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BUSINESS ABROAD: Cold Front Over Japan

4 minute read

Tokyo’s big, influential daily Yomiuri (circ. 2,284,902) last week headlined a series of articles on a startling economic theme: “Japan is at the mercy of the blue-eyed foreigners.” The blue-eyed foreigners, cried Yomiuri, are U.S. businessmen in Japan, who are charging “exorbitant” royalty fees. Such American companies as Westinghouse, RCA and Caltex have been “very cunning” in their dealings. Concluded Yomiuri: “Japan was not defeated by General MacArthur but by General Electric.”

The vicious newspaper articles were a symptom of the worsening relations, now approaching a postwar low, between U.S. companies and the Japanese government. Though U.S. industry has poured more than $229 million into Japan since the war, some 70 applications for $34 million in new investments are gathering dust in the files of Japan’s powerful Foreign In vestment Council. Fortnight ago, FOAdministrator Harold Stassen announced a plan to guarantee future U.S. investments in Japan. Four companies applied for such guarantee, but none was approved by Japan, and none is likely to be. Reason: the government regards FOA’s plan as a reflection upon Japan’s “stability,” has already given hints that investment proposals from U.S. businessmen will stand a better chance of Japanese government approval if they do not contain an FOA guarantee request. Even before the guarantee plan, the government had moved so slowly on U.S. applications for investment in Japan that the number of licensing and technical-help contracts signed by U.S. firms with Japanese companies dropped from 133 in 1952 to 83 last year, will probably total no more than 50 this year.

Japanese tax collectors are doing their share to discourage good business relations. They have started disapproving the 50% Japanese income-tax deduction formerly allowed Americans working for U.S. firms investing in Japanese business.

Cut the Costs. Part of the blame for the new cold front can be laid to a few U.S. businessmen who did indeed charge up to 30% for patent rights on everything from cowboy hats to rubber falsies, at a time when Japanese businessmen would pay any price to get back into world markets. But the fact is that U.S. industrial tie-ups pulled Japan out of the rubble, filled a ten-year research gap and boosted the nation’s export potential.

With new U.S. machinery the Japanese textile industry has cut costs 20% below prewar levels, and such processes as Cluett, Peabody’s “Sanforizing” have opened up new export markets from Australia to Canada—to the consternation of U.S. textilemen. Japan’s petroleum industry, which in 1949 had to import 92% of its finished petroleum products, last year was able to produce 90% of the products at home, due largely to some $71 million invested by Caltex, Standard-Vacuum, Union Oil and Tide Water. By agreements signed with Armco International Corp., Japanese steelmen have been able to cut costs 5% and boost strip steel output by 90%. In the electronics industry, RCA’s royalty of less than 2% on each TV set produced in Japan has saved the Japanese industry seven years and millions in research.

Pirates. Many U.S. businessmen suspect that the new cold trade war in Japan is partly a smoke screen to cover up the increased pirating of U.S. products by Japanese manufacturers. Most U.S. firms do not bother to take offenders to court, since by the time the pirates set up shop, the Americans are often on the market with something better.

The biggest reason for the Japanese cool-off, however, is a resurgence of nationalism, particularly since the Hatoyama administration gained power. Tanzan Ishibashi, the balding, pudgy boss of Tokyo’s Ministry of International Trade and Industry, puts it bluntly: “There is a national feeling against too much foreign capital.”

Sharp Reminders. What can be done to better business relations in Japan? This week the U.S. Chamber of Commerce in Tokyo was readying an answer to Yomiuri’s anti-American series. But most U.S. businessmen, and Japanese with American business ties, think the best progress could be gained by frequent and sharp reminders to the Japanese that they would suffer a tremendous loss if U.S. and other foreign businessmen left Japan for Manila, Okinawa or Hong Kong.

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