Whenever Americans and Japanese negotiate together, it inevitably
leads to massive misunderstanding. The constant Japanese fear of error,
the constant sense that disaster is but one step away, the painful
difficulty of speaking to an outlander--all of this leads to meticulous,
painstaking negotiations, very often interrupted in the middle or
reversed at the end. Americans interpret this fear as duplicity, as bad
faith. On the other hand, the American tendency to casualness and quick
decisions frightens the Japanese: the ease with which we reach decisions
indicates that Americans are not serious, not sincere. We could not have
reached such an important decision so quickly, and alone. The Japanese
committee protects against failure, or at least impetuosity; the American
individualist is perfect for a country unafraid of the consequences of
failure. For this reason, negotiations between the two tend to be
unspeakably painful for both sides.
So neither understands the other and, often, neither cares very
much for the other. It is this sensibility that frames our foreign
policies and has already led to one war. Since World War II, Japan has
depended on the United States to secure resources and provide markets.
Should it stop doing either, Japan will have to go it alone. It is
critical to understand the precariousness of Japan's financial structure
and its industrial plant. Very small fluctuations can be severely
dangerous. Thus Japan, taken out from under American protection, becomes
both volatile and unpredictable.
The question is, first, just how far will this go; and second, what
actually is driving it? Our argument is that the deterioration will go as
far as it can between the two nations--to armed conflict. And the forces
that are driving it are not ill-will or misunderstanding, but the
profoundly impersonal economic and geopolitical.
We think of Japan as a fantastically successful machine. It sees
itself as a fragile, vulnerable system even as it celebrates its
successes. Indeed, Japan is extremely vulnerable. Debt is piled upon
debt, all leveraged against a ridiculously inflated Tokyo land market and
an overheated stock market. If either fell precipitously, the net worth
of Japanese corporations would plunge and the entire financial structure
of Japan would crack, since their balance sheets have no room to
manoeuver. Banks would accelerate the process as they called in loans and
cut lines of credit; a massive cash crunch would create a wave of
bankruptcies.
The Japanese corporations must make their debt payments. They are
so obsessed with this that they really don't care about profits, and are
generally only one-half to one-third as profitable as American
corporations. Japan's proud indifference to profits has more to do with
the banker at the door than with any vaunted strategic vision. What their
corporations need is cash flow to make these payments. Like a used-car
dealer with a loan note due and too much iron on the lot, the Japanese
need to move the product and hang profits. So, what Americans see as
dumping, the Japanese see as desperation.
Now, under these circumstances, the entire Japanese economy depends
on exports. They cannot sell domestically because they can't afford to
cut the savings rate that runs the system--they need the cash flow. Japan
Inc. is in a perpetual fire sale. So when we ask the Japanese to please
balance trade, not matter how much they would love to oblige, Japan
cannot do this. Americans do not seem able to grasp the fact that the
Japanese financial system is as precarious and archaic as their
industrial system is robust and creative.
If the truth be known, Japan would love to give the United States
what it is asking for. Japan wants desperately to maintain the post-World
War 1I relationship. But Japan simply cannot give the Americans what they
so reasonably demand: balanced trade. We are accusing the Japanese of
unfair trading practices without examining the causes. It is not merely a
matter of opening the markets and allowing trade to be balanced. The
Japanese economy is heavily dependent on that imbalance to support what
is an extremely weak financial infrastructure. Given Japanese successes,
it is shocking to think of Japan as suffering from any weakness. But in
fact, beneath its sterling industrial performance, Japan is struggling
with an overloaded, antiquated, jerry-built financial system that
threatens the entire economic miracle.
Thus, any talk of protectionism is anathema to the Japanese. On the
other hand, losing nearly $40 to $60 billion--nearly I percent of its GNP
each year in the trade deficit is anathema to the United States. This is
the crisis faced by Japan: what will happen if America goes
protectionist? It is not a moral dilemma, and it is not a theoretical
dilemma. It is, rather, a matter of life and death.
Japanese desperation and American obtuseness were an explosive
mixture in 1941. Our gentle prods were seen as mortal threats by Japan,
and they responded by exploding. Now most people see this scenario as
far-fetched. Preposterous is a better term. After all, no one wants war.
But no one wants recessions, either, and we get them all the time. The
United States has never gone more than 33 years without a major war, and
no one really wanted them either. Wars don't occur because you want them,
but because you're more frightened by peace.
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