View from Tokyo: Gut reaction behind a trade surplus on autopilot

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The Independent's Tokyo office is installing a new computer, and as part of this process requires a modem that will plug into a Japanese telephone line and transmit stories to the main computer in the head office in London. So this week a search began on the streets of Akihabara, Tokyo's famous electronic goods area, for the requisite piece of equipment. The computer that needs to be connected is a Toshiba, a Japanese brand, but it was assembled overseas with a keyboard designed for the English language.

'We don't deal with foreign computers,' was the response at the first shop. It was as if the computer had some communicable disease lurking in the keyboard. Four shops later, it became clear that Japanese computer salesmen have little time for people with foreign-made products. Although the shops had plenty of modems, they refused to even speculate on which types would fit the Independent's computer, and would not take any out of their boxes for testing purposes. Some were hostile to the point of rudeness.

Here, in the gut reaction of street salesmen against anything foreign, is one of the most basic reasons for Japan's enormous trade surpluses with the rest of the world. After the war, the government began programming the general population to work tirelessly to rebuild Japan's economy with high savings and relentless export drives in the national interest.

This reshaping of the fighting spirit of the Japanese soul, or Yamatodamashii, to put the country's economic interests above all else, has worked all too well. Even if the government would like to moderate its trade surplus for political reasons, Japanese corporations and customers are so thoroughly imbued with the nationalistic agenda of 'working for Japan' that the surplus keeps going up almost on autopilot.

Frustration

So there is some justification for the frustration of the Prime Minister, Kiichi Miyazawa, as he receives the latest demands from President Bill Clinton for further opening of the Japanese market to US imports. The latest strategy in Washington is to demand benchmarks for market access for certain US goods in the Japanese market, like computers, cars and financial services. This follows the agreement to give the US 20 per cent of the Japanese semiconductor market - a target that US firms have just managed to reach, but that is bitterly regretted by Japan as setting a precedent for other market sectors.

Mr Miyazawa has repeatedly stated that the government cannot force private companies to favour buying goods from a particular source - foreign or domestic. It is true that there is no law in Japan that forbids Japanese computer salesmen to deal with foreign machines, and that the government could repeal. Nor is it likely that in Toshiba's relations with its distribution network there is a printed manual requiring salesmen to deal only with customers who have bought their goods in Japan.

That is not to say that there are not many deeply held - often irrational, but no less potent - prejudices in Japan against anything foreign. Far from it. But there is not a lot the government can do to change this gut level of economic nationalism, at least not in the short term.

Japan and the US are now embarking on the latest round of trade negotiations, with the Japanese current account surplus already having reached dollars 36bn in the first three months of this year. That is not only one-third more than for the same period last year, but more than the entire current account surplus for Japan for the years 1970-79, as Kenneth Courtis, the chief economist for Deutsche Bank in Tokyo, points out.

The surplus is now running at 3 per cent of Japan's GNP. The US says that level is unhealthily high, and wants it reduced to between 1 and 2 per cent of GNP: but despite the record high level of the yen against the dollar, it is hard to see Japan coming close to the US target in the near future. And this, Mr Courtis says, is bad news for all concerned: 'The politics of trade are set not only to become more intense and heated, but also more destabilising for financial markets and the global economy.' And all because a computer salesman would not sell a modem to a customer with a foreign-made computer.

Meanwhile, an argument has broken out within the ranks of the Japanese government over whether the recession in Japan has ended or not. This is important not just for domestic political reasons, but also for international consumption: Japan has come under considerable pressure over the past 12 months to stimulate its sagging economy to help boost the world economy by sucking in more imports. Tokyo has already spent Y24,000bn ( pounds 145bn) in special budgets to boost the economy, but some ministers fear the government will be asked to do more during the Group of Seven summit in Tokyo next month.

Behind the scenes

So it was politically important for the Economic Planning Agency to come out with a report on Thursday announcing that the recession is officially over. But behind the scenes there was much politicking, with the powerful Ministry of International Trade and Industry (Miti) arguing that it was too early to pull down the storm flags.

The result was a Japanese compromise. First the head of the EPA, Hajime Funada, stated that the economy 'seems to have almost bottomed out'. But later in the day a Miti mandarin told a news conference that 'we have been told the comment (from Mr Funada) does not represent the unified view of the government'. (Sound of a slapped cheek in the wings).

Yesterday the Bank of Japan added to the official pessimism when it released its quarterly tankan report on business confidence. The report said that at least business confidence had stopped deteriorating for the first time since November 1989 - but said this did not mean that a recovery was under way. A bank official said 'there is no evidence that this is the turning point' of the recession, and added that Japan could yet suffer a double-dip recession.

The reason for the differing views seems to come from the type of statistics examined. The EPA report highlighted good figures for housing starts, public works spending and the rising stock market. But critics pointed out that much of this is directly due to government spending, and that the two most important indicators, corporate and consumer spending, continue to languish.

In addition manufacturers are having to struggle with the additional burden of the appreciating yen, making it harder for them to export. Private economists are mostly taking the cautious view, and are not forecasting a real recovery until 1994.

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