Chapter 15. Smack Dab in the Middle
Chapter 15. Smack Dab in the Middle
The library was the most spacious room in the office with an extensive display of JETRO’s white papers on Japan’s foreign business operations and trade statistics, including inward and outward investment, video tapes promoting various Japanese industries and Japanese corporate culture and management, which were loaned to schools. There were volumes of books serving as data bases of Japanese corporations who were promoted as potential business partners for foreign companies.
JETRO’s services were directed to small and medium-sized businesses whose owners wanted to do business in Japan but were unfamiliar with regulations, the markets and consumer culture. JETRO’s import promotion programs and literature were packaged to give the corporation a glossy professional image of a Japanese government-supported agency that was earnest in its efforts to help small businesses enter Japanese markets. From the late 1980s, JETRO began publishing a series of market reports for products that found consumer acceptance such as foods, alcoholic beverages, clothing, sports equipment, cosmetics, electronic equipment, jewelry and organic products.
In 1989, JETRO released A Survey on Successful Cases of Foreign-Affiliated Companies in Japan. Claiming that foreign direct investment had been liberalized because the Foreign Trade Control Law had been amended in 1980, JETRO presented thirteen case studies of successful ventures in Japan. The thirteen manufacturers who were questioned about how they had prepared for operating in Japan replied positively about their experiences. However, they were not identified by company names but by product, the location of headquarters, location of operation in Japan, and the amount of capital investment.
In 1990 a colourful magazine was issued describing companies that had entered Japan successfully. The Challenge of the Japanese Market pointed to companies, such as Baccarat, Bausch & Lomb, Cartier, Jaeger, Peugeot, Rolex and Reebok, that had been accepted in Japan. However, JETRO did not advise small-business owners that the main reason these companies had successful ventures in Japan was that they already had brand-name recognition among Japanese consumers before entering, and that Japanese people had traditionally been eager buyers of luxury goods when they travel overseas. The majority of the companies mentioned had originally joined with a large Japanese trading company which routinely scouted for companies with products that were ready for the market, as was the case for Mercian Inc.
JETRO offered a number of support services. In 1991, the Senior Trade Advisor Program was inaugurated in the United States, whereby former executives from Japanese multinational companies or JETRO staff were posted to the International Economic Divisions of state governments. They visited small businesses operating in their states to find products that would ostensibly suit the Japanese market. By 1994, there were twenty-one advisors who could also serve MITI as information-gatherers. When small business owners visited a JETRO office in the US to inquire if their products were suitable for the Japanese market, they were referred to a trade advisor assigned to the office. Owners were often advised to revise their products to meet either the Japan Industrial Standards (JIS) or consumer preferences to such an extent that the capital investment necessary for revision was often far more than the business owners could afford, given the risks of entering unknown territory.
In 1992, in response to the United States’ demand that Japan open its markets to more imports MITI wrote the Law on Extraordinary Measures for the Promotion of Imports and Facilitations of Foreign Direct Investment in Japan, setting the stage for the construction of Foreign Access Zones (FAZ) throughout Japan.
In January 1993 before the inauguration of FAZ MITI International Vice-Minister Yuji Tanahashi met with foreign business executives in Tokyo to discuss the implementation of FAZ and MITI’s plans to modify customs laws, create a fund for industrial structural adjustment, subsidize foreign investment, defray investment costs, guarantee loans, provide additional investment information and support employee recruitment. When asked if the difficulties experienced by foreign companies to access Japan’s markets were due to lack of effort, Tanahashi replied that the Japanese language could be problematic but he did point to the successful entry by large international firms such as Motorola and Texas Instruments.
Ehime and MITI: a marriage of convenience
In April when I learned that the first FAZ was in Matsuyama, the capital of Ehime Prefecture the interlocking relationship between Ehime and MITI became clear. A company comprised of government organizations and private corporations was established to manage FAZ. The Ehime Foreign Access Zone Co. Ltd. constructed a distribution center for the handling of imported goods and three exhibition halls, one of which was the largest exhibition hall in the Shikoku-Chugoku region. The hall was suitable for numerous events with conference rooms fitted with projection and simultaneous translation equipment. The entire exhibition area covered 7,300sqm. JETRO set up a JETRO FAZ Support Center in the facility to provide FAZ-specific information.
Ehime is the largest of four prefectures on Japan’s fourth largest island of Shikoku. The prefecture has 5672.5 km of coastline, the fifth-longest in Japan, facing Asia which probably was one of the reasons given for establishing a FAZ. The population at the time was approximately 1.4 million with about 500,000 living in Matsuyama.The primary industries are agriculture (citrus), forestry and fisheries. The secondary industries are chemicals, machinery, paper pulp and shipbuilding in Imabari where Imabari Shipbuiling, Japan’s largest shipbuilder, operated in the deep waters of the Kurushima Straits. In terms of per capita income, Ehime was ranked around 35th among the forty-seven prefectures, 34th for personal income, 25th in industrial output, 25th for agricultural produce and 30th for the size of the budget.
Ehime is one of the most scenic areas in Japan and tourists flock to Matsuyama Castle and to Dogo Onsen, Japan’s oldest hot spring which is the site of Natsume Soseki’s famous novel Botchan. Besides being the birthplace of Kenzaburo Oe, the 1994 Nobel Prize winner for literature, Ehime is reputed to be the home of Haiku poetry.
Governor Iga had been an officer of the Ehime local government and a staunch member of the LDP. As vice-governor under the previous administration, he was in line to succeed as governor. At the beginning of Iga’s administration, one of Ehime’s representatives in the Lower House in the National Diet was an LDP politician who entered Prime Minister Takeshita’s cabinet in 1987 for one year as Minister of Construction. Ehime was blessed because Ihei Ochi was fortuitously in the right place and, as a consequence, the applications for public works in Ehime were accepted in the first Takeshita budget.
The governor took full advantage of Representative Ochi’s connection with the MOC and the construction industry and he cultivated an interpersonal network with top officials in the ministries to promote Ehime’s needs. Iga established Ehime’s presence in the United States through Iyo Bank, Ehime’s regional bank, opening a one-man office in Manhattan to provide offshore services to Ehime businesses in the United States. Regardless, Ehime business transactions were intermittent at best.
Iga’s ties to the ministries enabled him to access large subsidies for public works which included a network of highways and tunnels throughout Ehime’s mountainous terrain, and the Kurushima-Kaikyo Bridge in tandem with the Shimanami Kaido, a 60 km expressway that would link up Ehime with Hiroshima across the Seto Inland Sea and which was under the management of the Honshu-Shikoku Bridge Authority, a JH subsidiary. The bridge was due to open to the public in 1999. Iga’s efforts also brought an international airport, a convention center, a modern art museum and, his biggest triumph, a FAZ.
The Managing Director was very friendly with Governor Iga’s son. He took him and a JETRO New York staff on a road trip across the US. When the executive secretary confided to me that not only had the president been the recipent of the governor’s hospitality in Ehime but, also, she had been entertained by the governor it became clearer why Governor Iga’s son was sitting at a desk in JETRO New York. Upon his return to Ehime he became the first director of FAZ. After returning to MITI, the Managing Director was posted as the Director of the Import and Export Division, which could explain his relationship with the governor’s son.
Importantly, Shikoku’s only nuclear power plant comissioned in 1977 is located in the fishing village of Ikata, Ehime and supplies the island with most of its electricity. Due to the Oil Shock in 1973 and the need to reduce industries’ reliance on fossil fuel the government announced that nuclear energy was a national priority. In 1974, the Three Power Source Development Law was enacted to subsidize local authorities that were willing to host nuclear power plants. MITI together with the regional utility companies and the heavy industries involved in nuclear power such as Mitsubishi, Toshiba and Hitachi, agressively chose sites for the construction of nuclear power plants in rural, depopulated municipalities with inadequate tax bases, where the civil societes were considered weak and where subsidies to support local small businesses and maintain employment would promote the acceptance by local authorities of nuclear power plants in their areas. Ikata was a perfect representation of a needy local authority.
More Offerings from MITI
In 1993 the aforementioned Business Support Centers (BSC) opened in Tokyo, Yokohama, Kobe, Nagoya and Fukuoka to assist foreign small-business owners during their visits to Japan to find buyers for their products. The BSC offered exhibition space, temporary office facilities and consulting services free of charge.
Also in 1993, the Foreign Investment in Japan Corporation (FIND) was established as a private corporation, promoting itself as “Your Foothold in the Japanese Market.” Its services included the contribution of funds to foreign businesses that wanted to operate in Japan. The corporation claimed: “¥500 million in capital provided by the Japanese government (Structural Fund) and a further ¥445 million was invested by powerful businesses in the private sector and industry associations.”
Among the thirty-one stockholders were MITI industrial associations such as the Electronics Industries of Japan (EIAJ). A MITI subsidiary, the Industrial Structure Improvement Fund, was also a stockholder. The majority of private companies who owned equity were industries that MITI regulated, including Toyota Motors, Mitsubishi Chemical Corp. Nissho Iwai Corp, Kobe Steel Ltd and Nissan Motors Corp.
It’s the Image that Counts
The librarians’ remit was to help visitors with their enquiries about Japan and doing business in Japan. They answered telephone calls from people requesting information about Japanese markets, the literature available about their products’ applicability to Japanese markets and the JIS regulations.
I sat at the middle desk which had been occupied by a retired male JETRO local staff. The Australian woman had left before my arrival and since there was little activity in the library, she was not replaced. Although the Philippine woman did not know much about Japan nor its markets, she also served as the in-house notary public witnessing and signing-off legal documents brought to her by the directors which included applications for visas for family members, bank accounts, insurance policies, IDs etc. She tended to read novels during most of the day and chat with the receptionist and Japanese assistants.
I noticed that when visitors entered the library they were not served unless they approached the woman’s desk for information and she simply pointed to the books on the shelves. When I tried to go into more detail about market access with visitors and callers she instructed me to direct specific enquiries to JETRO Trade Promotion to be handled by the Senior Trade Advisor. The visitors’ ethnic diversity, which included Koreans and Russian émigrés, illustrated that America was indeed a melting pot but the Korean businessmen complained to me that their reception by the librarians had been discriminatory and that they had received poor service.
The library was empty of visitors most of the time and the daily telephone inquiries numbered less than ten. I tended to greet visitors when they entered the library and since I could answer their questions without referring them to a Senior Trade Advisor I was considered to be stepping out of line.
The library was considered JETRO proper and my new post gave me a direct pipeline to the Trade Promotion Division and to Research and Planning. As long as I continued contributing articles to Inside/Outside Japan I would remain semi-attached to Research and Planning. MITI officers from other divisions came to my desk to request help with analysing data regarding US business and politics and with translating English documents into Japanese and vice versa. The work automatically made me a partner to their activities.
The officer from JASME continued to request information. The relationship evolved into a friendship with him and his new wife who had accompanied him to New York. The newlyweds were living in a small apartment near JETRO. Sometimes they invited me for a Japanese meal and occasionally we met at a restaurant. During his two year tour the officer worked regular hours compared to the majority of officers, leaving his wife to fend for herself. She could not speak enough English to communicate comfortably with Americans and stayed in the apartment alone. She began to paint in order to pass the time and discovered that she had a hidden talent.
The female non-career officer from EID/MITI (EXIM Bank) continued to visit me for assistance with the new Trade Insurance regulations. She was the first female officer to be sent overseas by MITI and undoubtedly felt the pressure. In her forties and single, she had entered MITI as a non-career officer directly after graduating from college. Even though non-career officers are generally ineligible for promotion as directors of divisions and top positions in the ministry, she preferred focusing on her career. Her apartment was conveniently located near JETRO, allowing her to work throughout the night to communicate with EID/MITI in Tokyo. While the other officers went on holidays and were with their families, with the exception of entertaining visiting officials, she had no social life and little opportunity to see much of New York. I began escorting her to points of interest.
She enjoyed her visit to Franklin Delano Roosevelt’s house and museum located in Hyde Park where there was also a museum dedicated to his wife Eleanor Roosevelt. The officer was fascinated with the exhibits in the museums which explained the New Deal and the Social Security System and, especially, the photographs of the bombing of Hiroshima and Nagasaki.
Through the work I became acquainted with her superior, a career officer who directed the JETRO EID/MITI office. In his early forties, after graduating from Tokyo University from the Law Faculty he entered MITI on the fast track. His father who was in the Coastguard relocated several times during his son’s childhood which exposed the officer to diverse regions in Japan. He opted for a career in MITI because his father did not have contacts in business circles. MITI sent him to John Hopkins University for a year of study in 1982 which, according to him, was invaluable. Although he used US consultants based in Washington DC, his analytical skills helped him to produce a high standard of work during his term. When I interviewed him in January 1994 he told me about his first exposure to a person of color. His reaction was similar to the majority of Japanese:
There were no foreign students in my school, only Japanese. When I was in junior high school, I was traveling from Tokyo Station when a foreigner asked me something. I couldn’t understand anything! It was shocking to meet someone who didn’t speak Japanese. He was black. I guess that even if he was white I would still be shocked. Three years of English study didn’t work at all so I couldn’t answer.
The officer joked that when he was staying in a Washington DC hotel, he felt that because he was Asian he was given a room at the end of a hall next to the elevator. He also was seated in a restaurant at a table next to the kitchen. When he confided to the JETRO New York Managing Director, who was a colleague at MITI headquarters, that he felt discrimination the director replied that the poor service was probably due to his dishevelled student attire. I told him that single American women often experienced the same treatment.
Japan’s Import Promotion Measures: MITI’s promotion of MITI and JETRO?
The February 1993 issue of the paper announced a series of measures which would support the flow of exports to Japan’s markets:
Japan’s worry about its trade surplus is not a recent phenomenon. When the surplus continued to swell after rounds of tariff reductions and other measures to reduce procedural hurdles, Japan introduced steps unprecedented in world history and began actively promoting imports. The government’s current efforts expand similar measures, with the stress on encouraging foreign businesses to come to the Japanese markets or to increase their imports to Japan. Among such import-promotion programs are:
- Special lending rates provided by the Japan Development Bank (JDB) for import-enhancing facilities and the Export-Import Bank of Japan for importation of manufactured goods
- Set-aside-for-imports programs in government procurement.
- Business Support Centers (BSC), to be added to JETRO. Intended to provide free ‘business centers’ to foreign people who actually visit Japan to find leads or establish contacts.
- Foreign Access Zones (FAZ). By March 1993 a total of seven air- and sea-ports will have expanded facilities for encouraging imports.
- Expansion of the activities of the office of Trade and Investment Ombudsman (OTO) established to resolve problems faced by foreign markets in Japan.
The president’s Perspective in the same issue was clearly in MOFA territory as he lauded former President Clinton’s support for George W. Bush’s military entry into Iraq:
Future historians are likely to rate President Bush high for shaping a clear direction for the “new world order.” His decision to take military action against Iraq just a few days before handing his post over to Mr. Clinton gained worldwide support, and significantly reduced the sense of instability and uncertainty in the post-Cold War international order that people began to have not long ago after the East–West schism ended in a victory for Western philosophy.
While welcoming Clinton’s continuation of America’s foreign policy, the president took the opportunity to emphasize that there was also the need for Japan to change from “a passive participant to an active player in the global system” and that the country was obliged to “dedicate itself to the betterment of the world with a far greater vigor than it has in the past.”
My article “Sipping Sound” regarded Suntory’s marketing strategy through TV adverts and the promotion of the arts.
Promotion of Industrial Policy with a Scottish Twist
In February the president asked me to access a copy of Andrew Carnegie’s Gospel of Wealth. I found the book at the Andrew Carnegie Foundation office but I did not discover why he had requested it until I read the March issue of Inside/Outside Japan. Although it is an amusing interpretation of Andrew Carnegie’s Gospel it also represents the president’s “creative” promotion of MITI’s Vision for the 1990s.
The essay was used as the foundation of his address “Creating Human Values in the Global Age” he delivered on March 10, 1993 to the members of the Carnegie Council on Ethics and International Affairs. In his address “MITI and Human Values” he managed to connect MITI’s Vision and the release of another fiscal stimulus package with Andrew Carnegie’s Gospel of Wealth while simultaneously presenting his ministry as a compassionate and caring agency determined on helping the Japanese realize a better quality of life.
Although it would take some stretch of the imagination, comparisons can be made between MITI, a Japanese bureaucracy, and Andrew Carnegie, a Scottish immigrant from Dunfermline who became the father of the American steel industry. He founded Carnegie Steel, the forerunner of US Steel, in 1869, a year after the beginning of the Meiji Restoration. He made his fortune in iron, coke and chemicals. The Ministry of Agriculture and Commerce (MAC) began nurturing Japan’s steel industry in the late nineteenth century. However, here any similarity between Carnegie and MITI ends because Carnegie’s wealth came out of his own pocket and not from tax revenue. The parks, libraries, schools, hospitals, meeting halls, universities and concert halls were personally financed. Japanese government fiscal stimulus packages are funded by public finance.
The president introduced himself to his audience by mentioning his recent visits to the Carnegie-Mellon Institute in Pittsburgh and Carnegie Hall in New York, both highly visible examples of Andrew Carnegie’s philanthropic activities. Then he got down to the subject of his speech, “creating human values as a form of industrial policy.” Describing his ministry as a firm but gentle guide of Japan’s industry, he said that MITI was sometimes called “notorious” but that he was unaware of the term’s origins: Perhaps it has to do with the way Japan’s economy developed rapidly in the past five decades and MITI’s supposed role in that development, which is often expressed by the very term “industrial policy.”
The president spoke of Japan’s competitive spirit as the driving force behind Japan’s industrialization after the Meiji Restoration quoting the first sentence of the first essay in Carnegie’s Gospel: “The problem of our age is the proper administration of wealth.” He reflected:
Though Mr. Carnegie was a great philanthropist, in his gospel he did not preach a “kinder, gentler attitude,” he was hard-nose arguing, at one point that “no substitute [for the law of competition] has been found: and while the law may sometimes be hard for the individual it is best for the race because it insures the survival of the fittest.”
The president’s reference to Carnegie’s generous but hard-nosed character was clever because it connected with MITI’s use of administrative guidance. He insisted that Japan’s post-war industrial policy included cooperation but there was a catch: “Competition is important, but a body of people – be it family, a company, or a society – cannot hope to function and grow without cooperation among its members.”
The president was inferring that companies cooperated with MITI’s guidance to form cartels, to rationalize production, to fix prices and to procure from domestic suppliers in order to ward off competition from foreign firms.
Although the origins of the policy to rationalize production can be traced back to 1925 and the Ministry of Commerce (forerunner of MITI) MITI used the tool known as “administrative guidance” (Gyoseishido) since 1952 in order to form cartels of industries designated as important to national interests, protecting them from foreign competition and to maintain a level playing field among domestic companies. The tool can be used ad hoc at the discretion of the ministries. There are no laws that limit the number of times “guidance” is used, giving the ministries uncommon powers to regulate. Companies will usually receive notification that they are expected to follow ministerial regulations. The directives are either transmitted in writing or by telephone, although a law in 1997 officially curtailed the use of the telephone. Carnegie’s tract on distribution of wealth had a Socialist tone to it:
…under its sway we have an ideal State, in which the surplus wealth of a few becomes, in the best sense, the property of many, because administered for the common good, and this wealth, passing through the hands of a few, can be made a more potent force for the elevation of our race than if distributed in small sums to the people themselves.
Likewise, MITI’s Vision and MITI’s role could be characterized as Socialist. The president reminded his audience that post-war industrial policy had focused on catching up with the Western powers and on increasing Japan’s competitiveness in the global marketplace. Each of these visions, in that sense, was a “how-to” guide on a grand scale.
He assured the audience that “creating human values” was very much a part of industrial policy: “…after all, industrial policy … at least as practiced by MITI … is aimed to increase prosperity or a sense of well-being in the nation.”
He claimed that MITI was aware that the Japanese were not enjoying the fruits of their labor and that the Vision for the 1990s was to shift the focus from “how-to” to “what-for.” He listed some of the objectives of the Vision:
Greater consumer-orientation and protection, further promotion of recycling, creating greater employment opportunities, increasing security for the elderly, and pushing for advancement of women’s social and professional status. The vision calls for vast improvement of social infrastructure, including housing (no more rabbit hutches, please), and a massive attempt to reduce excessive concentration on Tokyo and encourage regional development … the vision sets forth goals that must be achieved to secure long-term economic development that is essential to the enhancement of human values.
The speech was included as a Supplement in the March edition of the paper.
My article for the February issue “The Big Squeeze” was based on my experiences while living in Japan with the high tariffs on foreign citrus, specifically California oranges. However, I was again given a caution for what was considered a risqué approach:
Orange amateurs blatantly describe the mikan as a Tangerine without seeds. Citrus connoisseurs understand the mikan mentality and its sophisticated subtleties. Barbarians from the West will tear open its skin, ravaging its flesh, barely aware of the sublime, sweet soul within. The more refined will gently part the thin, soft, orange robe, exposing the plump succulent crescents. They will tentatively unravel the silky white, membranous threads surrounding the translucent skin and, via lips and tongue, carefully let the delicate juice, intent upon capturing its fleeting honey essence.
Nevertheless, I received a number of calls from Japanese business executives posted in New York who praised the article. My readership among Japanese was increasing.
In the April issue as a government spokesman, the president stated a recurring theme in his editorial; although Japan’s economy might be regarded as stagnant, Japan was still experiencing growth of 1.5 percent GDP and that the first stimulus package of $87 billion was proving an effective measure to spark the economy but that the government would announce yet another stimulus package in mid-April. He put a spin on Japan’s role in the global economy:
The Japanese economy, which has remained in the doldrums since the “bubble” burst two years ago, is finally beginning to brighten. Improvements in machinery orders which began last October are continuing …
In mid-April the Japanese government will introduce a new stimulus package. Following the $87 billion measure that went into effect early this year, the new package will aim to boost ‘new social capital’ by inducing investments in things such as telecommunications and university laboratories … The effect of the previous stimulus package on the construction industry was evident in January, when top 50 construction companies reported a 60% increase in new orders from a year earlier …
Internationally, the continued recovery of the U.S. economy remains the key to worldwide growth. But Japan’s role is no less great, especially when European countries are reeling with serious recession. Japan is implementing large stimulus measures to increase domestic demand and help the world economy grow with stability.
The year 1993 is going to be a historic one when the foundations for a new international order will be laid. Both the United States and Japan are prepared to undergo fundamental change – the United States with the keyword “sacrifice,” to rebuild the domestic economy, and Japan with “global responsibility,” to strengthen its international role. It is our hope that during the U.S.–Japan Summit in mid-April President Clinton and Prime Minister Miyazawa will solidify the partnership of the two nations.
Since I had received a caution, my article in the April issue “The Big Squeeze (Part 2), Can the Quitting of Quotas Cause Chaos?” was confined to one page. It regarded the lowering of tariffs on California and Florida imports of orange juice and a small reduction of tariffs on fresh oranges:
The food and beverage industry, confident that consumers were hooked on 100% pure, quivered with eager expectation of future fresh orange juice markets when the quotas would come tumbling down, a virtual Valencia Valhalla. Processing and packaging plants in California, Florida, and Brazil were purchased. By the time the curtain lifted on April 1, 1992, at least ten major manufacturers and supermarket chains had gotten into the act….Alas, it is the “Sorcerer’s Apprentice” revisited! It’s Mickey’s worst nightmare! Only this time around, buckets of orange juice continue to multiply and, so far, marketing magic has not been able to rectify this miscalculation of the mass market.
A number of the officials at JETRO New York graciously allowed me to conduct in-depth interviews with them about their education and their impressions of the United States. They were relaxed because they were away from the pressures of their home offices and thus freer to communicate candidly about their attitudes towards the United States. Also, at that time the efforts by ex-LDP politicians to reform the political system evoked a more liberal and, therefore, easier environment.
Since I had anticipated their replies and likely to sympathize with many of their views I did not consider that my queries would intrude on their privacy. These interviews are as relevant today as in 1994. In other words, there have been no fundamental changes since then.
The interviews included a MITI official who answered the question of whether he thought that Japan could internationalize. His reply to my question why Japan cannot internationalize revealed the real picture:
I don’t think that the Japanese can internationalize. “Internationalization” is spoken about but Japanese go abroad, have experiences but return to Japan and their same way of life. Unfortunately, things from the outside will never enter Japan smoothly. I really don’t understand what “internationalization” is, but I think that for Japanese to achieve a level that enables them to negotiate and interact with various nationalities is difficult.
The officer from Kyoto Prefecture was also interviewed during the same period:
Japan is a small nation and insular. People are not open to outsiders. They build stone fences and close themselves off. Japan has internationalized in some areas like trade but for the general population, Japan has not internationalized at all.
I interviewed the president of the North American corporate headquarters of a major Japanese trading firm later that year. His insights are invaluable, particularly because Americans posted in Japan generally tend to socialize only among westerners due to the language barrier and the difference in cultures.
The Japanese who were sent here before me did not receive any education here. However, all of the Japanese who are posted here inevitably send their children to special Japanese preparatory schools (after regular school hours) as they do in Japan. They want their children to enter the Japanese education system. So even though Japan posts employees overseas for three to five years, Japan will not be able to internationalize. I don’t think that the Japanese mind is too rigid but the Japanese should try to understand world affairs. Being a tourist is no good. Japanese do argue that Americans who work in Japan for American companies leave without understanding anything about the society or culture. But Americans have a pretty good sense of themselves and the world because they go out into the world. You can’t compare the two countries! Japanese go to other countries on a theme: on business, on an adventure, to the desert to feel the heat, walking around the world or living in the mountains. They sport a dishevelled look to fulfil a dream. But they must really enter those societies.
Although in his December 1992 editorial the president entertained high hopes for the Clinton administration trade policies regarding Japan’s trade surplus, he expressed in the May 1993 issue of Inside/Outside Japan some concerns when he devoted his editorial to the Clinton–Miyazawa Summit which was held in April.
He protected MITI’s administrative territory by stating that Clinton was unrealistic about “result-oriented trade” or “managed trade” and that Japan was the submissive underdog at the negotiation table. Nevertheless, the president was not entirely forthright when he insisted that Japan’s economy was based on market mechanisms. Even though Japan was the second largest economy in the world and the world’s largest net creditor, Japan’s mercantilism was creating problems in the economy that would prove to be insurmountable unless deregulation and basic structural reforms were implemented quickly. He insisted:
The United States’ position as the senior partner and founder of Japan’s post-war democracy, and Japan, because of its inherent politeness and reluctance to offend …
There is undue emphasis on select aspects of bilateral trade and ignores, for example, the fact that the imbalance in trade between Japan and the United States fundamentally results not from allegedly closed markets but from macroeconomic factors and differences in export capabilities. Forcing numerical import targets on a trading partner would be the ultimate form of market intervention – as Japanese corporations and Mr. Miyazawa forcefully argued.
The president ended his editorial with a subtle warning:
In the new era following the Cold War, we certainly hope our amicable relationship will continue, with the United States changing itself to affect basic economic restructuring, Japan to further facilitate access to its markets and take on greater global responsibilities. This is all the more reason we must oppose demands that deliberately interfere with market mechanisms.
My article, “The Shell Game” which regarded the route taken by Blue Diamond Almonds from the 1960s to enter the Japanese market was based on my visit while living in the Napa Valley to Blue Diamond’s center in Modesto where the almond growers’ cooperative is located and where the bulk of California almonds are cultivated. Although the company opened a small office in Tokyo in the 1960s, in order to integrate almonds into the Japanese diet it connected with cooking schools to instruct young women how to use almonds in recipes. Blue Diamond also produced almond snacks for the Japanese palate. I concluded:
The California almond is in Japan to stay because,
What did that crazy goose once say? (or was it actually Frito Lay?)
“I bet you can’t eat just one!”
On the second half of the page was the announcement that the government would release a $116 billion stimulus package to “primarily improve social capital.” It was 35% bigger than the previous package, the total amount equalling 2.8 percent of Japan’s GDP for fiscal year 1992. It was expected to induce a “2.6% multiplier effect on GDP.” The package was targeted for improving housing and sewage, as the president had promised in a previous Perspective. But he did not include that the infrastructure work would keep Japan’s unemployment numbers low. The last paragraph indicated that Japan was determined to open its markets to imports: “The package also features financial schemes intended to create new facilities to promote imports [FAZ]. Among the measures to increase imports is ‘import sale facilitation financing,’ which will be made by the National Finance Corporation and the Small Business Finance Corporation.”
The Sins of the US
The June 1993 issue included a special MITI report presenting the US as the culprit:
The Japanese Ministry of International Trade and Industry (MITI) has issued the second annual report on unfair trade policies of Japan’s major trading partners. The report examines U.S., Canada, Australia, and Asian nations, as well as Japan, and finds that the United States most violates GATT rules and resorts to unilateral actions.
Even though the US-Japan April trade talks were not as productive as was hoped and even though the paper served to promote Japan’s interests, in his Perspective the president overstepped his remit when he used the US National Cooperative Production Act of 1993 and the National Competitiveness Act of 1993 to take a swipe at President Clinton:
Needless to say, to truly promote industrial competitiveness, the U.S. government must do certain things that are far more visible and far more essential: to name only two, reducing the budget deficit and improving opportunities for education and vocational training. It is in these areas that we had high hopes for President Clinton; his call for change struck us as timely and convincing…We are somewhat worried therefore, that the stalemating forces in Congress are gaining influence again.
My article “California, Here I Come” was about one of my favorite Japanese confectionary producers Ezaki Glico and the Glico caramel. When I called the Glico Sales office in California to enquire about Glico’s corporate history the director sent me a large corporate book released to Japanese corporate clients to commemorate Glico’s 75th anniversary. It was an exquisite chronology of the company’s development through photographs of pre-war factories and employees, designs and brands. It was also a history of pre and post war Japan. I reluctantly returned the book several weeks later.
The founder Riichi Ezaki started his company in 1921 with one product – caramels packed in a box with a toy token to entice children. His factory was destroyed during the war and in order to resuscitate the business he decided to add the California almond to the caramels and then extended the brand with more almond creations, importing 95% of the almonds from California:
Glico’s products were not always almond oriented. A best seller, Pocky, whose name nuances innocence, were two dozen chocolate covered sinful sticks cuddled in a red and white Pandora’s Box. But one way or another, the almond gets Glico and now Almond Pocky joins the pack.
At the end of the article I included the woman officer from EID/MITI at the end:
Is Glico’s image now ALMOND? Inside/Outside Japan dropped into the office of a director who came to JETRO New York from Tokyo last year. Her elegance and sophistication are greatly admired by her colleagues. When popped the question, her lovely countenance turned pink with pleasure and “I wish I may, I wish I might” star light sparkled in her eyes. “Glico? Why, the tokens, of course!”
I sent several copies of the paper to the California office. A week later I received a call from the director who told me that the Glico CEO who was the founder’s son had read my article and was very pleased with the effort. Mr. Ezaki wanted to know what he could send me to express his appreciation. Without hesitating, I requested a copy of the book. At the end of June I received a package from Glico’s corporate headquarters in Osaka. A letter of thanks from Glico’s corporate planning office accompanied a complimentary copy of the book, which is among my most prized possessions. Glico’s support served to forge an abiding relationship with Inside/Outside Japan and closer ties to Research and Planning.
The LDP Bites the Dust
In August 1993, Prime Minister Miyazawa lost the no-confidence vote in the Diet (purportedly due to his proposed tax hike), and resigned from office, which marked the end of the 38 year reign of the LDP over post-war politics. Hosokawa became the Prime Minister and formed an eight-party coalition government. His domestic policy focused on the reform of the electoral system and confronting political and corporate corruption. His international policies were the antithesis of Abe’s and other right-wing politicians when he formally recognized that Japan had waged a war of aggression in the Pacific. He also made a formal apology to Korea for Japan’s colonization. The charismatic prime minister cut residential and income tax to alleviate the impact of the bursting of the economic bubble on the economy but was pressured by MOF to raise the consumption tax from 3 percent to 7 percent by 1997 to compensate. However, Hosokawa could not bring consensus in the coalition. The president used his Perspective to announce Hosokawa’s victory:
Japan’s Liberal Democratic Party (LDP) yielded its ruling position for the first time in 33 years, creating an unprecedented opportunity for change in Japanese politics and governance. The new Prime Minister Morihiro Hosokawa, 55, is, like President Bill Clinton, a former governor.
The coalition that produced Mr. Hosokawa is made up of Socialist and seven other parties. Some people worry about the coalition’s inherent instability, noting that a patchwork group of diverse views that came together mainly to remove the LDP from power…
Needless to say, not everything is rosy. Just as President Clinton has run up against oppositions in his call for sacrifice, which is essential for change, so will Prime Minister Hosokawa’s government have to overcome difficulties in its pursuit of change.
There were only a few writers for the August issue and I was asked to contribute two articles. “The Candy Man Can” was about the history of another favorite Japanese confectioner, the milk company Morinaga, which also produced chocolate and caramels and which I also consumed with gusto. The Morinaga caramel was based on a recipe from a confectioner in Oakland, California where the founder worked in 1868. The Morinaga caramel was introduced slightly before Glico’s and was a major competitor:
The milk caramel made its debut in 1914 at a food exhibition in Tokyo, receiving rave reviews. Like the Hershey bar, it is a survivor. The packaging throughout the years has been innovative, reflecting the trends of the times. But the original yellow box still stands as an affectionate reminder of the past and a comforting affirmation of the present.
The president requested that the second article concern a school which American Honda Education Corporation, established in 1991 as a non-profit organization for potentially unsuccessful high school students in Estes Park, Colorado. “Rocky Mountain High” touted the new school a success, comparing American Honda’s corporate philanthropy with American corporate philanthropy.
MITI officials were divided between two camps; the “nationalists” and the “internationalists” who were the officials sent abroad for education and to serve as secretaries in Japanese embassies overseas. Although the “nationalists” had the reputation of being more insular and more protective of MITI’s administrative territory I often could not differentiate between the two camps. It depended on the officers’ career objectives and if their loyalty to their superiors, who were in the position to promote them, influenced their principles.
The president was considered an “internationalist” and very liberal for a MITI official, at least in terms of his objectives for reform of Japan’s political economy, clearly set out in his Perspectives. In his September Perspective he promoted Hosokawa’s two initiatives for promoting economic growth. But it was questionable whether the president was agreeable to deregulation of markets to the extent of raising Japan’s foreign inward investment from 2 percent, the second lowest of the thirty OECD countries to a much higher level.
The new administration believes that to further improve the Japanese quality of life and enhance creativity, expanded business opportunities are indispensable, including greater foreign participation in Japanese markets.
My article was, as usual, based on previous work experiences and explained the purchase of Ridge Winery by Otsuka Pharmaceuticals.
The November issue on Inside/Outside Japan was a major attempt to convince readers that Japan was set to reduce its trade surplus and to open markets to imports. “Urgency to Import Expansion” was an announcement regarding the trade conference held in October to discuss import promotion programs to reduce Japan’s huge trade surplus:
Surpluses of such magnitude invite frequent criticism from major industrial nations, which have either a huge deficit or only a modest surplus. They have pushed up the value of the yen to a breaking point, while not bringing much sense of well-being to Japanese consumers…JETRO has set up special facilities to exhibit imported houses.
The Perspective in the same issue was informative to American readers because it revealed the struggle of Japanese corporations to restructure in order to accommodate the bursting of the bubble such as a cyclical economic downturn and the rapid appreciation of the yen. It provided some facts which probably most readers were not aware of:
…there is good reason for Japanese corporations’ extreme reluctance, even under unprecedented pressure to downsize, to destroy their long-standing employment system overnight. There is strong sentiment that employer-employee relations must remain equitable and stable. The average pay discrepancy between top management and a new employee is 12 to 1 in Japan in contrast to the United States where it is frequently as great as 40 to 1 or greater.
The president’s Perspective in the February 1994 issue “Hosokawa Fights for Political Reform” was an optimistic announcement of the prime minister’s “major victory at the end of January. He secured it only after making bruising last-minute compromises. Nonetheless, for Japan’s electoral system it was a major stride forward.”
My article “Sally Goes Round the Sun” regarded Kyocera Corporation’s ceramic engine and the company’s focus on environmentally friendly products.
Beginning to See the Light
From December 1993, the editorial staff of the Nikkei Shimbun ran a series of articles on the front page that delved into the bowels of Japan’s bureaucracy. They were triggered by the drive for political reform and the recent scandals regarding elite bureaucrats parachuting to posts in industry after retiring from their ministries (known as amakudari as explained in chapter 16). I read them faithfully.
The articles were later collated for a book that was published in June 1994. A Creaking Giant Power (Kishimu Kyodai Kenryoku) examined the relationship between the bureaucracy and the National Diet as well as the power of the bureaucracy itself. It explained why bureaucrats were more influential than politicians in Japan’s governing system, and why the Japanese did not believe that politicians could plan effective legislation and that there was no real leadership in the Diet. The reasons given for their lack of confidence were: (i) politicians were subservient to the whims of special interest groups; (ii) there was ongoing friction between political factions; and (iii) politicians did not have the expertise or experience to plan effective policies because bureaucrats had been given the power to draft laws since the Meiji period.
These articles were revolutionary in terms of bringing to the public domain the environment of the post-war ministries and the vehicles which ensured that the post-war system remained intact.