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Number 1 Shimbun

Mr. Smith Goes to Tokyo, Part 6 - Workaholics Living in Rabbit Hutches

No1-2018-09 04


The last in a series by the late Financial Times bureau chief, in which he recounts how trade wars in the late seventies were becoming (figuratively) bloody.

 

by Charles Smith

In the unstable days following the energy crisis caused by OAPEC’s oil embargo of the early seventies, one of the most critical issues between Japan and Europe was shipbuilding. The two sides met in the mid-1970s for agonizing talks extending over two years, this time at an almost continental level on the European side. Eventually, in Paris in February 1977, Japanese shipbuilders offered to cut back their share of a fast-shrinking world market from about 70 percent to somewhere near 50 percent, and promised to raise bid prices on international contracts by five percent. They had been underbidding European yards by 30 to 40 percent.

If there was generosity on Japan’s side there was also self-righteousness. Around the time the shipbuilding issue was nearing settlement, Hirosuke Dan, Japan’s vice minister of finance for international affairs, published an article in a Tokyo English-language newspaper suggesting that his country’s negotiating tactics suffered from the “the Oriental virtue of modesty.” On the other hand, Europeans and Americans, he said, “believe in taking whatever advantage there is by complaining where possible.” While Dan was praising Japanese modesty, European and U.S. critics of Tokyo often talked of Japanese “cunning and craft.” Who was right?

If the West had a grievance, it shouldn’t have been about Japan’s suspect magnanimity on the ships issue. The more serious problem was imbalances resulting from Tokyo’s deeply ingrained reluctance to import manufactured goods. In the early years after the oil shock, Japan’s imports from Saudi Arabia – mostly oil, of course – were worth more than twice as much as its purchases from all of Western Europe.

A companion statistic, presented with an aggressive flourish by British Trade Secretary Edmund Dell in a speech at the FCCJ in 1977, revealed that only 20 percent of Japan’s global imports consisted of manufactured goods. (The rest were food and raw materials.) This, we were told, compared with a 50 percent manufactured goods import ratio for the countries of Western Europe.

 

"In the late 1970s, fists were being shaken in embassies and trade ministries in Tokyo even as there were friendly hand-grasps on factory floors in Europe."

 

Dell appeared to see the 20 percent figure as something planned by Japanese officials who regarded imports of manufactures as “unpatriotic.” He warned that the UK government would have difficulty “resisting pressure for putting barriers up against Japanese goods” if things didn’t improve. In the meantime, Britain would become a “calculating free trader” so far as Japan was concerned.

A Ministry of International Trade and Industry official put a different slant on the 20 percent figure. He said Japan’s manufactured goods import ratio was low because it didn’t belong to a “fraternity of affluent nations” the way the UK and France did. A friend at the Boston Consulting Group at the time told me much the same thing. He said Japan was in a weak position because it lacked a natural trading region of high-income nations where its products could be sold without provoking protectionist reactions.

But if the argument was about geography why would Tokyo be export- ing “surplus” French paintings back to France instead of using some of its embarrassing supply of cash to buy more European art works? And why did Japanese shops impose epically memorable mark-ups in pricing some imported consumer goods?

A well-known brand of Scotch whisky – Johnnie Walker’s prized Black Label – in the late 1970s boasted a landed value in Tokyo of ¥677 (US$2.21 back then) per bottle before import duty and a retail price of ¥14,380 ($47.14). A French brandy was worth ¥2,850 ($9.34) at dockside in Yokohama but fetched a price of ¥25,000 ($81.96) in Mitsukoshi, an upmarket department store.

Daylight robbery of consumers wasn’t the fault of Japan alone. There sometimes seemed to be a conspiracy between Japanese distributors and foreign import agents who handled the same products to grab profits by creating a legend of rarity. Apologists said that such fantasies were an innocent throwback to the austere early post-war years, but European trade officials preferred to see well organized plots between competing Japanese manufacturers and their bureaucratic allies.

These were some of the ways in the late 1970s in which fists were being shaken in embassies and trade ministries in Tokyo even as there were friendly hand-grasps on factory floors in Europe. Of course, it wasn’t just hard-pressed officials who were running out of patience. A well-known American think tank suggested that Japan was aiming to build a global monopoly in four or five major industries – including steel, cars and consumer electronics – by subsidizing exports and blocking imports.

Meanwhile, there were people in London, Paris and Brussels who claimed that the workers whose employers were out to conquer the world were suffering substandard living conditions. A very senior luminary at the European Commission who made a brief visit to Tokyo called the Japanese people “workaholics living in rabbit hitches.” The quote was highlighted in a document distributed by the EEC’s Tokyo representative office, which also went on to talk about “profound differences” in the ways that Japan and Europe organized their societies.

If the differences could not be reduced, the impact on Japan-Europe relations might spread beyond disagreements about car exports, said some officials. In 1978, Sir Roy Denman, a respected figure at the UK Board of Trade, said that the state of economic relations reminded him of Europe just before World War I.

Asahi Shimbun tried to raise a laugh on the theme of Japanese social deprivation. The newspaper pictured an apparently senior Eurocrat driving into Tokyo in a smart black car past a crowd of poorly dressed and under-nourished local residents. The official was impatiently dictating a memo to his secretary that read: “Not rabbit hutches! Bird cages!”

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. He was diagnosed with malignant lymphoma at 80, and set about writing his memoirs of a long and fascinating career. The Number 1 Shimbun began running excerpts in a series starting in the April 2018 issue, with this the sixth – and last. Charles, an FCCJ member to the end, died on May 18 at age 82.

 

Published in: September 2018

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