiber optic cable by making and putting fiber cable all over their entire
country.
Today, the Japanese are lousy at making high quality major
telecommunications equipment that your telephone company would buy. In the
world market though, there is lots of money to be made in this, which right now
AT&T mostly gets. Because Japan doesn't know how to make good telecom
equipment, they will need to do three things:
>1) get some good telecom equipment so they can copy it and improve it.
>2) pick a very strategic but simple niche market in the industry and take it
over completely (ie. dumping) to get a foothold so they can use it as an anchor
to increase the market share in telecommunications (same strategy as the LCD
screens example above).
>3) start small.
It turns out they have already started to do these things. For (1), they
promised some US big name telecom makers that they might get a piece of the
Japanese telecommunications market in return for a small sale of their best
equipment to the Japanese national telephone company. AT&T and other North
American firms fell for this scheme (maybe the laid off TV maker executives
went to work for AT&T). AT&T sold them one copy of their most advanced
equipment for a promise from the Japanese to 'possibly' buy many more. This is
foolish as AT&T has just let a country which has made a public declaration to
be the world leader in telecommunications get a copy of their best equipment.
AT&T's equipment will get copied and show up as Japanese brands a few years
from now. Perhaps AT&T doesn't understand that Japanese phone companies and
Japanese manufacturers work together to defeat foreign firms like AT&T. Hence,
selling equipment to a Japanese phone company is not much different from
selling it to a competing Japanese manufacturer.
For (2), Japan already has acquired two main strategic industries.
Firstly, as you know they have 100% market share in the small LCD screens that
the new picture phones and tele-computers/tele-bank machines will use. If AT&T
wants to make a picturephone, they have to get the screen from their
competition who also makes these phones (which I saw when I was Japan). Imagine
the laptop computer example above all over again. This is an other reason why
these small LCD screens are so strategic. Secondly, Japan has made an effort
to be the best and cheapest (via dumping) at making a highly specialized
component of fiber optic transmission systems which America uses in its
network. Now Japan's salesmen talk to almost every phone company in the world
to sell them this part. Now on his future visits, he can use his existing
contacts to sell them other things Japan will soon be making.
For (3), you probably have already seen what's going on when you go
shopping. Panasonic, Murata, Fujitsu and others all make very fancy electronic
phones. They also make small telephone switching equipment (like AT&T's smaller
products). Eventually, these will get bigger and bigger until they make the
bread and butter items of AT&T. This is the same strategy they used to enter
the car market too. They started with motorcycles, moved to cheap cars, then
to trucks, then to sports cars, then to luxury cars. Today we know the results.
Again, this is also true with TVs, first they made black and whites, then color
TVs. Today the TV in your house is most likely Japanese (even if its a store
brand). This was an industry which America had 100% market share about 25 years
ago. This is what is likely to happen to telecommunications too.
ITS NOT ALL JAPAN'S FAULT:
American's behavior when trying to do business in Japan is not what it
should be. After seeing how some American firms operate there, it is little
wonder our success rate is often so poor. For example, something of an
annoyance (and also advantage) to the Japanese is American business people
working in Japan who don't speak Japanese, or know nothing about the country
they are dealing with. These included some trade representatives from an Oregon
company, some people from Boeing whom I met at a Nissan factory, and some from
the Government of Wisconsin at a machine tools fair trying to attract Japanese
industry to their state.
The group of businessmen I met from the Oregon company I met in Roppongi
(an entertainment district in Tokyo). These people were a disgrace to American
industry and opened my eyes to why the Japanese are able to take advantage of
us in business. Firstly, these men spoke no Japanese at all (so they couldn't
understand what their opponents at the negotiating table were saying) and knew
nothing about the culture. They asked me what it was like to be a 'gringo' in
Japan. It seemed that they thought the business adversaries they were
negotiating against in Japan were running some 2 peso Mexican hot dog factory.
My conversation with them was a real eye opener to many of America's problems
when dealing with the Japanese in business.
At least their company didn't send a women to do their negotiating. This
would have been a mistake of huge proportions. Japanese corporations and
businessmen typically treat any company who sends a woman with ridicule. Its
one of the best ways to lose a contract. Although Americans may dislike
Japanese sexism, Japan is fast becoming the world's economic power which means
they get to make the rules, not us. This is part of the price Americans pay for
buying all those Toyotas and Sonys for so many years. As Japanese industrial
influence spreads throughout the world, more of this type of treatment of women
by Japanese companies will take place (as many women working in Japanese
transplant companies in the US can attest).
The very presence of the trade group from Wisconsin at machine tools fair
is the result of a very foolish, self destructive and shortsighted US practice
which will now be explained. With so many jobs leaving America (due to many of
the above Japanese tactics), some states have decided to go to Japan to try to
attract Japanese companies to their state. Because America (unlike almost all
other industrialized countries) doesn't co-ordinate or regulate this in any
way, what happens is that states get played off against each other by Japanese
companies and the Japanese government. The state which gives the most tax
breaks or contributes the most money to build the plant gets the plant. This
is probably good for the winning state in the short run, but is much worse for
the country as a whole (and that state) in the long run.
Here's why: What this leads to is Japanese companies opening US branch
plants paid for by the US taxpayer and which pay little or no taxes themselves.
With many states doing this to each other to 'win' a few jobs, everyone winds
up losing. This is because after each state has 'won' a plant from some other
state, the final tally shows that no one state has gained any jobs from any
other state (or very little anyways), yet every state is short lots of tax
money which must be made up by placing more taxes on individuals, or US
businesses (who must now compete against the American state subsidized Japanese
businesses). The only winner in all of this is Japan who gets property tax free
factories and in worse cases plants which we the taxpayer, sometimes pay to
partially build through government grants. The Honda Accord plant in
Marysville, Ohio was a result of this practice. Japanese companies producing
out of tax free plants are also at an advantage to defeat US companies, who
must pay taxes. Ultimately, this practice makes America lose, not gain, jobs
(see above section 'assembly plants') and pay more taxes. This very topic is
the subject of many sick jokes in Tokyo about America's greed and foolishness
today.
An other problem (and the subject of other good jokes in Tokyo) lies
within our federal government. There has been much talk recently about 'foreign
agents'. These are very high level Federal public servants and elected members
Americans sent to Washington to represent them, who go work in the U.S. Federal
government for a short time, make contacts in the government or trade
department, then betray the country by selling themselves out as
representatives to foreign interests. These people were our front line trade
negotiators, staff members, trade attorneys, elected officials and have the
inside knowledge the foreign interests need to circumvent our trade laws,
defeat our companies and find out what our confidential future trade laws are
likely to be. These people sell themselves to the other side in order that they
may personally get rich through the resulting huge amounts of 'blood money' as
they use their contacts they made while serving the public, in order to betray
America. The amount of money involved is in the millions of dollars per person.
Some are delayed bribes which are paid after public service is completed for
favors done while in public office. Often, these people start representing
foreign interests within weeks of quitting their government job. The book
'Agents of Influence' (1991) by Pat Choate, contains the foreign agents list,
a thorough explanation of how this scam works, and how this is obliterating our
status as a rich industrial country. The book also explains very well the point
made on the Nov 27, 1992 edition of ABC's 20/20 (which did a segment on this
problem) about how the Japanese are way way ahead of everyone else in paying
bribe money and how we have lost billions of dollars and hundreds of thousands
of jobs as a result of this small handful of people willing to sell out their
country and their kids for cash.
As can be seen, America has many problems which are not the fault of the
Japanese, but are of our own doing. Japanese work as a team much better than
we do. They struggle together to save their companies when in need (versus
jumping ship, staging strikes like the recent ones at GM, or selling out to
foreign interests). They don't pay their CEO's millions while driving their
companies into the ground. They also realize that management and workers are
not each other's enemy. The competition is the enemy. No war was ever won with
internal conflict and the same goes for this one. Labor strikes (no matter how
justified) and management selfishness and shortsightedness are not the answer
to our problems. Co-operation and a common vision is the only solution.
One only has to look at the social and economic troubles today in
countries like Britain (which years ago in its time, was also the richest and
most powerful in the world) to see our destiny if we continue in our erroneous
and divisive ways. They failed to take action in time and suffered the
consequences. They were once the world's most powerful economy. They too
thought that any damage to their economy would have profound impact to the
world, and hence, thought they were safe as the rest of world would not let
anything bad happen to the British economy. They were wrong. People saying this
today about the US economy are also wrong. Britain's economic power diminished
gradually and unnoticeably, such that today, what happens in the Britain is not
so important to the world global economy. They are now a minor player and now
have a much lower standard of living. Our economic power is now in decline,
following the 'British pattern' which occured many years ago. We will suffer
their fate if we don't change.
CONCLUSION:
The article is not meant as an affront to the ordinary Japanese people (to
whom nothing is held against). Like most conflicts, it is the ordinary people
who get caught in the middle and wind up suffering. The same, unfortunately,
is true for this conflict. This paper is not about them, but is about their
companies and their government policies.
America's citizens have failed to realize that Japan practices a different
kind of trade than America does. Japan practices adversarial trade, where the
goal is to wipe out the foreign countries' industries in order to dominate them
entirely. For the Japanese, business is in every sense of the word, like war.
Americans who buy Japanese goods, unknowingly help them reach this goal. The
Japanese (and other countries such as Korea and Taiwan who have adopted
Japanese style business practices) are not our economic allies, they are our
competitors and they are dangerous to us.
America often complains that Japan must change its ways to become more
like us. This is not true as America is not number one anymore. It is not a
request we can make. Today, the tables are turned. This time, America will have
to change its ways to become more like the Japanese. Japan will likely surpass
the United States to become the world's leading economic, technological and
manufacturing nation by the end of this decade, even though it has only 1/2 the
population of America. History has pointed out every time, that the richest and
most economically powerful country in the world, ultimately becomes the
strongest militarily. We have to realize this and be prepared to accept it, or
we have to do something about it. Japan will not have to change their ways to
become like us, as tomorrow they will wield the power, not us.
This article by:
lleclerc@nyx.cs.du.edu
Louis Leclerc
P.O. Box 453
Jackman, Maine 04945-0453
USA
Please send me any corrections or omissions and this article will be updated.
The most recent version of this article (JAPANYES) is kept at FTP site:
monu6.cc.monash.edu.au (login: anonymous), in directory pub/nihongo
This article is copyright (1992) under the laws of the United States of
America. However, I hereby give permission that it be distributed widely and
freely over any media. This article cannot be sold or licensed.
A P P E N D I X
-->List of companies:
This is a list of some Japanese (or Japanese owned and controlled)
companies. Some of the names that make this list may surprise you,
depicted by '*':