It has long been a refrain among U.S. executives bent on expanding into markets across the Pacific: Let's pass up Japan's tough markets and go for booming China and Southeast Asia. Yet when President Bill Clinton presses the flesh with American business leaders during his minisummit with Japanese Prime Minister Tomiichi Murayama on Nov. 20, he won't be hearing the "Japan Bypass" song as much as he might hear a new tune titled "Cracking Japan."
American companies are making intriguing inroads into Japan's high-tech, auto, consumer goods, and retailing markets. Sure, a turbocharged yen that's up 26% vs. the dollar since 1993 is one reason, because it makes U.S. products so attractively priced. Yet subtle changes in buying habits, cracks in a fortress-like distribution system, and smarter marketing could set the stage for sustained growth in U.S. imports. "In the last two years, more changes in Japan [retailing] have happened than in the last 40," says Takao Kondo, president of Budweiser Japan Co.
SHATTERED MYTH. Taken together, these trends explain why Japan's trade surplus with the U.S. declined 14%, to $23 billion, for the six-month period ended in September--the first year-on-year drop since 1991 (chart). True, the falloff owes much to the re-import of Japanese autos from U.S. transplant facilities, and some of Japan's export momentum has merely shifted to offshore manufacturing centers. None of the U.S. gains mean that all the barriers have suddenly vanished.
Still, sales of such U.S. products as autos and personal computers are expected to continue to increase. The Detroit auto makers are getting more serious about selling in Japan. At the recent Tokyo auto show, Ford Motor Co. unveiled a right-hand version of its Taurus wagon and sedans that will hit the showrooms in 1996. Chrysler Corp. did the same with its compact Neon, which Chairman Robert J. Eaton hopes will shatter the myth "that U.S. companies aren't making a big enough effort to meet the needs of Japanese consumers."
Some of the biggest gains are now being scored in Japan's long-coddled high-tech sector. Motorola Inc. has grabbed about 14% of Japan's recently deregulated and now booming cellular-phone market. And U.S. personal-computer makers, led by Compaq, Apple, and IBM, have grabbed 30% of Japan's $9 billion PC market by pricing their products 20% to 40% below those of key rival NEC Corp.
U.S. computer makers will also get a big boost from Microsoft Corp.'s Nov. 23 launch of English and Japanese versions of Windows 95 in Japan. Microsoft will peddle Win95 not only in traditional computer retail chains but even through Japan's convenience giant Lawson's, which has 5,400 outlets. "We would be disappointed if we don't sell 4 million copies a year," says a spokeswoman.
The ferment in Japan's notorious multitiered distribution system explains many of the U.S. gains. The growing clout of Japanese discounters, for example, is offering U.S. companies a unique shot at bypassing the nation's price-gouging wholesalers. Packard Bell Electronics Inc. is doubling its original 1995 sales target to 120,000 personal computers, thanks to its tie-up with discounter Daiei Inc.
WHY NOW? The relatively new trend among Japanese consumers to demand value for their money also offers an opening for U.S. retailers. Gap Inc. recently opened an 8,350-square-foot store in the heart of Tokyo's ritzy Ginza district, betting consumers will flock to its array of value-priced casual wear. Similarly, Campbell's Soup Co. is taking aim at Ajinomoto Co.'s dominance of Japan's $500 million soup market with the rollout of four imported products in September. Why now? The drive for convenience so powerful in the U.S. is sweeping into Japan.
No one is arguing that the long-term competitive battle is over, or even that the Americans will be able to wipe out their trade deficit with Japan, still expected to run about $47 billion this year. But the Japanese are seeing more goods stamped "made in America." If those gains prove sustainable, American companies that have resorted to bypassing Japan will certainly come to regret it.