NEWS ANALYSIS : Japan’s United Front Frays : U.S. Trade Pressure Causes Government-Industry Rifts
Rising U.S. trade pressure, including the threat of sanctions and a falling dollar, has put cracks in Japan’s resolute refusal to back down on access to its auto market.
Those fissures may not yet be large enough to force a compromise on the key issue of higher targets for auto parts purchases by Japanese companies. But the Clinton Administration seems ready to drive in a powerful wedge: sanctions on $1 billion or more of Japanese imports. The move is seen as necessary to chip away at the imbalance in auto trade that accounts for the bulk of the nation’s $66-billion deficit with Japan.
Japan has never been the monolith suggested by the term Japan Inc. But just as the various divisions of a far-flung multinational corporation will coordinate their interests, Japan has long sought to subordinate varied corporate and individual interests toward broader national goals.
America’s threat to impose sanctions on Japanese products since trade talks broke down last week, along with the continued weakness of the dollar, have made it increasingly difficult to maintain that united front.
Japanese industrialists, for example, are blaming the auto makers for pushing up the yen and poisoning relations with America by failing to come to an agreement.
“A lot of executives say the auto companies should just accept (American demands) rather than create problems for everybody,” says Seichiro Yonekura, a business professor at Hitotsubashi University in Tokyo.
There is similar grumbling among the broader public. “There is the feeling that the auto industry is once again making trouble,” says Kiyofuku Chuma, chair of the editorial board of the prestigious daily newspaper the Asahi Shimbun.
Tomio Tsutsumi, vice minister of the Ministry of International Trade and Industry, told reporters last week that MITI is “concerned” that other Japanese industrial sectors would pressure auto makers to compromise.
There have also been hints of differences between government and industry. MITI has repeatedly insisted that Japanese auto makers would not agree to increase their targets for auto parts purchases. But the Asahi Shimbun reported last week that Toyota and Honda were preparing to do just that.
An earlier newspaper report quoted a Toyota official as saying that it had told the Japanese government it was willing to boost parts purchases from America but was sternly warned to keep quiet so as not to undermine the government’s negotiating position.
Toyota says its officials were misunderstood and that it has no plans to increase its targets for parts purchases. But the reports underscore the differences emerging among the various interests.
Toyota and Honda are reportedly more willing to go along with the demands because they are expanding production in the United States and can more easily raise parts procurement targets. Similar targets would be much more painful for Mazda and Mitsubishi.
And Toyota, which is by far the most competitive, might not be entirely unhappy if the high yen and U.S. pressure combined to force some of its competitors to merge and downsize their operations. Analysts have long predicted such a consolidation in the Japanese auto industry.
The auto dispute is also driving a wedge between those who believe it is in Japan’s best interests to accelerate deregulation in the country--even at the expense of some jobs--and those who believe in more glacial change.
Jiro Ushio, chairman of Ushio Electric and the new head of a powerful economic group, the Keizai Doyukai, said pointedly last week that if the government was going to insist on free-market principles in international negotiations, it ought to “apply the same principle to the domestic economy.”
The key determinant of whether Japan agrees to higher import targets of auto parts will be the view of the auto industry and the government toward those auto parts suppliers struggling to survive in the face of a rising yen and the movement of auto production offshore.
Some auto companies may want to break off ties with these companies, but they feel compelled to remain loyal. U.S. sanctions could give them the excuse to cut the strings. But such a break would also require a wrenching open of Japan’s keiretsu system--which groups major companies with hundreds of subcontractors in stable, long-term relationships--and it is unclear whether the auto companies are prepared for that.
But even if the auto companies are prepared to let the suppliers go, the Japanese government may take a different view if the unraveling of keiretsu means a substantial increase in unemployment.
In the meantime, the old institutions of Japan Inc. are trying to maintain a united front. Shoichiro Toyoda, chairman of Toyota, and also of the Keidanren, Japan’s largest and most powerful trade organization, has called on Japanese industry to stick by the Japanese government because they might be next to come under U.S. pressure. The auto companies know they may have to depend on the Japanese government to help them carry out the inevitable layoffs over the next few years as domestic auto production shrinks.
It is unclear, however, how well such efforts can hold together once sanctions are imposed and auto companies begin to feel the pain directly. “They are trying to stick together, but it is going to be more and more costly to stay the course,” a Clinton Administration trade official said.
The key point, of course, is the level of pain. In his weekly radio address, President Clinton said over the weekend that he is tired of “hitting a brick wall” in U.S. efforts to sell autos and auto parts in Japan. “Now we must act to protect and create American jobs,” he said. Clinton said he asked his staff to draw up a list of potential sanctions to impose against Japanese imports. The United States is expected to announce the tariffs in a couple of days.
But not everybody is convinced that the United States is serious about imposing the sanctions.
“Do you really think it will happen? How much do you want to bet,” said a Toyota official, laughing. “We don’t think it’s going to get that rough.”
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Parts Imbalance
Despite gains made by the United States in 1994, Japanese auto parts exports to America outnumbered U.S. auto parts exports to Japan by a ratio of nearly 11 to 1.
Japanese auto parts exports to the U.S., in billions of dollars:
1994: $14.6
U.S. auto parts exports to Japan, in billions of dollars:
1994: $1.34
Researched by JENNIFER OLDHAM / Los Angeles Times
Sources: American Automobile Manufacturers Assn., Commerce Department Bureau of Economic Analysis
