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JAPAN: Bumpy Progress

4 minute read

The U.S. is Japan’s best customer, and the strength of the American recovery is being anxiously watched by Japanese officials for any sign of slowdown—which Japan does not need. When oil prices went through the roof two years ago, Japan’s economy went through the floor. Heavily dependent on once cheap oil to fuel its breakneck postwar expansion, Japan slid into its worst recession in 30 years. Recovery has been slow, and the government’s attention has been diverted from important economic matters by the Lockheed bribery scandal (marked last week by the arrest of four businessmen). But now a surge in exports, including sales to the U.S., is brightening the picture. Last weekend, Prime Minister Takeo Miki was able to report to President Ford and five other world leaders at their economic summit in Puerto Rico encouraging evidence that the Japanese economy is finally, if spottily, perking up.

During the year’s first quarter, Japan’s output of goods and services rose 3.5% from late 1975. That was far behind the U.S. performance of 8.7%. But it was ahead of last year’s 3.1% increase and even better hi comparison with the grim year of 1974, when real G.N.P. actually shrank by 1.2% and many companies were driven toward bankruptcy. Now corporate earnings are once again on the rise. Official unemployment —which never got much above 2% of the work force—and inflation have abated. The Japanese are responding by buying apparel, leisure equipment, vacations and houses.

While the latest numbers are impressive, Japanese businessmen and bankers are not overly optimistic. Says an official of the Fuji Bank, one of the country’s largest: “It’s all relative, really. The improvement looks all the greater because things were so incredibly bad last year.” There are also worries that the recovery is not broadly based, since it has been paced almost entirely by that famous Japanese specialty, exports.

In May, exports swelled for the fourth consecutive month, making a cumulative increase since the start of the year of more than 22%. Sales abroad for certain items increased dramatically: autos up 62%, household electronics (television sets, tape recorders, stereo systems) up 55%. An important factor, in addition to the U.S. recovery, has been Japan’s customary willingness to sell anything to anybody. One hot item: the export of entire factories to Middle Eastern and Communist countries.

The export boom has already generated a Japanese trade surplus of $4.8 billion this year and has caused testiness among Japan’s trading partners, who do not like the idea of buying so much more from Japan than they are selling there. Political pressures are mounting for countermeasures. One of them could well be an increase in the exchange value of the yen to blunt the competitive edge of Japanese exports, a subject that doubtless was raised discreetly at the economic talks in Puerto Rico. Prime Minister Miki so far has argued that the situation is temporary and should redress itself as imports increase along with the domestic recovery.

Easier Entry. The government has begun moving to increase imports. Autos are now allowed into Japan, even if they have met Japanese air-pollution standards only at the point of shipment instead of the point of entry. That makes it easier for European and U.S. makers to sell cars to the Japanese.

Yet for now the sharply increased exports are fattening some companies while leaving others untouched, prompting one economics professor to describe the recovery as one marked by “extreme bumpiness.” Industries dealing in exports are doing well, while those geared mainly to domestic markets are, in some cases, struggling. The feast-with-famine syndrome shows up even in separate divisions of giant companies. One part of Mitsubishi Heavy Industries Ltd. makes factories for export and is doing well; another division makes tankers and will have idle berths soon for the first time in 15 years.

No one doubts that Japan’s recovery will some day be in full bloom. But few experts believe the pace of the recovery will match that in the U.S. It is likely to be a long time—if ever—before Japan’s growth rate equals the torrid 10%-plus pace of the 1960s, before oil suddenly became expensive.

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