From: clare@nynexst.com (Clare Chu)
Subject: Re: Interesting article about recession, politics and Japanese trade policy (1/2)
Organization: Nynex Science and Technology
Distribution: na
Date: Thu, 15 Oct 92 18:09:10 GMT

Due to the discussion about Japan, I found an interesting article on alt.politics.perot.
Haven't read it yet, so don't flame me or anything...
In article <1992Oct15.014416.12333@midway.uchicago.edu> ar12@midway.uchicago.edu writes:
>The following article comes from FTP site monu6.cc.monash.edu.au.
> 
>It is a very informative and quite disturbing piece about the
>problems between the United States and Japan and how they relate to
>some of the problems the US is experiencing today. The article
>talks about the mechanics of Japan's trade strategy and uses many
>examples. It is a bit long, but is thoughtfully written and
>explains with explicit detail what seems to be actually happening.
>At the end of the article is a part about the US debt and how the
>author thinks it may destroy America a few years from now.
> 
>This article seems relevent and worthwhile to post. I'd appreciate
>your comments on it if you have any.
> 
>My own comments follow the end of the article.
> 
>-Andre
>ar12@midway.uchicago.edu
> 
>Here it is....
>---------------------------------------------------------------
>
>       D O E S   A M E R I C A   S A Y   Y E S   T O   J A P A N ?
> 
>    (A M E R I C A   W A   N I H O N   N I   "H A I"   T O   I U K A)
> 
>     There are many misconceptions about Japan and its miraculous success
>in the post-war era. ". While staying in Japan in mid 1992, I tried to
>look at Japan's seemingly miraculous success with the hope to understand
>it so that maybe we could apply some of their plan in our own country.
>"What makes Japan so good?", "How did they get from third world country to
>richest in the world so quickly?" are common questions asked in America.
>Today, I will try to answer with examples, at least partially, these
>questions. 
> 
>     Going to Japan, I expected to see a very efficient country from which
>America could learn in order to regain her former prosperity. During my
>trip, the reality began to sink in that what is really happening was quite
>different from expectations and in some ways quite disturbing. The
>Japanese have a very different approach to doing business than we do. This
>paper will elaborate, justify and try to show what is happening and why it
>is important that this be understood here in America. Following this
>article on Japan, is a piece about the US national debt, which has
>relevance to this discussion.
> 
>     I must thank my fiance, Mutsumi (a native Tokyo-ite herself) for her
>help in writing/editing this paper and her guidance as I toured and tried
>to understand her country. All names have been changed or omitted to
>protect anonymity as we do not wish to reveal anyone involved with or
>mentioned in this paper for fear of them being labelled deviants in a
>country that is not so tolerant of internal dissent. 
> 
>     Don't be afraid to question what you read here as I am confident that
>if you research the points yourself (hopefully by going to Japan to see
>for yourself or reading materials on the topic), you will find the points
>made in this paper to be truthful. 
> 
>THE "JAPAN PROBLEM":
> 
>     Some claims echoed in America which are commonly dismissed as "Japan
>Bashing" statements, surprisingly turn out to be true upon investigation.
>The following statements may seem brash right now, but their meanings will
>become clearer in the explanations and examples that follow. 
> 
>     It seems that Japan is in some kind of economic war against us. Their
>objective is for them to win and for us to lose. Through the use of
>cartels, price fixing, government-corporate 'anti-foreigner' tactics as
>well as adversarial trade and predation strategies, Japan is destroying
>much of America's strategic industries, standard of living and military
>strength. These actions are also destroying the jobs of ordinary American
>people. 
> 
>     Those who study these types of topics know that economic wars can be
>even more devastating to a country's long term future than conventional
>wars. Japan is organized to fight, uses a tactical strategy and has a
>fundamental plan. America's economic strategy is in disarray and there is
>no plan. As a result, America is losing the economic war by default. 
> 
>     The greatest transfer of wealth in the history of the world from one
>country in the world to an other is happening right now, from the United
>States, to Japan. This is no accident and is in a large part responsible
>for our economic problems in America today. Many new graduates and
>students today realize the consequences of this much more than their
>parents. People entering the workforce today are likely to have a standard
>of living considerably lower than that of their parents. Members of the
>current generation are unlikely to be able to afford a home like the one
>they grew up in. They are much more likely to have trouble finding a good
>job upon graduation than their parents ever did and will need two sizable
>incomes to support their family. Their parents may lose their jobs, and
>not be able to find other 'good' ones as they don't exist in America
>anymore. These problems may not seem relevant to the 'Japan issue', but in
>fact they are. 
> 
>IN THE BEGINNING, THE TV CARTEL:
> 
>     A very famous example of Japanese national government and corporate
>coordination to take over a foreign industry is that of the Japanese TV
>cartel, first set up in the 1960's. This is how Japan took the free-world
>TV industry away from the United States. PBS Frontline did an excellent
>documentary on this ("Coming From Japan"). 
> 
>     In the 1960's, the Matsushita Industrial Electric Company, Sanyo,
>Toshiba and others formed a TV cartel in Japan. They got US TV technology
>from the giants in the industry (Zenith, RCA Quasar) in the following way.
>The Japanese government prohibited US made TVs from being sold in Japan.
>Instead, they insisted that the technology be licensed to Japanese
>manufacturing companies rather than importing (still often the case today
>in Japan). The US companies thinking they could still make money this way,
>agreed to these terms which enabled the Japanese companies to acquire the
>technology on how to build TVs.
> 
>     The above Japanese companies, with tacit approval from the Japanese
>government, set up a cartel to inflate TV prices in Japan in order to turn
>around and use the money to sell below cost TVs in America. This was to
>drive US makers out of the American and world markets. US TV makers went
>bankrupt or left the industry as they could no longer fund research to
>continue making improved and high quality TVs. They could not compete with
>the artificially low Japanese TV prices in America and were forbidden to
>enter the Japanese market to take advantage of the high prices there.
>Hence, the US makers could not make money. Furthermore, secret deals
>illegal under US trade law were set up by Japanese TV makers and US
>retailers such as Sears and Woolworths to sell the TVs under store brand
>names. As a result, once famous brands such as Sylvania, Quasar, Admiral,
>Philco and RCA have vanished or are foreign/Japanese owned. Zenith is the
>only remaining US TV maker today. No US companies make VCRs. 
> 
>     The transcript of this PBS program is available via FTP at Internet
>site: monu6.cc.monash.edu.au in pub/nihongo, or at the address listed in
>the appendix of this article. It is very thoughtfully written and is an
>excellent case study of what is explained in this paper.
> 
>     In the 1980's the Japanese applied this same strategy to the machine
>tools industry and now completely dominate that industry (a point well
>made at a machine tool exhibition I visited in Tokyo). Before that was
>motorcycles and computer memory chips (the US tried to retaliate but
>failed as our companies couldn't organize with each other during the now
>famous 'dram shortages' a few years back). It will be happening again with
>major and smaller kitchen/washing appliances during the 1990s. It has
>already happened with liquid crystal computer displays where the Japanese
>today have 100% market share (these were actually invented in the USA).
> 
>DISPELLING SOME STATISTICS:
> 
>     Several misleading claims are made in the media about how the trade
>situation today with Japan is fine. These will now be dispelled. One claim
>states that Japan is opening its market because it has increased imports
>by 9% in 1986-87 and 18% in 1988. This is a half truth because Japanese
>exports during the same period increased by much more than that. In other
>words, the trade gap got bigger, not smaller between Japan and its trading
>partners.
> 
>     An other false claim, most often made by Japanese trade
>representatives, states that it is naturally expected that Japan has a
>trade surplus with America. This is because if every Japanese bought $100
>of goods from America, and every American bought $100 worth of goods from
>Japan, an imbalance would occur in Japan's favor as there are twice as
>many Americans as Japanese in the world. 
> 
>     This is a mathematical fallacy. To see more clearly this picture,
>imagine a world with 2 countries, one with 100 citizens, and an other with
>1 citizen, you. Each person has $200 to their name. Every year you buy
>$100 of goods from the other country, and each of their citizens buy $100
>of goods from your country. If you work out this example, you will see
>that in a little over 2 years, you will have accumulated all of the money
>in the world and the other country will be penniless. This is the current
>state of affairs between Japan and its trading partners. Although things
>are actually occurring more slowly, this is the trend.
> 
>POLITENESS AND CODED LANGUAGES, A BACKGROUND:
> 
>     Japanese communicate with each other and the outside world a bit
>differently than we do. This is often a cause for misunderstanding between
>our two peoples. 
> 
>     Because Japan was a communal society, a way of speaking in a way not
>to directly offend the other person (who they still had to live close to
>after a discussion had finished) has developed over time. There is even a
>Japanese word, called 'Tatemae,'  which refers to this kind of phrase.
>These kinds of phrases are a type of 'lie' in order to be polite. Often,
>when Japanese use words like 'goal' or 'difficult' in reference to a
>request you make, this is tatemae. 
> 
>     Some recent examples from the evening news will make this point
>clear. Recently, George Bush went to Japan to open the Japanese market to
>US goods and to get the Japanese to use more US made car parts in the cars
>they sell to America. When he left the Japanese Prime Minister said the
>agreement they reached was 'a difficult goal'. This is Tatemae code for
>'we have no intention of meeting your demand'. But of course, the Japanese
>PM would not say this directly to George Bush, who is president of
>America. This would be extremely impolite and Mr. Miyazawa could never say
>such a thing directly to an individual of such prestige. The Japanese PM
>is thus in a difficult position. This is an occasion for Tatemae.
>Foreigners (especially Americans) who don't use Tatemae have extreme
>difficulty to understand its usage. Later, when the 'promise' is broken,
>Americans often end up thinking they were lied to by the Japanese when
>this was never the case. Really, the Americans were supposed to pick up on
>the Japanese polite refusal, but failed to because they took what the
>Japanese said literally.
> 
>     As an other example, an agreement was reached where Japanese would
>allow more US made computer chips to be sold in Japanese products.
>Recently the Japanese have said this goal would be 'difficult' to reach.
>This is code for 'we will renege on the agreement'. If you know about
>Tatemae, it is much easier to know what the Japanese really plan on doing
>when faced with a politically difficult position as well as what they
>might be trying to say when they talk on television.
> 
>     Finally, a claim is often made by cornered Japanese officials that
>'Japan is at a crossroads' and the problems described in this article are
>being resolved today and the Japanese market is opening, but it takes time
>and Americans must be patient for Japan to succeed at this difficult task.
>They have been saying this for the last 20 years.
> 
>DISCRIMINATION:
> 
>     Although the Japanese are individually are very polite people, Japan
>is a very racist country, maybe even more so than we are. The common name
>for foreigners is 'gaijin' in Japan. This is a racial slur somewhat in the
>way 'nigger' refers to a black person in America. There is however a
>polite form of this word, 'gaikokujin', which means literally 'outsider
>person'. 
> 
>     When you enter a rental agency to rent an apartment (the only way to
>get a place in Tokyo), some of the rental books say on the cover 'no
>gaijin'. If you are a gaijin, you cannot rent anything in these books.
>This type practice seems to be very widespread in Japan.  
> 
>     Discrimination does not extend only to foreigners. Looking through
>any major newspaper, you will see ads which ask for Japanese only (no
>foreigners), men only, young women only, or people of a certain age. I
>brought some of these ads back with me. Discrimination doesn't seem to be
>illegal in Japan. A law does exist however stating that it is a Japanese
>goal not to have discrimination (hint:this is Tatemae). This 'anti-
>discrimination' goal/law does not seem to be enforced in any way. 
> 
>     Other races are ranked in a kind of social order in Japan, first is
>Japanese, then white people, then other asians, then all other races
>besides black people, who are last.
> 
>     The government sometimes is a partner in racism and discrimination.
>There is an 'untouchable' sect of Japanese society in Japan. They are
>referred to as 'Burakumin' and are a particular group of Japanese of
>Korean decent. A small square on the top corner of the Japanese birth
>certificate (I saw Mutsumi's) is filled in if the person is a Burakumin,
>or is blank like Mutsumi's if she is not. This is used by the government
>and the companies to deny these people good jobs and advancement during
>their careers. 
> 
>SHAME AND HONOR IN BUSINESS:
> 
>     Japanese people operate on a system of shame and honor (or the
>appearance of it anyways). This developed due to the fact that so many
>people must live peacefully in crowded conditions. When something does go
>wrong, there is a lot of shame on the individual responsible. If the
>failure was bad enough, he commits suicide (a practice dating back to when
>Samurai committed suicide in front of their superiors when they were
>responsible for a major failure). Some major public figure commits suicide
>out of shame at least once a year in Tokyo.
> 
>     For example, while I was there, the CEO of Toyo Rubber (they operate
>as B.F. Goodrich here in America) committed suicide by jumping in front of
>the subway because profits were poor this year. A couple years back, after
>a train wreck in which some people died, the manager responsible for the
>whole affair also committed suicide.
> 
>     An interesting side note to this case is the existence of laws
>discouraging suicide by jumping in front of trains in Japan. The
>government has laws to fine the jumper's surviving family members based on
>how much disruption to service was caused by the suicide of the now dead
>family member. Apparently, the intent of the laws is to force the jumper
>to think about the harm they will do to their family by choosing the train
>as a means of suicide, hoping they will instead choose other means to end
>their life and minimize service disruptions. In practice though, these
>fines are hardly ever enforced.
> 
>THE DISTRIBUTION SYSTEM, WHY FOREIGNERS ARE SET UP TO FAIL IN JAPAN:
> 
>     An extensive hierarchy of small distributers and shops exists in
>Japan which hinders the distribution of foreign goods. When Americans say
>the Japanese distribution system is 'difficult', 'byzantine' or 'complex',
>this is what they are referring to. In reality, the Japanese distribution
>system is fixed. This is why it is so difficult and complicated for the
>foreigner to succeed in. 
> 
>     Japan, being a communal society, follows a strict code of loyalty.
>Shopkeepers have loyalty to their suppliers and customers. They all have
>loyalty to the nation, Japan. Undoing this arrangement that brought the
>country and its companies so much wealth and power via the entry of
>foreign goods would be disrupt this system of loyalty. This is one reason
>it is so difficult for a foreigner to enter the Japanese market. There are
>higher forces at work too though:
> 
>     How important this was became very clear when I befriended a Japanese
>government worker, Hiroshi, who explained to be how the system worked and
>why a foreigner cannot usually circumvent it. I made him the following
>proposal as an example. The discussion went something like this:
> 
>     I can sell high quality made in USA GE refrigerators and Hoover
>vacuums at a much cheaper price in Japan that Toshiba and Sanyo can (this
>is in fact true). I want to start a business. I go to Japan, but no store
>will carry my products because I am a 'gaijin' (foreigner), and my
>products are foreign. Doing so would anger the domestic suppliers of these
>distributers who may hold some of the shop's loans or offer them favorable
>payment plans.
> 
>     I decide then, I will set up my own company in Japan, open a shop and
>sell the appliances myself since no Japanese store will do so for me.
>Hiroshi said 'You can't because you are a foreigner. Foreigners cannot own
>companies in Japan'. This is in fact true. It is this government practice
>which keeps foreign business ventures in the control of the Japanese (and
>hence why they tend not to succeed). It is also the reason there are so
>many 'joint ventures' between a Japanese company and a foreign one to
>enter the Japanese market. Otherwise, the foreigner is forbidden to enter,
>or later set up to fail.  
> 
>     So, anyway to get around this law, I told Hiroshi that I will open
>the business in Mutsumi's, my wife's name, so now a Japanese owns the
>company. He said 'you will still fail because as you get success in the
>market with your inexpensive American goods, the other vendors will get
>angry at you. They will politely ask you to raise your prices to that of
>the Japanese made goods so the system doesn't get disrupted'. I course
>replied that I would refuse to do this as its not in the interest of my
>customers. Hiroshi replied 'then the vendors and the Japanese companies
>(such as Toshiba, Mitsubishi and other appliance makers) will complain to
>the government. The government will then prevent you (subtly though as
>free competition is 'the law' in Japan) from operating your business
>successfully or profitably. New building permits for your stores will be
>delayed for months for no reason. Business license paperwork will get
>misfiled or lost without explanation causing you legal hardship. Goods
>will be delayed unloading off your ships for 'too busy customs officials'
>or 'lost somewhere on the pier for 6 weeks' making you miss delivery
>deadlines and angering your customers...' Such 'subtle' persuasion is how
>you are brought into line in Japan. 
> 
>     True-life examples of this abound. Here are a few:
> 
>This is exactly what was done when a foreign garment manufacturer tried to
>sell their clothing in that country (threatening the domestic garment
>industry). Customs delayed unloading of the goods until enough of the
>summer season had passed making the summer fashion clothing unsaleable.
>Making foreign farm produce which competes against domestic Japanese
>produce wait on ships long enough to rot or not be appetizing to the
>consumer is an other practice.... 
> 
>     The Feb 10, 1992 of Time Magazine describes how a U.S. lamp
>manufacturing company encountered also exactly this problem. It took them
>9 months to get lamps off the ship sitting in the harbor and into retail
>stores in Japan after customs, and other government agencies stalled and
>stalled (which cost this particular company lots of money).
> 
>     Many anti-foreign goods laws are often in the form of 'protection' to
>the consumer. These are applied discretionarily and are really written to
>hinder foreign goods from entering the market.
> 
>     Some of the more famous ones include a law which for many years
>banned US beef from Japan because 'Japanese intestines were too short and
>couldn't digest US beef which is too hard'. An other banned european skiis
>because the snow in Japan was 'different'. US made towels were banned
>because the fibers were 'too rough' for Japanese ears, which are 'softer'
>than ours. All foreign rice is banned for 'national security'. Rice in
>Japan as a consequence, is the most expensive in the world.
> 
>     As an example of the no-foreign ownership rule, the recent baseball
>team fiasco comes to mind: Nintendo recently bought the Seattle Mariners
>Pro Baseball team. It is in great irony that it is illegal under Japanese
>law for an American to buy (very lucrative) Japanese Pro baseball teams
>(from ABC News Nightline).
> 
>THE BUSINESS CARTEL, KEIRETSU:
> 
>     Let us go now to a primer on Japanese business organization. Almost
>all the significant companies in Japan are aligned into one of about 6
>keiretsu or business 'groupings'. These are loosely linked 'super-
>corporations' for lack of a better term. Most of the Japanese companies
>whose brands we know and love here in North America are in these keiretsu.
>These keiretsu have been around a very long time (before WWII) dating back
>to feudal-like family run trading houses. Mitsubishi and Mitsui are two of
>the more famous ones. Famous companies like Nissan, Toshiba, Sumitomo Bank
>are all in keiretsus.
>     
>     Here is why this is so important. Each of these keiretsu have under
>them, member companies who operate in each of the major critical business
>areas. These are: banking, distribution, steel making, heavy manufacturing
>and electronics. Mitsubishi Bank, Mitsubishi Electric Corp, Mitsubishi
>Heavy Industries and a wide array of other Mitsubishi companies making all
>kinds of other things are in a keiretsu. (Mitsubishi is unusual as most of
>their operations have the same name). Each of the companies in the
>keiretsu are independent and very specialized in what they do in all
>senses of the word except for loyalty. Imagine a keiretsu is something
>like a college fraternity. Their individual independence is what keeps
>things from getting too big and out of control, yet they can make a united
>front for issues important to the national or keiretsu effort. 
> 
>     To make the point, a car company and electronics company in the same
>keiretsu have a long term relationship to help each other, for example to
>make a really fancy computer control systems for cars, or to make special
>lift-loaders for the computer company's factory. If you walk into a
>Japanese transplant auto assembly plant in the United States, you will
>find that the equipment from the stamping presses to the forklifts are
>Japanese brands, even if it is more expensive (in the short run) to do
>this. This is national and keiretsu loyalty at work.
> 
>     Every Keiretsu has a bank. This is the heart of the keiretsu. The
>bank is like a national central bank, but for the keiretsu. The bank takes
>money from winning operations and gives it to new ventures in the keiretsu
>without the red tape that a bank would usually give before lending to a
>new start up venture. Having a bank who is in fact a part of your company
>means they will be fiercely loyal, understand your business and not call
>your loans for silly reasons like US banks do. This is much more efficient
>than the way America does banking and lets companies join forces to use
>their capital much more effectively than the US can. 
> 
>     This is also why buying a Japanese product may put buyers of that
>product out of a job, even if they work in a different industry. They take
>the profits from the product that person bought, shift it through the
>keiretsu bank to develop, invest in and dump products into the industry or
>market that person now works in, and put them out of a job. See the
>telecommunications example at the bottom of this paper for how this works
>in practice.
> 
>COMMAND AND CONTROL:
> 
>     Japan's business effort is directed by the powerful Ministry of
>International Technology and Industry (MITI). It decides national
>strategic industrial policy and determines with the corporations, which
>industries to target, enter, exit, take over...etc. This is where Japan's
>'united front' when entering a market is co-ordinated from. This is also
>why you often see several Japanese companies entering a particular market
>at the same time (ie. TVs, and more recently, luxury cars). By acting in
>unison, the companies, banks and government can attack and overrun a
>foreign industry with a real punch. It also enables strategic moves which
>countries like America cannot do as American business efforts are not co-
>ordinated in any kind of way. 
> 
>     In fact such moves are illegal for US companies under antitrust laws
>from the 1930s. This puts us at an enormous disadvantage again US Japanese
>rivals as it is legal for example for Ford and Mazda to join forces, but
>not for Ford and GM to do so. The US antitrust laws were written at a time
>when US companies were the most powerful in the world. This is not true
>anymore and hurts America greatly as US firms struggle in the world
>marketplace again large foreign firms who are able to join their forces to
>defeat America's companies.
> 
>THE PROTECTED HOME MARKET...JAPAN'S LAUNCH PAD TO THE WORLD:
> 
>     Japan has a protected home market which serves a very important
>purpose to the country and the national business effort. The home market
>is for trying out new products, copying and improving foreign designs,
>getting capital (through price gouging) with out fear of foreign companies
>entering and ruining the game.  
> 
>     An unwritten rule is that there is no real competition in the
>Japanese home market between Japanese companies which are also strategic
>exporters. Real competition occurs in foreign markets outside Japan. The
>home market is a 'safe' market where these companies can experiment with
>their products, improve upon them, and fix problems with out fear of any
>real foreign competition capitalizing on their blunders (a luxury our own
>companies do not have in America). For example, SONY and Mazda did or had
>done this frequently within Japan. The scheme works as follows and is the
>critical reason why a Japanese company can enter almost any world market
>or industry from scratch and overrun it so quickly:
> 
>     Imagine Sony comes out with a new type cassette player which is very
>small. It breaks often because the small plastic gears inside are of low
>quality and wear out (this was true, actually). This machine though, is
>only sold within Japan. Only in the future when it is perfected will it be
>sold to the outside world. Now lets imagine GE is the dominant
>manufacturer in this market worldwide. They want to sell their player in
>Japan (which is better than SONY's) but can't because they are forbidden
>for all the reasons mentioned in this article. Sony fixes their gear
>problems, tests it in the home market (this is one reason why the latest
>Japanese products hit the Japanese market at least 6 months before
>anywhere else) and later exports it abroad. Sony maintains its good
>reputation in America as their player works well (the US customer never
>got a machine with the defective gears). Sony sells this player at 3/4's
>the cost to make it in order to increase their market share and drive GE
>out of the cassette player business. Sony doesn't go bankrupt doing this
>because they can sell players in Japan at twice the cost to make them and
>hence cover their losses in America. Because GE is forbidden to sell in
>Japan, and can't make money at home in America because Japanese players
>sold there are too cheap, they surrender and lose market share. GE asks
>the US government for help but is refused. Later when this is exposed, GE
>is accused of 'whining' and 'not trying hard enough to enter the Japanese
>market' by the Japanese Prime Minister. 
> 
>     Now, imagine the reverse situation. GE also makes a machine that is
>poor quality in its home market of America (this was also true). The
>Japanese then enter unimpeded, dump their perfected goods here and drive
>GE out of the market. As you can see, whenever a US company makes a
>mistake in the home market, it suffers greatly, but when a Japanese
>company does in their home market, they don't suffer so much. Hence, even
>if the American company is more efficient and generally of higher quality,
>the Japanese companies will ultimately defeat the US competition. This is
>true even if the US companies make fewer and smaller mistakes over the
>same period of time because the US company gets hurt for a mistake in the
>home market, but the Japanese one doesn't. This is an other reason the
>Japanese protected/non competitive home market is so important to their
>success.
> 
>     The non-competitive home market serves an other important function to
>Japanese industry. Smaller/weaker Japanese companies are allowed to
>survive because it is possible they may some day have a 'winner' which
>would be good for Japan (this actually happened to Mazda with the Miata
>and other recent offerings in their foreign markets). If the company were
>bankrupt though, they could not come up with 'winners' sometime in the
>future. Its better to let the weak competitors survive in Japanese market
>in the hopes they become strong someday. Because of laws restricting
>foreign ownership as well as 'cross-holding' agreements between the
>Japanese companies, there is very little risk a non-Japanese company could
>take over these weaker players and enter the Japanese market.
>Unfortunately, the same protection is not bestowed among America's
>promising small companies who are easily taken over up by major Japanese
>players who want their technology.
> 
>     The no-home-competition point is ironic, because some newspaper
>reporters who don't understand the Japanese economy write quotes like
>"there are 7 car companies in Japan (a country with 1/2 the population of
>America) therefore the car industry must be extremely competitive in
>Japan". The truth is that there are 7 car companies in Japan because there
>is almost *NO* competition in the home market. This is why their market
>shares in Japan are stable. They are basically fixed. If there were
>competition, the strong players like Toyota and Nissan would have absorbed
>or bankrupted their less powerful rivals like Mazda and Daihatsu long ago.
> 
>WHAT IS DUMPING AND WHY IS IT BAD:
> 
>     A New York Times writer last year wrote in his commentary that
>Japanese companies are foolish because they practice 'dumping' (selling
>their products here for a price lower than it costs to make them), and
>that he hopes they continue as it benefits the American consumer. His
>article is misguided and shows why it is so difficult to understand why
>Japanese business practices are so dangerous to America.
> 
>     Some Americans think buying dumped products is good. This happens
>because they don't see the real costs to themselves which are not on the
>low sticker price. These cost turns out to be higher to the buyer than the
>savings on the product price (otherwise the Japanese would not be
>dumping... ...there's no such thing as the deal that's too good to be
>true). The key is that this cost is indirect but very real never the less.
>It turns up somewhere else than at the checkout counter and is how Japan
>benefits by 'dumping'.
> 
>     The cost to America (and the benefit to Japan) turns up in the long
>term. This is why it is not seen so easily. It turns up in America as
>unemployment, closed factories and reduced national strength as US
>companies cannot compete against this practice. Japan's factories run,
>their people get jobs and later on Japan makes much more profit than it
>originally cost to do the dumping. Japan can do dumping by raising prices
>in the home Japanese market to pay for dumping in America. US companies
>don't have this luxury as the US market is open to the outside world and
>prices cannot be artificially raised to pay for dumping elsewhere.
> 
>ECONOMIC STRATEGY, WHAT IT ALL MEANS:
> 
>     Many people ask, what is a national industrial strategy. Some people
>claim it is a form of socialism or communism. Nothing could be further
>from the truth. Again, the best explanation is by example.
> 
>     A few years ago Japanese industry co-ordinated a successful attack to
>take over the entire world commercial supply of LCD computer screens by
>selling them at 1/3 the price to make them, (PBS Frontline, "losing the
>war with Japan") and waiting for the US upstarts who invented them to go
>bankrupt. As a result, today all LCD screens in any non military computer
>in the world are made in Japan. This is a very strategic component because
>it will be used in portable computers, medical imaging equipment,
>videophones, HDTV, touch sensitive visual programmable fridges and
>stereos..etc. 
> 
>     If you are a non Japanese maker of any of the above items, this is
>very bad for you, because you will have to go to the Japanese to buy these
>screens to put into your product (say a portable PC computer). However,
>the Japanese companies also want to make these products too (entering your
>industry is part of their long term strategic plan (which is 200 years
>long)). As a result, they want to make you uncompetitive. They do this by
>selling these screens to you at a price higher than they sell the same
>screens to Japanese PC makers (which might even be the same company as the
>screen maker). They can do this because they have destroyed the US
>competition. You are forced to go to them if you want these screens. 
> 
>     You need these screens though so your PCs can compete with the
>Japanese PCs which will be on the market soon, so you must buy them as
>there is no other supply. This means though, that your PCs are more
>expensive then the Japanese ones because you are paying more for your
>critical components than the Japanese companies are paying. ...You lose...
> 
>     Besides offering to sell you the screen at some ridiculously high
>price, the Japanese will often offer to manufacture your entire product at
>a reasonable price and put your name on it. For example, the Mac Powerbook
>portable computer is not a Mac at all, but really a SONY.
> 
>     This type of deal is really nice for Japan because it gives the
>Japanese companies the rest of the technology to make your product
>(besides the strategic component). This also makes you dependant on them
>for all your manufacturing (because your factory is now closed, your
>workers unemployed and new ones too hard to train quickly). Finally, your
>Japanese supplier can bypass you entirely at a future date and sell the
>computers they make for you, but with their own name on them. They do this
>in the factory your sales helped them to build in the first place.
>Mitsubishi did this to Chrysler with cars, first it was the Eagle Talon,
>then later the Mitsubishi Eclipse....both cars are identical, but really
>Mitsubishi's.
> 
>     The LCD screen monopoly is what enables Japanese companies have such
>a large market share in portable PCs which use these screens yet almost no
>market share in desktop PC computers (which don't need these screens).
>Japan hasn't been able to take over the desktop PC market because its
>still advancing too quickly and they have no monopoly on any critical
>components in these machine. As a result, this industry can still belong
>to America. America is able to hold on rapidly advancing industries
>through innovation, but Japan cannot. This is because by the time Japan
>copies a foreign design, it is already obsolete. Japan has poor luck
>trying to hit a moving industrial target and will usually miss. So long as
>an industry moves fast enough, and the Japanese don't succeed in taking
>hold of some critical component of that industry, the US will be able to
>hang on to it until it slows down or matures, then the Japanese can
>successfully take it over.
> 
>     By focusing on taking over markets like LCD screens, critical
>computer chips, high precision machining, and auto manufacturing, Japan
>has significantly reduced America's ability to make these things in time
>of national need. Japan lost world war II because they had a poor
>manufacturing base (they had to stockpile for 4 years before starting
>World War II). They have learned very well from that mistake, which now
>America is are making.
> 
>     This example shows why something like LCD screens are a strategic
>component and why Japan needs to dominate this industry. This is what is
>meant by a famous Japanese phrase: 'business is war'. Key markets
>overlooking industries are like peaks overlooking cities. The strategy in
>a business war and economic war is the same, and the outcome is the same.
>Domestic factories are gone because the industry has been killed
>economically (rather than being bombed), workers are out of a job, and the
>target country has much less power and safety in the world. It is like a
>real war, but less bloody.
> 
>THE ECONOMIC WAR, A SUMMARY OF THE MASTER PLAN:
> 
>     Free world trade is a good thing for all countries. Generally,
>countries raising protectionist barriers against each other is very bad.
>This in fact, helped cause the 1929 depression. What is happening now
>though is worse. Although some will tell you that US and Japan are
>practising free bilateral trade, this is not true. Today, Japan and
>America have basically a one-way trade relationship. Japan closes their
>market towards us, but we don't towards them.
> 
>     Some say that Japan has a national strategy to control economically,
>what it could not get militarily 50 years ago. An impulsive claim perhaps.
>But, today, I am not so sure. 
> 
>     Some may think that only America is having trade problems with Japan
>right now. This is not true. Most other industrial countries in the world
>are in the same predicament. Today, Japan has a huge trade surplus not
>only with America, but with almost every other country in the world it
>trades with. This happens when Japan buys less in products from other
>countries than the other countries buy from Japan. This is bad because it
>means Japan takes money out of America's economy and use it for their own
>purposes (such as buying our real estate, or companies).
> 
>     Japan's trade surplus is no accident. It is not the result of
>Japanese efficiency, American laziness or anything else the Japanese
>government officials may tell you on the TV. The real cause is this: Japan
>trade patterns are not bi-directional in the common sense where two
>countries buy each others exports and a happy state of affairs results.
>Japanese policy is to intentionally use foreign cash profits not to buy a
>foreign country's exportable products, but rather its capital assets like
>companies and real-estate, while preventing the other countries from doing
>the same thing in Japan. This enables Japan to get wealthy and powerful
>extremely quickly while still being more inefficient and averse to
>business risk than its trading partners. When 'whiners and Japan bashers'
>claim Japan is 'cheating', the following is what they are trying to say.
>Here is an explanation of how it works.
> 
>-->Defense:
> 
>     There is a three tier economic defence which the Japanese use. First
>is a set of laws which severely restrict/prevent foreign ownership and
>control of Japanese companies and assets in Japan. As a consequence, GM
>must sell their cars through Isuzu and Ford through Mazda. Chrysler
>doesn't sell many cars in Japan. Long ago Ford used to have a large market
>share in Japan but the government closed their operations and forced them
>out of the country. Today, foreigners typically cannot own Japanese
>companies, especially those in strategic industries such as manufacturing
>and technology. It is because of these laws and regulations that you hear
>about so many 'joint' ventures between US and Japanese companies, where
>the venture is intended to help the US company penetrate the 'difficult'
>Japanese market. These joint ventures really enable the Japanese companies
>to get foreign technology without having to invent it themselves. The
>foreign company gets only a token market share in the Japanese market in
>return. 
> 
>     It was in this way the Japanese companies learned from the US
>companies how to make TV's in the 1960's. More recently, the Japanese
>government recently forced Texas Instruments to join a venture with SONY,
>where SONY got technology in exchange for TI being able to sell some of
>their products in Japan.
> 
>     The second defense mechanism is the wide 'cross holding' of stock
>shares between the companies in Japan. This basically works by having the
>Japanese companies print up lots of shares and exchanging equal values of
>these shares with other Japanese companies. This is very cheap for the
>companies there to do. As these shares are never given up or sold, they
>are effectively taken out of circulation. Because companies own such a
>large percentage of each others shares, it is impossible for a foreign
>firm or individual to accumulate enough shares (51%) to take over a
>Japanese company. As a result, a foreign takeover of a major Japanese
>company has never occured. 
> 
>     A side note of all this is that Japanese companies are able to think
>long term because they don't have to answer to stock holders at the annual
>shareholders meeting. Because so many shares are cross held, private
>shareholders tend to be not so significant in number and hence not a
>threat to the board. This is why US companies must worry about short term
>performance so much, often at the expense of wiser long term decisions.
>Japanese companies do not have to worry about this, so they tend to invest
>much more in the future than we do and hence are much more successful.
> 
>     The final defense system is a well set up structure of government
>laws, behaviour and corporate co-operation which prevent foreign companies
>who get around the first defence system from succeeding to make money by
>selling products in Japan. The government delays foreign entry of goods
>through lots of intentional customs and other regulatory snafu's as well
>as red tape designed to hinder a foreign company to the point it becomes
>non competitive in the Japanese market place. 
> 
>-->Offence:
> 
>     The offensive strategy is also a three tiered system. Firstly,
>government (through the powerful Ministry of International Technology and
>Industry) and corporations co-ordinate and select targeted strategic
>industries which they want to enter, or take over. 
> 
>     Secondly, they obtain the basic technology (often from the current
>foreign firms in the industry), then copy and improve upon it. They do
>trials and further improvements in the Japanese home market which is
>protected against encroachment by foreign firms which may be already
>established in the rest of the world within that particular industry.
> 
>     The final and most critical stage in the offensive system is the
>practice of product dumping in order to gain market share overseas (ie.
>Matsushita, Hitachi...below). Japanese companies will initially export a
>product overseas at a price usually lower than it costs to make it. The
>same product is usually sold in Japan at a higher price so the Japanese
>company doesn't go bankrupt. This lets the Japanese companies increase
>their marketshare as foreign buyers tend to buy the lowest price quality
>product. This places stress on non-Japanese competition. Sometimes the
>foreign competition is a well deserved target (ie. poor quality US autos),
>but more often they are not. Once the foreign competition has given up, or
>has been sufficiently weakened and the Japanese dominate that industry,
>they bring the prices to a level reflecting cost of manufacture and
>development and move on to the next market they want to take over. Using
>this technique, the Japanese can enter and take over in a short while,
>almost any industry they choose no matter how unrelated (which they have
>done). Their system is virtually foolproof as long as you have trading
>partners and individual consumers who tolerate or don't understand the
>dynamics of what's really happening.
> 
>     It should be noted that raising the price of a good within Japan in
>order to pay for dumping in the foreign country is becoming less and less
>prevalent as the Japanese companies today have enough cash to finance
>dumping in the foreign country strictly from cash reserves. Once they have
>wiped out the foreign competition, the profits start to roll in.
> 
>     In some ways this is America's fault as Japan has taken advantage of
>the open US market, as well as its tolerance to Japan's closed market in
>order to help them rebuild their country after WWII. Ironically, America's
>best scientists and engineers are working for military projects, whereas
>theirs are working on commercial ventures, where the war is actually being
>waged. 
> 
>SUCCESS DOESN'T ALWAYS COME THE FIRST TIME:
> 
>     Sometimes, the Japanese will fail at first to enter a market. For
>example, the Japanese auto companies entered, and retreated from the US
>auto market several times before making their successful onslaught. During
>the intervals that they were not so active in the US market, they were
>learning from their mistakes, improving, refining and testing their
>products in their protected home market, preparing to enter the US market
>again at a later time, which ultimately they did.
> 
>     This strategy is still used today. For example, recently the Hitachi
>company, a major Japanese telecommunications maker announced it was
>withdrawing from the US telephone switching market (large specialized
>computers used by telephone companies to make your phones work). It would
>be foolish on the part of the US telecommunications makers to believe that
>they have defeated Hitachi (some actually believe they have) because
>telecommunications is a Japanese government designated strategic industry
>and Hitachi will most certainly be in it in the future. As happened in the
>auto industry, Hitachi is at home right now refining and improving their
>products based on what they learned from their last campaign in America.
>They will be back stronger than before. I know this because I saw some of
>their new and upcoming products when I was Japan. Once their improvements
>are complete and proven in the home market, they will re-enter the U.S.
>market, possibly surprising America's domestic makers.
> 
>INNOVATION:
> 
>     A serious problem, which the Japanese themselves have acknowledged is
>the lack of originality and innovation. This is quite notable when you
>look at the companies' histories. The Toshiba company in Tokyo has a big
>science center with a time line of its history on a wall.  On it were its
>achievements. It read something like 'transistor imported into Japan 1950,
>manufactured here in 1953', 'teletype imported 1931, manufactured here
>1935'...etc. There were no inventions, only refinements. Hitachi, NTT (the
>telephone company), Nissan and Matsushita had similar 'timelines' in their
>centers with quotes like above. 
> 
>     This happens because inventing means failure (for a time at least)
>and no guarantee of success. Because the Japanese cannot be seen to fail
>(this is shameful and very bad in Japan), they do not invent. As their
>companies become more powerful, I wonder who would be around to make the
>discoveries like xerography, the transistor and LCD TV (all invented in
>USA). I found 2 Japanese government sponsored organizations in Japan with
>the task of short circuiting this problem. 
> 
>     One, the Technology Transfer Institute, specializes in finding small
>companies around the world with new technology and helping Japanese firms
>buy the technology. If the Japanese firm wants it but can't buy it, they
>sometimes steal it by patenting similar items copied from the foreign
>company's original and then intimidating/bankrupting the small company
>through a blizzard of legal action. If the company is publicly traded, or
>the owner wants to sell, the company is bought outright by the Japanese.
>America, unlike Japan, makes no effort to protect its strategic companies
>from foreign takeover. Imagine your small company and its patents versus
>the attorney war chest of Mitsubishi Industrial Company. 
> 
>     This is actually what happened to Fusion Systems a small American
>firm which invented and patented a new way to get spray paint to stick on
>pop cans (PBS Frontline, "American Game, Japanese Rules"). Mitsubishi
>bought one of this firm's machines and came out a few months later with
>one of their own. The small firm sued. Mitsubishi then made many small
>modifications to the machine (not improvements, just voluminous iterative
>changes), patented all of them and sued the company many times over (for
>each patent). Mitsubishi just waited for the Fusion Systems to run out of
>money defending them all (and offered to drop the cases if the small
>company sold them the rights to the machine). 
> 
>     If Japan can't get technology this way, they get it free from public
>foreign research. A Japanese institution exists which is called the 'Japan
>Research Foundation'. It actually does no research, but translates foreign
>research papers into Japanese for the Japanese companies to use.
> 
>     A major reason for getting foreign research this way is that Japanese
>universities themselves don't do much research. Their equipment is
>extremely outdated (in contrast to corporate labs). These schools are
>literally straight out of the third world (possibly the last physical part
>of the third world still in Japan). University is a place for students to
>drink and party before joining a company for life. At the University of
>Tokyo, the most prestigious university in all of Japan, the buildings are
>in extreme state of disrepair. Stench of raw sewage permeates and leaks
>down the hallways of the buildings and the (often drunk) students live in
>extreme squalor. Academics did not seem to be taken seriously by the
>students who were too busy drinking or playing sports. The libraries were
>almost devoid of students. Some buildings like the Library for American
>Studies were very nice, but many others were in shambles. Half of all the
>windows in many of the buildings were broken and glass was strewn about
>the floors. There were no working safety/fire control systems. Electricity
>wires were hanging exposed in hallways and lighting was not functioning
>(for many years it seemed) in parts of buildings. Old gas stoves were
>running unattended in kitchens with cardboard covering broken windows.
>Piles of garbage and wrecked cars were strewn about the campus and behind
>buildings. Nothing had been painted or cleaned in about 20 years. The
>grass hadn't been cut in a very long time and had reached full height.
>Cats and other creatures lived in some of the buildings. The school
>swimming pool was a filthy algead mess. If this seems unbelievable, one
>can get off at Todai-komaba station in Tokyo and go see for themselves.
>This is all the more extremely surprising as the rest of the country is so
>rich and modern, more so than most parts of America today. 
> 
>     There is an important reason for all of this. In the world,
>universities typically do research to advance learning and science for the
>world. This is extremely expensive to fund, and is a lousy way for a
>country to get the most value for its money, so Japan does not do this.
>The Japanese government makes no effort to seriously support its
>universities. Furthermore, unlike their U.S. counterparts, Japanese
>companies give no money to universities. This does not mean that Japan
>does not value basic university research. Quite to the contrary. It is far
>cheaper to let the other countries' schools and governments do and pay for
>basic research (which is published openly to the world) and to simply
>translate and read their papers. 
> 
>     Japanese research money and results stays in the corporate and
>government labs, where it may be kept secret from the foreign countries,
>which are the enemy in the economic war. Japan does do research (lots of
>it actually), but not for public dissemination and world advancement.
>Research is done to gain advantage over their rivals. Last year, the
>Toshiba Company alone spent more on research than was spent (privately and
>publicly) in all the country of Canada. This is the fundamental reason why
>Japan refuses to fund universities and diverts it to corporate research
>instead. It is something we must understand. 
> 
>     Ironically, it may not be a weakness of theirs that their
>universities are so awful. If they know that they can get research from
>America for free, they are smart to put their money in their private
>company labs instead where they can use it against the US companies.
> 
>     In spite of all this, Japanese workers still get an excellent
>education. This is because education up to (but not including) university
>is very good and extremely well funded. In great contrast to the
>universities, the elementary, secondary and tertiary schools are very well
>stocked with the best of equipment, facilities and teachers. They are as
>nice as anything in America. Furthermore, highly specialized training
>programs are provided to newly hired workers when they join their
>companies. This makes up for the weakness of the Japanese university
>system. 
> 
>     A further point to this, companies do not to give grants to charities
>(nor universities). Corporate citizenry doesn't not exist in Japan in the
>way we know it here. This is why it is extremely rare to find Japanese
>corporate run foundations in Japan or America. This is also why it is
>extremely unusual to see for example, a PBS program sponsored by a
>Japanese company (though recently, this is changing for the US branches of
>Japanese firms as they learn how important Americans relate charity to a
>company's image).
> 
>....Continued in Part 2/2;JAPANYES
>