'Japan Unincorporated' actually is better name
TUESDAY, FEBRUARY 6, 1979 THE JAPAN ECONOMIC JOURNAL




Japan Incorporated was, I think, a term invented by a journalist writing for a U.S. magazine back in the early seventies.

It caught on quickly. It summed up neatly the disciplined, planned and collusive society that many like to believe is Japan, and it has since been the subject of many more articles, several books and even an official survey by the U.S. Department of Commerce.

Yet for those of us who live and work in Japan there are times when Japan Unincorporated would seem to be a better name. Let me give some examples.

Recently an economist friend of mine visited Japan. He was on the last leg of an Asian tour and being a meticulous fellow (like most economists) he had gone to much trouble to acquire travellers cheques denominated not just in U.S. dollars but in yen also.

Indeed, he had even made sure that his yen cheques were issued by Bank Y, a bank bearing the proud name of one of Japan's largest zaibatsu groups. He reckoned that while the dollar cheques would probably be needed in Southeast Asia they would be of little use in Japan where the dollar was falling by the day and where they would probably prefer you to use yen anyway.

Cheques in the name of Bank. Y were the obvious answer he thought. He was wrong. On arrival I took him to a branch of Bank X, another large and proud zaibatsu bank, where they had installed a large international division as part of their efforts to drum up foreign business.

Embarrassed Silence

My friend presented his cheques. There was an embarrassed silence followed by a look that I thought was reserved for delinquent debtors and single women seeking housing loans. No, they said, they did not accept Bank Y's cheques. Would they accept dollar cheques? Of course!

After a long trip across town to collect the dollar cheques I decided to ask why they were 'so averse to Bank Y cheques, mainly to find out whether they could produce a reason that made it less than entirely obvious that Bank X was determined to do nothing to help Bank Y in its struggle to gain international recognition.

They came back with some sheepish story about how they didn't have the samples of Bank Y cheques needed to check for forgeries. A few weeks later I noted with interest that Bank X had been caught by yet another wave of forged U.S. dollar cheques.

There is another story about another economist invited by the Japanese Foreign Ministry to tour and lecture in Japan. As a guest of the Japanese government he assumed he did not need a visa.

The immigration officials at Tokyo airport had other ideas and he quickly found himself detained with the brusqueness those officials tend to reserve for such occasions.

Urgent appeals by the Foreign Ministry to have him released were fruitless. Immigration officials belong to another ministry -the Justice Ministry -and in Japan that means they belong to another and very closed world.

Eventually a Foreign Ministry man prevailed on a good friend in the Justice Ministry to look into the matter. Only as a personal favour could the economist be released, to provide Japan with the benefit of his knowledge and experience.


My fellow Australians are particularly prone to Japan Inc. obsessions. They watch closely the way Japanese steel mills keep a united front in the purchase of iron ore and coal overseas.

Indeed, they are now telling themselves that they have to get tough and united themselves to avoid being picked off in price negotiations.

Yet in the recent Japan-Australia "meat war" the Australian government found its strongest ally was the Japanese Foreign Ministry. It turned out the Ministry was also engaged in its war to break down the protectionism of the Agriculture and Forestry Ministry and improve Japan's overseas trading image.

Bureaucratic factionalism

And talking of bureaucratic factionalism, by far the best (or worst) example was the ten year rivalry between the Imperial Army and Navy which helped greatly to accelerate Japan's defeat in the Pacific War.

If Japan were a ruthless monolith carefully planning to promote its interests at the expense of foreigners, how do we explain the extraordinary rice situation?

In the name of helping agriculture and increasing food self-sufficiency the Japanese government buys rice from producers at two to three times the international price. It then spends a lot of money to store the rice and subsidise its sale, but the price to consumers is still high enough to encourage a massive switch to bread consumption.

In the past 16 years real incomes have more than quadrupled but annual rice consumption per head has fallen from 118 kilograms to 83 kilograms.

Meanwhile the government has accumulated a surplus stock of seven million tons.

To solve the problem the governmenti is running an "eat more rice" advertising campaign. Rice, the ads tell us, contains the true essence of Japan. More realistically, the government is also planning to sell it at bedrock prices as pig food, or give it away in the form of foreign aid.

But it feels powerless to take the most obvious step-end the system by which rice can only be sold by the traditional distributors, most of whom still like to operate from poky, out of-the-way barns surrounded by fifty kilo sacks of last year's harvest.

Meanwhile the local super-markets and corner stores banned from selling rice are more than happy to encourage further wheat consumption by displaying every variety of at- tractively packaged bread and noodles. The wheat is almost entirely imported.

Meanwhile Japanese farmers continue to turn from wheat and other crops in order to grow more of the heavily subsi- dised and profitable rice. Agri- cultural self-sufficiency is falling rather than rising, and the taxpayer pays the cost.

One could, I suppose, see the ability of the rice growers and the traditional distributors to have their way at all costs as an example of Japan Inc. in action. But if it were a typical example then we could soon expect the Company to go bankrupt.

Advantage to foreigners

Another example of how Japan's strange society can work to the advantage of foreigners is the sarakin (literally, salaryman finance) phenomenon.

For years Japan's banks have for their own conservative reasons been reluctant to move into the personal finance field. The result is a proliferation of loan sharks charging over 100 per cent interest and enforcing their illegal writ with the help of gangsters.

At last count they were responsible for over 100 suicides annually and over 1,000 cases of people forced to "evaporate" ie disappear from normal society.

The Finance Ministry has now decided the only way to solve the problem is to open the field to U.S. firms. Their enthusiastic response has already sent interest-rates tumbling. And this is the same Ministry which for years was said to resist bitterly any expansion of foreign bank activity in Japan.

Meanwhile some Americans insist that the conservatism in Japan's distribution and finance industries is part of a plot by Japan Inc. to keep the foreigner at bay.

Collection of groups

Japan is not really a nation as we know it. It is a collection of groups, factions and vested interests which relate to each other on the basis of mood and/or the practical demands of a situation.


(If anyone thinks this is a contradictory blend then he should consider our sterotype for the female of our species.)

Japan does not fully embrace the concept of a society based on fixed laws or principles decided ultimately by a central government.

At times this approach can produce a remarkable ability to ignore conventions and discard legalism in favour of acting swiftly, cooperatively and arbitrarily. This is the Japan Inc. that many have come to admire, or fear.

Examples include the notorious "administrative guidance" system under which Japan's bureaucrats assume arbitrary power to tell the businessmen what to do (just as the businessmen assume the occasional right to tell the bureaucrats what to do).

But at other times it can produce remarkable chaos and discord. Vested interest groups -the rice farmers and the doctors in particular -can hold the nation to ransom.

To preserve a mood of national "harmony" local resident groups are allowed to block indefinitely the construction of badly needed ports, factories, power plants and transport links.

Even the administrative guidance has its limits. It failed for example to prevent Japan's electronics industry from pressing ahead with fullscale production of two different VTR machines unable to use each other's casettes.

And while it usually tries to control competitive investments by Japanese firms as they rush into serious overproduction of goods such as steel or petrochemicals, it watches on helplessly as similar competitive investments are made overseas by the textile, car and electronics makers.

True, other socitties can sometimes show the same cumtraclictory tendencies. That no doubt goes to prove that all of us are basically the same.

It is just that the Japanese are more of the same than the rest of us.

TUESDAY, FEBRUARY 6, 1979 THE JAPAN ECONOMIC JOURNAL


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