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Number 1 Shimbun

Mr. Smith Goes to Tokyo - Part 5

Mr. Smith Goes to Tokyo - Part 5


When Charles Smith arrived in Tokyo in 1973 as Financial Times bureau chief, he had no idea he would end up spending most of the rest of his life here. Reaching 80 and having been diagnosed with malignant lymphoma, he set about writing his memoirs. When he finished the project recently Charles – still an enthusiastic FCCJ member – consented to share with us some memories from the FT Tokyo segment of his long and interesting career. The series began running in the April issue. On May 18 Charles died, at age 82. A Club memorial evening was held July 11. In this penultimate installment he tells us about covering trade disputes and their adjustments in the 1970s.

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Nakasone- and Ohira-watching were among the lighter-weight pleasures of covering Japan during my first few years in Tokyo. A heavier-weight job was keeping up with the changing economic and political interfaces between Japan and the West.

Change was certainly the word. At one point in the mid-1970s a surcharge was imposed on supposedly risky Japanese bonds issued in London’s capital market. A year or two later Japan was being asked to accept “voluntary” restraints on exports of some “too successful” goods to western markets.

What was going on? It seemed that neither risky Japanese borrowers, nor too-successful Japanese exporters were acceptable as regular members of the community of advanced countries. And perhaps Tokyo really was an irregular case. Japan’s economy had been re-launched after World War II using a development model provided by the Occupation, which recommended the aggressive use of exports to help create a modern industrial economy while being ready to protect weak sectors.

I believe open markets weren’t part of the (then) US model, and perhaps there was no generally accepted code for world trade behavior when the Americans gave Japan their advice. Also, thanks to Washington, Japan had entered the 1960s with what quickly became an undervalued exchange rate ($1=yen 360). An eminent American economist had set that rate with the stroke of a pen.

I didn’t know any of this in 1968-69 when I first heard diplomats at the US Embassy in Tokyo expressing anger about Japan’s selfish trading practices. But it was clear that the picture was many-sided. Japan’s remarkable array of non-tariff barriers could be seen as making it a delinquent in a world of supposedly well-behaved traders. It didn’t seem to count that Tokyo was doing all too thoroughly what Washington had told it to do (although perhaps staying too long with the original recovery package).

At the back of all that, there were political questions. When it came to foreign policy, was Japan a too-passive – and therefore less than full – member of the club of advanced nations? Should it have worked out its own policies towards Asia instead of automatically following the American lead on, for example, China and Taiwan? In the case of Europe were Japanese politicians still thinking only of country-by-country relations when they should have noticed that they were watching attempts to create the world’s biggest eco- nomic and political bloc?

In the mid-to-late 1970s being the FT’s Tokyo reporter was like being a child on the lower reaches off a climbing frame, hoping to get a step up without shedding too much blood.
I had a lucky day in the summer of 1978 when Endo-san, a friendly but not particularly senior member of the MITI PR division, phoned to tell me that “Sir Michael” (a.k.a British Ambassador Sir Michael Wilford) had been seen in the building on the way to what seemed to be a personal meeting with MITI Minister Toshio Komoto.

As a follower of UK-Japan trade relations I thought I could guess what this meant: Britain had finally decided to ask Japan to formally lim- it its fast-rising motor vehicle sales. The British request (which was duly turned down by MITI) came after three years during which The Japan Automobile Association (JAMA) and Britain’s Society of Motor Manufacturers and Traders (SMMT) had been holding meetings at which JAMA “forecast” the level of Japanese car sales in the UK six months or so ahead.

These diplomatically correct discussions (correct because a formal promise by Japan to cut exports would have broken the rules of GATT and upset other members of the Europe- an Economic Community) were not working. The JAMA forecasts were based on solid commitments by Toyota Motor Corporation and Nissan Motor Company, the two largest Japanese vehicle builders, but three smaller companies didn’t see why they should be stopped from selling in the juicy UK market, so there were some rough edges. By the time the three outliers had been forced into line a year or so later there had been an unforeseen jump in car sales to Britain.

Then came a time when British Leyland couldn’t meet demand in its home market anyway because of difficulties with some new models. So the UK had felt it had to act. Japan said no, but officials promised “somehow” to get Japan’s car exports reduced from a fast rising 13 percent of the UK market to a more sober 10 percent.

For me the Japanese car story had begun during a summer holiday in 1970 when I spotted a small white Toyota speeding along a country road in northeast Scotland, apparently the first of its breed. At that time Japanese car exports to Britain had barely started. The other end of the story came in 1986 when Nissan opened a car plant in Sunderland, north-east England, which quickly established itself as the UK’s (and for a while the Nissan group’s) most efficient vehicle assembler.

By the early ‘90s there were three Japanese car assembly plants in Britain (Toyota and Honda as well as Nissan) and the UK’s native-born motor industry was on the way to extinction. A successor company to British Leyland was finally placed under administration in 2005. So much, I thought, for what diplomacy could achieve when British business failed.

Nissan had finally decided to open up in Britain three years after being urged to come by Margaret Thatcher’s government and more than a decade after its international business manager, Masataka Okuma, had written off the UK as the worst place in Europe to build a car plant.

He told me in 1974 that Nissan couldn’t face Britain’s stormy labor relations. That changed in the later 1970s. The UK was upgraded by Nissan when it turned out that British blue collar workers had begun to welcome Japanese managers after having been accustomed for years to being held at arm’s length by British management.

The powerful leader of Nissan’s own company union, Ichiro Shoji, was less welcoming. He told me in 1983 that investing in Britain would undermine Nissan’s strength and would “never be permitted” by the union. That only changed after a Japanese magazine had published an illustrated story about an alleged affair between the union leader and his mistress in Yokohama which showed the leader falling face-down in a puddle while apparently trying to escape a press photographer. He resigned and the UK project went ahead.

The Nissan affair’s happy ending reminded me of a tense editorial conference at the Financial Times several years earlier when Sony Corporation applied to open a TV factory in Wales. The Sony proposal was the first of its kind by a Japanese manufacturer.
Half of those present at the meeting thought that letting in a hyper-competitive Japanese company would spell doom for the UK’s admittedly backward TV industry. The other half said it would be better to have Sony exporting TVs from Britain to Europe than the other way round. The second group won the argument. Sony came and the UK industry survived, if it didn’t exactly flourish.

Ten years after the Sony affair, in 1977, I made a trip to look at Japanese factories in Europe as part of a 20-page FT survey on relations between Japan and the EEC. I spent a week interviewing managers at five plants in Belgium, France and Germany as well as three in the UK, Matsushita, Sony and bearings maker Nippon Seiko (NSK).

The messages I got varied, but the mood was upbeat. All the Japanese firms in Britain had started out by wanting to have single-company unions at their plants as was standard practice in Japan but they all ended by agreeing that staff should join just one craft or industry-wide union. This was a compromise between Japan’s system and the usual British practice of allowing multiple and competitive union membership.

British component suppliers were shocked when Matsushita said it would examine every single component, from transistors upward, coming from UK makers, but the quality of components soon began to improve. A company that supplied cabinets to Sony’s TV factory at Bridgend in South Wales set up a “Sony production line” where, I was told, the young female workers had acquired a “Sony spirit.”

My factory visits left me thinking that Japanese manufacturing investment-in Europe was a triple winner. As with Sony’s early TV investment in Wales, it was a way for Japan to partially by-pass restrictions on its exports and for Britain to exchange trade deficits for jobs. There were other less direct benefits. Japanese investment in Britain helped to spread the message that there might be better ways for management to deal with staff than the fossilized model of bosses in business suits facing aggressive unions. Japanese factories were good news for remoter regions of England and Wales and, later, Scotland where incomes were low and employment was falling.

What I did not realise was that Japanese investment presence in Europe in the mid-1970s was a fragile beachhead for what would become a tidal flow. In December 1975 Japan’s offshore manufacturing investments were worth just three percent of its GDP. At the same time the ratios were nine percent of GDP for the US and 17 percent for Britain.

By 1990 Japanese factories were scattered all over Europe and the US. When Donald Trump threatened to punish Japan in 2017 for over-exporting exports cars to the US, Toyota was exporting 130,000 cars a year from the United States.

Published in: August 2018

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