NetNews Usenet Archive 1992 #31/NN_1992_31.iso/spool/rec/games/video/25870

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From: [e-mail]
Newsgroups: rec.games.video,misc.forsale
Subject: Re: DOES AMERICA SAY YES TO JAPAN? PART I
Message-ID: <[e-mail]>
Date: 25 Dec 92 20:22:04 -0600
References: <[e-mail]>
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Organization: Southeastern Louisiana University
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In article <[e-mail]>, Louis Pagan <[e-mail]> writes:
> -------------------------CUT HERE----------------------------------------
> (JAPANYES; From Internet FTP: monu6.cc.monash.edu.au   in: pub/nihongo)
> (Part 1 of 2 sections)
> ----
> Japanyes; THE SECOND EDITION; (plus US DEBT section)
>
> The following article, JAPANYES, (2nd edition) comes from FTP site
> monu6.cc.monash.edu.au. The most recent version is in pub/nihongo.
>
> This paper was written by: Louis Leclerc; [e-mail]
>
> Please send him any corrections or additions to this paper.
>
> NOTE: This is a rather long but fascinating paper on how Japan Inc. functions.
> For a former free-trader like myself, it has shaken some of my beliefs to the
> very core. It will open your eyes a little, it will disturb you, and it will
> quite possibly lead you to ask some serious questions about the future of the
> United States of America as a world-leader. Reading this, IMHO, is well worth
> the effort.
>
> The level of detail and the overall gist is documented in many well-known,
> albeit difficult to read, books (see appendix). The author's prime service to
> us is the distillation of this information into a (relatively) brief synopsis.
>
> Tom Mathes               [e-mail]
>
> ---------------
> In the 2nd edition, typographical and content errors/omissions were corrected,
> sections re-organized for better flow and less relevant sections were
> deleted/condensed to make room for new material (the entire file must be under
> 100K to fit through email gateways). Japanese names were removed to protect
> their anonymity.
>
> Sections significantly expanded/added in the 2nd edition:
> DISCRIMINATION
> TRUE, BUT ONLY ON THE SURFACE
> IT'S NOT ALL JAPAN'S FAULT
> CONCLUSION
> COMPANY LISTING (many new names)
>
> Sections deleted/condensed in the 2nd edition:
> WHERE IT ALL BEGINS (combined with BUSINESS IS WAR)
>
> -------------------------------------------------------------------------
> (ed112992)
>
>                                Second Edition
>
>
>        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 a third world country to be the 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.
>
>      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. As a result,
> the greatest transfer of wealth in the history of the world from one country
> to an other is happening right now, from the United States, to Japan. As well,
> Japan is today, the largest holder of net foreign assets in the world.
>
>      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.
>
> 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
> called "Coming From Japan", (see Appendix for how to get transcript via
> Internet).
>
>      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
> although they were an American invention.
>
>      In the 1980's the Japanese applied this same strategy to the machine tool
> industry and now completely dominate that industry as well (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 ago). It will be happening again with major and smaller
> kitchen/washing appliances and telecommunications equipment during the 1990s.
> It has already happened with liquid crystal computer displays where the
> Japanese today have 100% market share (these were also 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 and ok 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.
>
>      In the real world though, this is not ok, and cannot happen for very long
> without serious consequences. 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 buys $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, so it will be clarified below.
>
>      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. After 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 aren't
> used to 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 Japan 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. "The Japanese market is opening, but it takes time and
> Americans must be patient for Japan to succeed at this difficult task." Japan
> has been saying this for the last 20 years.
>
> 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 may
> commit 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
> train because company 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. These demonstrate
> the 'group' orientation of this society. 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.
>
> 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 country person'.
>
>      When you enter a rental agency to rent an apartment (the only way to get
> an apartment 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 of
> practice seems to be very widespread.
>
>      As an example of how deeply this goes, one may look at the now famous
> Konishiki affair of last summer. Konishiki was the best sumo wrestler in all
> of Japan. However, he was an American (Hawaiian). The overseers of Japanese
> sumo continuously denied him the title of 'Yokozuna' (sort of an entry into the
> Japanese sumo Hall of Fame for grand champions like Konishiki). Konishiki won
> title after title, but was still refused. When pressed, the overseers claimed
> that the holder of the Yokozuna title must possess 'hinkaku', a special kind
> of 'Japanese grace'. They also claimed that it was impossible for a non
> Japanese to be capable of possessing hinkaku. As a result, Konishiki was
> refused the honor of the Yokozuna title. In the end, he never became Yokozuna
> (and neither has any other foreigner in the history of the sport).
>
>      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. 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. Races are
> ranked in a kind of social order in Japan, first are Japanese, then white
> people, other asians, then all other races besides black people, who are last.
>
>      The government is sometimes a partner in racism and discrimination. There
> exists an 'unclean' sect of Japanese society who are referred to as
> 'Burakumin'. They are a particular sect who's ancestors had an 'unclean'
> religious history. A small square on the top corner of the Japanese birth
> certificate is filled in if a person is a Burakumin, or is blank if they are
> not. This is used by the government and the companies to deny Burakumin people
> good jobs and advancement during their careers.
>
>      There exists an other dark side to government sponsored racism, dating
> from World War II, which exists even to this day. During the war, many Koreans
> were forcibly taken to Japan, made 'Japanese citizens' and enslaved, or forced
> to serve in the Japanese Imperial Army. Upon the end of the war, Japan revoked
> Japanese citizenship from these people and their children. Unlike other
> Japanese, they lost all rights to military pensions and healthcare (even for
> injuries suffered while fighting for Japan in the war). As a result, today
> these people live in Japan, but are stateless, have no passport and cannot
> travel outside of Japan. The Japanese government considers these people (and
> even their descendants who were in fact born in Japan) to be foreigners. It is
> 'difficult' for many of these people to get Japanese citizenship as Japan has
> no diplomatic ties with North Korea. One requirement is that they must abandon
> their real names and choose Japanese sounding ones (a requirement made on most
> people seeking Japanese citizenship). Needless to say, the number of people
> accepted as Japanese citizens or as immigrants to Japan is very very small in
> number each year. Some claim that Japan sees it as an advantage to maintain a
> racially pure society as it is less 'disruptive' to social order.
>
> 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 disruptive to 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. He explained to me how the system worked and why a foreigner
> cannot usually circumvent it. I suggested 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. The government
> worker 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 him that I will open the
> business in my Japanese wife's name, so now a Japanese owns the company. He
> said 'you will still fail because as you find 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, of course, replied that I would refuse to do
> this as its not in the interest of my customers. He 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 US 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 written in the form of 'protection'
> to the consumer. These are applied discretionarily and are really written to
> prevent or make it expensive/slow/impossible for foreign goods to enter the
> Japanese market. For example, one well known Japanese tactic is the use of only
> one or two 'inspectors' who are responsible for 'inspecting' every single one
> of an importer's products entering Japan (ie. bicycles or cars). As every item
> must be individually 'inspected' (ie. ridden or driven) very carefully and one
> at a time, this takes very very long to do (one never knows how long). This
> causes enormous delays and costs the importer lots of money as well as
> preventing timely delivery to the customer. Competing Japanese domestic goods
> are often exempted from these 'consumer protection' laws as inspection is 'done
> at the factory by the manufacturer'.
>
>      Of some other more famous 'consumer protection 'laws, one for many years
> banned US beef from Japan because 'Japanese intestines were the wrong length
> 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.
>
>      Finally, 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 keK;netsus. These keiretsus 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. The keiretsus were
> disbanded by U.S. forces during the occupation because it was feared they could
> one day be dangerous to America. However, upon departure of U.S. occupying
> troops from Japan, the ex-member companies rejoined each other to reconstitute
> the keiretsus which had previously been disbanded.
>
>      Here is why this is so important. Each of these keiretsus 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 (several hundred)
> 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, but for companies. 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 system 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 end 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 much bigger 'punch'
> then had they done so separately. 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 against 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 against 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) without 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 does
> not. For example, Japanese car companies have also come out with disasters
> comparable to the 'exploding Ford Pinto'. But by using their protected market
> for experimentation and improvement, they are able to resolve problems like
> this before they arrive on our shores. Our car companies have no such luxury
> and hence suffer the consequences each time they make a mistake. This is an
> other reason why 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 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 costs turn 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 nevertheless. It turns up somewhere else than at the
> checkout counter and is how Japan profits 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 small 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 refrigerators 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, some of the Mac
> Powerbook portable computers are not Macs at all, but really SONYs. Most
> portable PC computers today are made in Japan for the above reasons (even if
> they have American brand names on them).
>
>      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 to 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
> machines. 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 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 GLOBAL 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 the US and Japan are practicing 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 uses 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, real-estate
> and art, 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 defense 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 Japan 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 defense 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.
>
> -->Offense:
>
>      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, have
> failures and make 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. 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 America's 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 Japan's 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 target strategic industry and Hitachi will most certainly
> be in it in the future (as they have for 40 years). 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 US market, possibly
> surprising America's domestic makers.
>
> (Continued in part 2/2 (JAPANYES; FTP: monu6.cc.monash.edu.au in:pub/nihongo))