Mercantilism, Japanese Style

Economic reforms of the required dimension are inherently cultural as well as political. It took the U.S. years to tame the budget and produce quality cars, and its citizens still don't save enough. It will take time for Japan to open its markets.

But open them they must. No nation can continue running $135 billion in current account surpluses. Japan has used foreign sales to export most of its joblessness during its recession. The U.S., Europe, and other nations have lost jobs, production, and growth as a result of that mercantilist policy.

It is easy to see why many Japanese corporations oppose open markets. For decades, NEC Corp. dominated Japan's personal-computer market, along with No.2 Fujitsu Ltd. Two years ago, Dell, Compaq, and Apple introduced discounting. Prices plummeted and sales to individuals soared for the first time. Today, Apple is No.2 and NEC is in the red.

Competition can be threatening. That's why Japan has restricted access to the booming cellular phone market. The Ministry of Posts & Telecommunications has carved it up, handing the lush Tokyo region to Nippon Telegraph & Telephone, forcing Motorola to join a Japanese company already committed to the homegrown NTT cellular standard. No wonder Motorola has only 13,000 subscribers vs. 1 million for NTT.

Motorola now must rely on U.S. Trade Representative Mickey Kantor. Kantor declared Japan in violation of a 1989 agreement and began proceedings that could result in higher tariffs for Japanese imports into the U.S. Washington hopes this pressure will open up the cellular market.

Doing business in Japan is an exercise in political economy, not free-market competition. Each "win" in opening a market has a political component. Despite two decades of U.S. exhortation, there is no evidence that Japan is about to transform itself into anything remotely resembling an American-style, consumer-led, free-market society, notwithstanding the good intentions of Prime Minister Morihiro Hosokawa.

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