Japan's way of commerce
Norman Lamont
A former Cabinet Minister once told me of the only dealing he ever had with a Japanese politician. It was to do with Japanese subsidies for shipping, and he had been supplied with a weighty dossier of incriminating evidence. When they met, his Japanese counterpart immediately told him that it was completely untrue that the Japanese had ever subsidised shipping. The civil servants held their breath. The Cabinet Minister produced a little of his evidence. `Ah, yes', came the reply, 'we used to do that, but not any longer'. Then the Minister produced some recent evidence. There was a pause, and then: 'We will deal with that as soon as we get back'.
After the Bonn summit, many people remain sceptical whether the Japanese will reduce their huge balance of payments surplus. They promised the same last year, and it increased enormously. Others suspect that if it is reduced, it will be by buying raw materials for another trade offensive.
British businessmen are always deeply suspicious of the Japanese, and at the slightest opportunity hurl accusations of subsidies and protection. In the past they would have had reason. The key to the system was the Ministry for International Trade and Industry (MITI), and its famous system of 'administrative guidance', whereby it identified key sectors and moulded their structure and capacity. It was MITI which co-ordinated and backed certain companies to develop micro circuits, which are now all the fashion. It is difficult to know precisely how 'administrative guidance' operated. I was recently assured by a Minister that it was not, and never had been, a system of planning; it was more of a 'pied piper concept'.
Today, however, there are changes. Quotas and tariffs have been reduced. Indeed Japan is the only industrialised country with no tariffs on motor cars. Of course it is easy to preach the virtues of free trade if you have spent years protecting your industry, until it is among the most modern and efficient in the world. But Japan has become more of a market economy than before. In spite of the complicated retail system and the alleged aversion of Japanese consumers to foreign goods, it cannot be impossible to sell goods to Japan: British exports there increased by an above average 30 per cent last year. It is probably also true that industry is now less inclined to take orders from government. MITI certainly has difficulty in restraining car exports, with seven companies competing fiercely.
But even if Japan is opening up and becoming less corporatist, it does not mean that the challenge to the West will be less formidable. Success has been built on certain social attitudes, and the drive for commercial greatness has become a way of life. You cannot quickly change the remarkable dedication of Japanese labour. The latest example of 'administrative guidance' is that the Employment Ministry has indicated that Japanese workers ought now to take their full entitlements to holidays. Nor can you take away the adaptability of the Japanese. When the Japanese do intervene in the economy, it is to accelerate, not stop, change. The Keidanren, the Japanese CBI, have called for administrative guidance about those sectors of the economy from which they should now withdraw, in the face of new third world competition. While Britain pumps money into her ailing shipbuilding industry, the Japanese, with the full support of their trade unions, announce that they intend to reduce their capacity by 50 per cent. Most astonishingly of all, the leader of the Japanese auto workers' union has called on Japanese motor companies to invest in the United States, even though he calculates that it would cost 100,000 Japanese jobs.
Japan's great strength is its cohesion. It is often said that nature has helped by making the Japanese remarkably homogeneous, with no ethnic minorities, and fewer regional variations than Europe. The Japanese live their lives in groups, and emphasise group loyalties, as evidenced by the imposition all over Japan of uniforms for schoolchildren of all ages. According to Jiro Tokuyama, the respected writer, the emphasis on conformity gives less chance to the exceptionally talented. He believes that a Kissinger in Japan would not have been given the same opportunies as in America. Power can be given to the able, but not the the extraordinarily able: leadership should be safe and collective.
The Japanese attitude towards the individual is also reflected in the view of law as
something to be invoked only in the most extreme circumstances. In the past, Japan
ese have sometimes been astonished at the legal safeguards that European or American businessmen have proposed in joint
ventures. The Japanese do business on the basis of personal bonds, and they prefer to settle disputes by mediation or reconciliation. Hence there are only 15,000 lawyers in Japa, compared to 400,000 in the US, a country with twice the population. Not that the Japanese are lawless, far from it.
In government, too, decisions are taken on a consensus basis. There has been agreement about the need for national economic development, and this has been ruthlessly pursued. There is no consensus on foreign policy or Japan's relations with China, and so little has happened. In the past the Japanese were able to take bold initiatives, but only, according to TokuYama, by ascribing them to the wishes of the Emperor or to General McArthur. Today there are no such convenient symbols and decisions may be extremely slow. The danger is that restructuring the economy will not be accepted until world free trade is collapsing.
Consensus and loyalty to the group are also the basis of Japan's industrial relations. More than any other capitalist country, they have succeeded in persuading workers to identify with their companies. This has been helped by companies playing part of the role of a welfare state.
But today the cracks are beginning to appear. The practice of lifetime employment combined with higher pay for the longest-serving workers, is beginning to break down. It is hardly surprising when a worker over forty costs an average 50 Per cent more than one in his early twenties. Unemployment therefore falls, much more than in the US or Europe, on the other workers: 40 per cent of the unemployed are over forty. And unemployment is much higher than the offical 2.4 per cent. Adding back workers kept at home on reduced pay, the real figure is more like 6 per cent. It is hardly the ideal background for the government with a tiny parliamentarY majority to begin restraining exports in an economy built on exports; and yet theY know that without some action the free trade system on which they rely cannot sur" vive. Nor can there be any guarantee that the government's efforts to increase imports will work. Increased public spend" ing has little import content. They can cut taxes, but the Japanese worker already saves an extraordinary 24 per cent of his income, and may not buy more imports. The best alternative to trade restrictions is for the Japanese to invest massivelY abroad, not just in the Pacific area, but in the United States and Europe as well. This will pose problems for the host countries as well as for the Japanese. But time is running out if we are to avoid the disaster of world protection. For the Japanese that would be a fate like that of the Pied Piper's rats.
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