Now Is Not The Time To Bypass Japan

`Japan passing" has replaced Japan bashing as the key discussion topic among U.S. corporations investing in Asia. With markets expanding all across the Pacific Rim, why should U.S. executives pound on the portals of Fortress Japan? Roughly 40% of all manufacturing output there is managed by 10,000 regulations, many of which are designed to keep foreign companies out of coddled domestic markets. And Tokyo bureaucrats pull all-nighters figuring eut ingenious ways to erect invisible trade barriers as well. So why bother when China beckons, or Thailand, Malaysia, and Vietnam?

Because Japanese mercantilism is at long last being undermined. Japan's multilayered distribution system is being shattered by a new breed of discounters. Most are Japanese, hungry for U.S.-branded goods, but a growing number are American, including Gap Inc. and Toys `R' Us Inc. They are increasingly popular with Japan's new yen-pinching consumers, who, after four years of economic stagnation are willing to give American products a hard look.

This is why Compaq, Apple, IBM, and others have grabbed 30% of Japan's $9 billion PC market. Motorola has roughly 15% of the cellular-phone market. And Detroit auto makers are finally rolling out right-handed vehicles while trumpeting plans to increase their sales to Japan to nearly 500,000 cars by the turn of the century.

Is Japan still a maddening place to do business? Sure. And much more needs to be done. The biggest opportunities are in less-regulated markets, such as computers, software, retail goods, household goods, and CDs. In those markets that continue to be heavily regulated, Japan passing is a reality. Japan's overregulated financial markets have sparked a steady stream of delistings by foreign companies from the Tokyo Stock Exchange. And AT&T is looking to China for new growth because the $70 billion colossus Nippon Telegraph & Telephone Corp. continues to dominate Japan's telephone and multimedia fields.

Penetration of Japanese markets by U.S. products is bringing new benefits to Japanese consumers. Lower prices have led to Japan's first boom in home personal computers. And car prices are beginning to fall as well, with lower-priced Chrysler Neons about to give Japan's auto makers their first real competition in their main, smaller-car market, while the Jeep Cherokee sells into the booming sport-utility sector.

For all its problems, Japan's sophisticated $5 trillion economy is bigger than South Korea, Thailand, Malaysia, and Singapore combined. With barriers finally beginning to fall, Japan passing is a self-defeating strategy.

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