Made In Japan

by Akio Morita

  I was chatting with the late prime minister Masayoshi Ohira before he went off to one of the industrialized nations summit meetings, and I urged him to speak out in defense of Japan’s policies. He replied, “Well, I know what you mean, but my English is not really very good and… .” He was too modest about his English ability, I thought. “I don’t speak well enough to say freely what I would want to, so I just do it the Japanese way,” which is to say virtually nothing or attempt to make your points by indirection or polite suggestion.

  I said to him jokingly, “Well, if you are going to do it the real Japanese way, please go fully dressed in traditional clothing.” That way, I told him, people will recognize you as being different and will pay more attention to you. They will listen more closely and maybe they will make more of an attempt to understand you as a real foreigner. This idea does not run counter to my view that the Japanese must become more internationalized—it reinforces it. So often we try to avoid being seen or speaking out. But if our leaders go to international conferences dressed in Western clothes and pretend to understand what is going on, they will miss a lot.

  Prime Minister Nakasone and his foreign minister, Shintaro Abe, know English very well, but very few of our senior politicians can comfortably speak English, the international language. The same problem exists with many senior Japanese businessmen, although the second generation of leaders is more at home in international settings.

  I tried to make the point with Mr. Ohira and others that unless you can join in with the international group on their own terms, then it is best to proclaim your difference so you can be noticed and listened to seriously. Japan’s intention of opening its markets to the world is serious, but we have had difficulty getting enough foreign firms to come in and make the effort, because they felt the investment might be too great, or it would take too long to become profitable. I thought foreign firms needed some extra stimulation.

  In 1972, when I founded Sony Trading Corporation, I put ads in prestigious publications in the United States and Europe, looking for products to sell, and we got more than three thousand inquiries immediately. Our two-page ad in Time magazine said, “Sony wants to sell U.S. products in Japan… . Japan is a foreign country to U.S. businessmen. However, it is a domestic country to Sony and we know both its market and its potential.” We now have a group of over forty shops called “Sony Plaza” selling foreign consumer goods, and we are on the lookout for more imported items to sell. Apart from that, when the prime minister urged all Japanese to buy more foreign goods in 1985, we joined scores of other companies in pledging to do so. As an added gesture, we began shipping American-made Sony Trinitron color picture tubes from our San Diego plant to Japan for assembly in Sony sets to be sold in Japan.

  The stand of the Japanese government in its economic relationship with the world is that openness of its markets is the rule and restrictions against imports are invoked only as a rare exception to the rule. The hope is, of course, to keep the exceptions as few as possible. But in reality even the prime minister and the other top politicians who created this fine declaration cannot live by it completely because they are, after all, politicians in a democracy.

  Here’s an example: even while Prime Minister Nakasone was having so much success in opening up Japan’s markets to foreign goods, one of the restricted agricultural imports (an exception to the rule, we might say) was a plant called arum root, or sometimes devil’s tongue, which is used to make an ingredient, konnyaku, that we Japanese enjoy in sukiyaki and in many traditional boiled dishes. One of the prime growing areas for domestic arum root is Gumma Prefecture in central Japan, which happens to be the home constituency of two of the most influential politicians in Japan today: Prime Minister Nakasone himself and former prime minister Takeo Fukuda, who is very influential in ruling party politics.

  It is a danger when Americans and Europeans become too emotional without thinking rationally about the problems. Japan is America’s best partner today, and Japan simply cannot live without the U.S., because it is the biggest market for us, our biggest supplier of raw materials, food and feed grain, technology, ideas, and fads. At the same time, Japan is America’s best overseas customer for agricultural products and its best partner, industrially, technologically, and marketwise. We are cooperating in hundreds of technology agreements, including defense technology, and the trade between our two countries is the biggest two-way flow across an ocean in history—eighty-four billion dollars in 1984. Many Americans just do not realize how dependent we are on each other, and, in fact, the loss of American manufacturing jobs cannot be a comfort to Japan or any other country.

  But eventually, Japan, too, will lose manufacturing jobs in large numbers—we have done so already (in aluminum smelting and shipbuilding, for example)—as service sector jobs open up and new and different kinds of manufacturing jobs come on stream. There should be a way for American and Japanese policy to dovetail so that we could foresee problems and figure out how to face them in advance. When a strong dollar caused a big trade deficit and forced American industrialists to say they were losing competitiveness and must close factories while soaking up Japanese dollars to help finance the deficit (about forty billion dollars in 1984 alone), we found ourselves in a vicious cycle. Lashing out emotionally could solve nothing. The major industrial governments realized this in 1985 when they tried to gain some control over exchange rates, especially the yen-dollar rate, which to my mind should be the main and most crucial concern of the trading world today. But the initial moves caused serious problems because the movement was too fast.

  Early in the 1960s, world trade was at a crossroads, and America led the free world into the Kennedy round of trade negotiations. That brave action avoided a serious split of the world into trading blocs. Nations sat down together and decided to drastically reduce tariff barriers to trade. In doing this, they accelerated the growth of all the countries that participated. But many of us realized then that nontariff barriers, trade restrictions, and so-called voluntary restraint agreements, surcharges, import quotas (and even domestic tax laws) continued to restrain world trade and would have to be eliminated. We were then protecting some quite healthy enterprises and politically touchy territory.

  It seemed to me at the time that with two-thirds of the world’s population living at a very low economic level, the developed world had a responsibility and opportunity to help bring them into a higher economic sphere, which would be a benefit to everyone. After all, the people of developing countries have the right to enjoy the benefits of an advanced civilization, better food, clothing, education, and entertainment, but we in the developed world haven’t done enough to help them. This is shortsighted of us because they are our future strength, allies, coproducers, and customers. I am reminded of the story of the two shoe salesmen who visited an underdeveloped country. One cabled his office, NO PROSPECT OF SALES BECAUSE NOBODY WEARS SHOES HERE. The other salesman cabled, SEND STOCK IMMEDIATELY INHABITANTS BAREFOOTED DESPERATELY NEED SHOES. We are too much like the first salesman, and we have not moved on this need to help the Third World. Japan’s overseas development assistance, while growing, is still inadequate and even the government admits it. But in a broader sense, neither the free world nor the Communist bloc has done enough.

  I was invited in 1969 to testify before the subcommittee on U.S. foreign economic policy of the Joint Congressional Economic Committee. My picture had been on the cover of Business Week magazine holding our newest Sony Micro Color TV, and I guess I was something of a target as a result of the trade problems. I spoke about the need to remove nontariff barriers around the world and the parallel need to help move the underdeveloped nations into the mainstream of world economic life by focusing resources not on capital investments such as highways, dams, steel mills, and national airlines, but on the human resources of the countries and on developing a desire within these nations to become second Japans.

  After I had read my prepared statement, I hoped to be excused, but t
here were questions from some of the congressmen. The Japanese press said I was “grilled” by angry congressmen, but I didn’t think of it in those terms. One of them asked me about the establishment of Sony, and I answered him. Then he said, in very lawyerlike language, “I will ask you whether it was possible for us Americans to start a firm in Japan when you started Sony in Japan.”

  I said, “No, it was not possible.”

  “But Sony has now established a firm in America. Why is it that America is not allowed to enter Japan?”

  I gave a rather long-winded answer, but I think I made my point. “Immediately after the war America looked like a giant in the eyes of penniless Japan,” I said. “The Japanese had a fear complex that giant America’s free inroads into Japan would immediately out-market them. Whatever the reason, as long as they have this fear complex, they will feel resistant toward liberalization.

  “Free trade is an ideal, and Japan keeps its face turned toward this direction. But as the American government has to consider the situation in making political utterances, the Japanese government, which is adopting a highly planned economy, sometimes finds itself in a difficult position. Personally, I feel that the government’s moves for liberalization are slow, but I think it is certain that things will be free eventually.” I didn’t think then that it would take quite so long as it has.

  I have often said that a booming Japanese economy is the greatest weapon against Communism that the free world has in the Pacific or anywhere else in the world. It is unfortunate that Japan’s slow way of doing things seems unfair to the kind of “victim consciousness” that the U.S. has developed where Japan is concerned. America is a country of humanism and emotion. Americans like to favor the underdog. According to some Japanese scholars, the power of the American press, indignant at Spain’s treatment of tiny Cuba, aroused the national consensus that led to the Spanish-American War. American sympathy for China’s Chiang Kai-shek as the underdog in the war with Japan (dramatized by his charming, American-educated, English-speaking wife), turned into a national consensus that eventually helped to drive the United States and Japan to war.

  I think the old Avis car rental slogan, “We’re Number 2, So We Try Harder,” is a perfect example of this American humanism. But America is not number 2, Japan is, and very glad to be it. However, as Japan moved from underdog against Russia to bully in China, to aggressor against the United States, to disastrous defeat, and then to number 2 in the world, American attitudes about Japan had to undergo many changes. Even number 2 may seem too big for comfort to some. On Capitol Hill, which I have visited often, there are politicians who go through dramatic emotional swings, making sensational speeches and statements for the press that they feel are good for their political campaigns. It seems to me that American politics has too much of this kind of grandstanding. We cannot see the facts for the rhetoric. And that is what worries me about the direction in which our relations are headed.

  In 1919 the American Congress was carried away with emotion and passed the Volstead Act that outlawed all alcoholic drinks. Common sense today tells us that it was a stupid thing to do, and certainly there must have been millions of Americans who felt it was wrong at the time—probably including many congressmen and senators—but they went along with it. The law was broken by millions of Americans who would never have dreamed of doing anything else illegal. The Volstead Act was repealed in 1933.

  What this taught me is that public opinion can move American policy. If a really negative feeling sweeps America about Japan, there can be trouble everybody may regret. Once such a trend moves too far it is very difficult to stop. And the fact that Americans too often seem to believe that they are right is a complicating factor. The United States will not likely pass a Japanese prohibition law, or repeat the mistakes of the thirties, but both Japan and the U.S. should be aware of the dangers of emotionalism and pettiness in our relationship that could lead to economic and political problems.

  I have been dealing with Americans for many years and they are always in a hurry. It is common to hear in America: “There’s no time!” “Do it now!” “He who hesitates is lost!” America was swept into Vietnam on this kind of emotional rush. American politicians said the United States must do this in Vietnam for the sake of the peace of the world. They lost perspective. Once the Americans love something they love it too deeply, and when they hate something they often go too far in their hate. Many foreign friends of the U.S. feel this way about America.

  Take the case of China, for example. For a long time, the United States did not want to recognize that China existed, even though nearly one billion people lived there. America tried to isolate China because it didn’t like the country’s politics. And so in recognizing the Taiwan government, it tried to punish the Beijing government by pretending mainland China did not exist. Anybody who bought a Chinese-made trinket in Hong Kong on a vacation trip could be in trouble if he or she tried to bring it home to the U.S. in those years. Diplomatically, it was as though a third of the world’s people did not exist. During that time, Japan did not recognize Communist China either, and we had no official diplomatic relations. But our people went to China often. Many went back and forth and did business and made contacts and did news reporting. And then suddenly America changed its mind. Richard Nixon went to China. Without telling anybody in advance, including China’s closest neighbors, such as Japan, which had been following a policy supportive of the U.S., Nixon suddenly recognized the existence of a billion people.

  In Japan we are still the inheritors of an agrarian cultural tradition and philosophy, which are influenced by nature and the change of the seasons. Perhaps because of this we are not a hasty people. We have thousands of years of history and tradition and that is why we are not pleased when we are treated as newcomers by such a young—even though great—country as the United States. We have a proverb that says everything changes in seventy days, which counsels us not to be hasty, not to overrespond, not to react too quickly. There ought to be a middle ground between the two approaches, the too hurried and the too slow.

  WORLD TRADE: Averting Crisis

  I

  Shortsighted statesmen and businessmen around the world see their problems in bilateral terms: American businessmen are worried about their problems with Japan, and Japanese businessmen worry about how they can cope with the complaints of American and European governments and businessmen.

  The other day I heard a joke about an American and a Japanese who were walking through the jungle together when they saw a hungry lion running toward them. The Japanese immediately sat down and began putting on his running shoes.

  “If you think you can outrun a hungry lion,” scoffed the American, “you are a fool.”

  “I don’t have to outrun that hungry lion,” said the Japanese. “I only have to outrun you!”

  But the lion we face, our coming crisis, is global. We can’t run away from this lion. I believe the world economic trading system is in great peril and the squabbles over specific trade issues and between countries only mask the real problems that are below the surface. Solving these small pieces of the problem do not serve us at all.

  I believe the main problem is with our money. In order to have economic activity in a free and open economic system, you have to have buying and selling at appropriate prices. The prices will be affected by supply and demand, of course. That’s the simple basis of the free economic system.

  If I sell a product worth a thousand yen to someone in the United States or Britain, I expect to be paid the dollar or the sterling equivalent of a thousand yen. The rate at which that exchange is made must be fair and should reflect the relative competitiveness of the different nations’ industries, because I believe that industry should be the primary factor in setting the value of the nation’s money.

  As an industrialist I know that competitiveness has to be balanced and that the exchange rate acts as the balancing mechanism. At the Bretton Woods conference in 1944 exchange rates were
fixed by international agreement. The rates were based on the economic realities of that time and the foreseeable future. Japan’s rate was set at three hundred and sixty yen to the U.S. dollar during the immediate postwar period, and it remained at that rate until 1971 even though our nation’s industrial competitive power increased greatly. Our Japanese currency, then, was undervalued when compared with other currencies. A weak yen against a very strong dollar, for example, made Japanese goods cheaper in America, and it encouraged Japanese companies to export. This led to mounting trade imbalances in Japan’s favor. Because of the strong dollar, U.S. exports became quite expensive.

  When U.S. president Richard Nixon devalued the dollar in 1971, all currencies, including the yen, were allowed to float free of the old fixed-rate limits, and the yen immediately became about 15 percent more expensive against the dollar. I thought that it was proper for an upward valuation of the yen to take place. In fact, many businessmen thought of the floating system as a potentially superior one to the fixed-rate system because it could continually balance nations’ industrial competitiveness.

  I saw an analogy for what I thought the new system would be in the handicap system used in golf, in which the capability of each player is balanced against that of other players. Every year the golfer’s handicap is adjusted to reflect any changes in the player’s capability. A player can win or lose even with his handicap, which can range from zero to thirty-six, but he knows that the game is fair because everybody is playing within a fair system.