The United States and Japan are each other’s most important allies. “The U.S. is our only true friend in the world,” says a Japanese diplomat. But for 40 years, Americans thought they needed the Japanese as much as the Japanese needed them. Throughout the cold war Japan served as the key Asian bastion against communism, the cork that bottled up the Soviet Pacific fleet. “Japan is like a floating aircraft carrier off the coast of Vladivostok,” former prime minister Yasuhiro Nakasone once remarked. Japan, in turn, wanted protection–especially for the sea lanes that bring fuel and raw materials to the resource-starved islands–and its export-driven economy needed free access to the gold mines of America’s consumer market. The deal paid off for both countries. America won the cold war while Japan waged what almost amounted to an undeclared trade war against its own patron.
Now that the cold war is over and America’s economy is on the ropes, the relationship with Japan is bound to change. The Japanese are openly disdainful of America’s economic and political follies; they are much more assertive about their own place in the world–even their potential military role. Whatever strategic posture it eventually adopts, Japan already presents the United States with its most potent foreign rivalry. Harvard political scientist Samuel Huntington writes that Washington’s single most important strategic objective is “to maintain the United States as the premier global power, which in the coming decade means countering the Japanese economic challenge.” If America wants to be more than just another major country, the reckoning cannot be long delayed. For the second time in half a century, the United States will have to come to terms with Japan.
The relationship has never been based on deep mutual understanding or genuinely shared ideals. Despite its veneer of Western-style democracy, capitalism and pop culture, Japan has bedrock values and practices that differ sharply from those of the United States. “The widespread perception that Japan plays by different rules is basically right,” says MIT economist Paul Krugman. “That is not a moral judgment. It’s just a statement of fact.” Not that Japan openly flouts the rules of international commerce. Its habit is to accept the rules written by others and then bend them to its own purposes. Japan pays lip service to the alien ideal of free trade even as it rigorously protects its own key industries, largely by custom, and crowds out competition by foreign producers in markets overseas.
Each country’s national character is almost a mirror image of the other’s. The Japanese are rigid conformists; Americans practice individuality up to-and sometimes over-the brink of selfishness. Americans believe that if they make a better or cheaper product, other people will always buy it, because fairness equates with economic self-interest. The Japanese believe it is almost unpatriotic to buy a foreign product when that might hurt their own farms or factories; they are willing to pay a premium for buying Japanese, and thus their culture reinforces their economy.
When Americans complain that the Japanese don’t play fair, the Japanese reply that Americans should try harder. “To ask whether Japan plays fair is to ask the wrong question,” says James Morgan, chairman of Applied Materials Inc., a Silicon Valley maker of semiconductor-production equipment that has been very successful in selling to Japan. “America’s unique sense of fairness is not shared by the rest of the world.” International markets have changed, Morgan says, making “Japan’s way of doing business more relevant and effective.”
Japan is a nation of fanatical savers; Americans are demon spenders. It wasn’t always that way. Before the war, Americans were the world’s best savers, stashing away 19 percent of their total output (including government and institutional investments). After the war, as domestic consumption became the engine of economic growth–and as government entitlements expanded–the gross U.S. savings rate dropped to 16 percent. Meanwhile, Japan’s need to rebuild and to sell overseas–and its failure to develop an adequate pension system–forced its citizens to become more frugal. Their savings rate climbed from 13 percent in the 1930s to nearly 30 percent today.
The governments of the two countries have radically different priorities. Tokyo organizes and directs Japanese industry in ways that Americans regard as anticompetitive collusion. American politicians think of the consumer first; Japanese leaders favor producers. American presidents–George Bush not alone among them–often consider foreign policy their strong suit and domestic affairs a no-win proposition. Japanese politicians put the home front first. “The U.S. has a long-term political and military strategy for its role in the world and no policy at all for economic competitiveness and growth,” says Chalmers Johnson, a political scientist at the University of California, San Diego, and author of a groundbreaking study of Japan’s bureaucratic juggernaut, the Ministry of International Trade and Industry (MITI). “Japan has no political-military strategy but an extremely clever and deliberate long-term strategy for economic dominance and growth,” he says. “Japan pursues high value-added jobs for its citizens. The U.S. pursues democracy and world peace. Japan gets the jobs, everybody gets [the benefits of] the peace.”
It is possible for Americans to admire the Japanese; it is possible to fear them. But there is no reason to envy them. For all their country’s economic power, most Japanese live in straitened circumstances, with a relatively low standard of living, long working hours, cramped housing and scant opportunity for recreation. They endure a political system that does not respond to ordinary citizens, an educational system that puts brutal pressure on the young and a family culture that belittles women, by Western standards. The Japanese joke that their country has a first-class economy, a second-class political system and a third-class standard of living. Recently the new prime minister, Kiichi Miyazawa, promised to make Japan a “lifestyle superpower.” His country has a long way to go. To improve the quality of life, the government plans to spend more than $3 trillion on infrastructure over the next decade.
The relationship between the United States and Japan remains unequal, Despite all the progress it has made, Japan still has no desire to lead. “We want to be the best number-two country in history, " says Koichi Kato, the chief cabinet secretary and former defense minister. Within limits, it is still possible for the United States to push Japan around–or at least to nudge it in helpful directions. But the Americans have to be careful about what they ask for. Washington wants Japan to shoulder more of the burden of global leadership, but after the horrors of World War II nobody wants a revival of Japanese militarism.
If Japan is to play a larger role in the world, it must do so in peaceful venues. Japan is already a leading source of foreign assistance, which amounts to about 1 percent of its gross national product–approximately the same amount that Japan spends on defense. By comparison, the United States devotes about 8 percent of its GNP to its world role, almost all of it going to the far-flung military effort. If Japan could be persuaded to spend a lot more on global leadership–say, 5 percent of GNP–the result would be a vast increase in assistance to poorer countries.
A Japan that pays more should have more say in world institutions, notably the United Nations. Officially, Washington has long advocated a permanent seat for Japan on the Security Council. But for fear of weakening the council, U.S. diplomats don’t push the idea. Giving Japan a permanent seat “would so fundamentally change the importance of the Security Council that they would be getting into a different institution than they thought,” says a U.S. official. That’s like telling the Japanese they shouldn’t want to belong to any club that would have them as members.
With its bilateral trade deficit soaring past $50 billion a year, the United States is entitled to demand economic relief from Japan. It cannot expect fundamental change. The Japanese will not scrap their industrial structure or completely alter their shopping habits, any more than they can be made to change their bedrock culture. But they can ease up a bit–on American competitors and on themselves. The Japanese government can encourage domestic consumption; indeed, it will have to if it wants to make good on Miyazawa’s “lifestyle” pledge. Japanese manufacturers can restrain some of their more aggressive export practices, as they did in the 1980s when, under pressure from Washington, they “voluntarily” limited auto exports to the United States.
Already, the European Community has voted to impose limits on Japanese auto imports and on production by Japanese “transplant” factories in Europe. The restrictions, which take effect next year and will last for the rest of the century, hold Japan to 16 percent of the European car market. The United States, where Japan has 33.5 percent of the car market, could impose similar restrictions, chipping away–not for the first time–at its own free-trade principles. The Japanese might even volunteer for another round of self-imposed restrictions, putting a cap on their share of the American market in order to head off protectionist moves by Congress and to avert disaster in the U.S. auto industry. “The Japanese recognize that one of the things they can’t afford is for Chrysler to fail,” says David Cole, a University of Michigan expert on the auto industry. “If Chrysler were to fall into the fire pit, Washington would probably go berserk.”
In an economy the size of America’s, foreign competition–even the cutthroat variety–has only a marginal impact, experts say. Most of America’s economic problems are self-inflicted. “Coming to terms with Japan means coming to terms with ourselves,” says Richard Samuels, a political scientist at MIT and an expert on Japan. Americans will have to reduce their budget deficit, which soaks up capital that U.S. industry desperately needs for new products and new plants. They will have to fix an educational system that turns out an increasingly ill-prepared work force. Their leaders may have to create new incentives for saving or change the antitrust laws so that companies can pool their resources on efforts such as research and development. And they may finally have to come up with some kind of industrial policy, perhaps even subsidizing the most crucial, high-technology industries so that America can compete on more nearly even terms.
“If the next 20 years are like the last 20 years, there will be a breakdown in U.S.-Japanese relations,” says Stanton Anderson, a Washington lobbyist for Japanese interests. Neither side wants that. Their economies are deeply intertwined already, and the Treasury has relied heavily on Japan to help finance the U.S. national debt. In the years ahead, the Japanese are likely to lose some of their momentum. The United States meanwhile has a choice: it can use the Japanese as a scapegoat or a spur. Scapegoating courts disaster for the country that resorts to it. The spur, energetically applied to one’s own hindquarters, may be the best way out of America’s dilemma.