Caught between the devil and the deep red sea of ink, Washington, which ran a dollars 50bn deficit with Japan last year, has prompted its fellow members of the Group of Seven industrialised nations to opt for a gradual strengthening of the yen. The first signs came at the beginning of February from a comment by a former official of the US Treasury, Fred Bergsten, who said the yen, then trading at Y125 to the dollar, was undervalued and should be guided up to the Y100-Y110 range.
This turned out to be a classic 'test the water' comment by someone not directly connected to policy-making. Ten days later, on 19 February, after the strength of the Japanese currency had been debated in newspapers on both sides of the Pacific, Lloyd Bentsen, the US Treasury Secretary, spoke out in favour of a stronger yen, 'because it will help us on trade'.
This propelled the yen to Y118.20 against the dollar, its highest value since the Second World War - a rise that was given support in a closed meeting of G7 deputy finance ministers in New York last weekend.
Since then the yen has moved little but has continued to rise, and the G7 meeting in London today is widely expected to endorse a stronger yen in what is likely to be a smaller-scale repeat performance of the Plaza Accords that gave rise to the last steep appreciation of the Japanese currency in 1986.
It is not clear whether a higher yen will put much of a dint in Japan's trade surplus while domestic demand for imports continues to be depressed. But it has revealed some interesting cracks in the establishment in Japan.
On the one side, the Ministry of Finance and the Bank of Japan are basically opposed to a stronger yen, because of their fear of the impact of a stronger currency on the economy at a time when recovery is not yet in sight. And the Prime Minister, Kiichi Miyazawa, has said that sudden swings in the foreign exchange markets must be avoided at all costs.
But, interestingly, the Ministry of Trade and Industry and some business leaders are quietly in favour of a strenghtening of the yen, for two reasons. First, Japan historically reacts well to threats from abroad. Japanese companies will be able to use the threat of the country's declining competitiveness in relation to foreign producers because of the stronger yen to rally their workforces to even greater efforts, at a time when everyone is feeling sorry for themselves because of the recession.
THE SECOND reason for the enthusiasm of the ministry and some business leaders for a stronger yen is that it will give companies the power to make cuts in their workforce while blaming them on foreigners and their 'treachery' in fixing exchange rates.
The new buzzword in Japanese boardrooms is risutora, the Japanese version of restructuring. Corporate Japan knows well that it must reduce its fixed labour costs by cutting jobs, but has been reluctant to do so up to now because of the tradition of looking after employees and not sacrificing them to short-term profit considerations. The excuse of gaiatsu or foreign pressure will take the sting out of what would otherwise be a difficult task.
Meanwhile Japanese subsidiaries of foreign-owned companies are showing the way in cutting jobs. The biggest sensation was caused by IBM Japan's announcement that it wants 1,200 of its employees, from a total workforce or 3,000, to retire early or to move to affiliated companies.
IBM Japan had cultivated a reputation as one of the most 'Japanised' of the foreign firms that have set up in Tokyo, and had boasted that its employees would have jobs for life just as if they were working for a Japanese company. The fact that IBM has cut 100,000 jobs in the US in the last eight years was virtually ignored in Japan, where the local job losses were seen as a signal of things to come.
The next foreign company to hit the headlines was Eastman Kodak (Japan), which is looking for 70 workers - about 60 per cent of its research staff - to apply for early retirement. Nihon NCR and the Japanese branch of American Express are also reported to be looking for staff to voluntarily give up their jobs.
The sensationalist Japanese press has focused on the bullying tactics allegedly employed by some foreign firms to get rid of their employees, including repositioning people's desks, disconnecting their direct- line telephones, or rendering invalid the card keys that open their office doors.
To get over this bad image and to encourage voluntary redundancy, management at several foreign companies is using outplacement firms to help find new jobs for those leaving. These firms run marvellously euphemistic programmes like the 'second-career assistance programme' to help soften the blow to a Japanese employee who has in effect suffered what in Japanese terms is the ultimate disgrace: being fired.
FROM THE prosaic to the fantastic, the Ministry of International Trade and Industry has decided to investigate UFOs, clairvoyants, telepathy and other parapsychological phenomena that would not normally cross the desk of a bureaucrat. A special institute is to be set up in 1995 to study art, culture and parapsychology with a view to finding applications for Japan's next generation of electronic products.
The idea for the institute came from a panel Miti set up last November to look at how industry can respond to human needs for art and 'inner peace'. With the electronics industry notoriously short of ideas for a new hit product, Miti wants to give a helping hand by delving into the workings of the brain.
Most of the applications of the New Age industries would be in audio-visual equipment. For example, scientists would monitor the brain waves of people attending tea ceremonies or arranging flowers to see if there is a way of reproducing the peaceful feeling artificially. One home-use device that has already been suggested is a machine that would emit supersonic waves intended to relax people by making them think they are sitting in a forest.
Perhaps the unemployed could be subjected to supersonic waves giving them the reassuring feeling that they are sitting in the office.
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