All Commentary
Sunday, April 1, 1990

Book Review: The Enigma of Japanese Power by Karel van Wolferen

Alfred A. Knopf, 400 Hahn Road, Westminster, MD 21157 • 1989 433 pages * $24.95 cloth

The nub of this book is that Japan really is an unfair trade parmer—but can’t help it. The author, a Dutch journalist who has spent most of the last 25 years in Japan, confirms what most Americans already believe: The Japanese are in fact subsidizing their exports abroad, while restricting access to their own markets. The surprise is Karel van Wolferen’s explanation for Japan’s neo-mercantilism. According to him, “Japan Inc.” is a myth. There is no master plan for world economic conquest conceived and directed from some inner sanctum at the Ministry of International Trade and Industry. There is no plan, no conspiracy at all. There is only the enigma of Japan itself.

Japan, says van Wolferen, cannot be understood in terms of the Western, free-market point of view, which assumes that individuals will always act in a rational, serf-interested manner. In the West, individuals are free agents; in Japan, individuals are expected to subordinate their own interests to those of the group.

Behind the facade of a modern industrial democracy, Japan remains a semi-feudal kingdom where individuals owe their first allegiance to their corporation, department, profession, class, family, or other social unit. These groups, which van Wolferen refers to collectively as “the System,” are the real rulers of Japan—just like the feudal lords of old.

In effect, the Japanese are not so much a nation as a tribe, bound together by an ethnic and cultural homogeneity. Traditional manners and customs carry greater weight than constitutional processes. Thus, prime ministers negotiate treaties, parliament passes laws, and bureaucrats issue regulations, but “the System overrules the state at every turn.” But the System is not a shadow government. Indeed, it has no formal structure at all. The different groups which comprise the System pursue their own objectives and strike their own bargains with each other without regard for a coherent national policy. There is, as van Wolferen piquantly suggests, no Harry Truman to say the buck stops with him. “In Japan, the buck keeps circulating.”

It is this lack of accountability that makes dealing with Japan so exasperating for outsiders. For example, the Japanese government has in recent years made a great show of removing many official trade barriers. Foreigners—especially Americans—are now being told it is up to them if they want to sell in Japan. They must learn the Japanese language and Japanese customs; they must do more careful marketing research; they must discover what the Japanese consumer really wants; they must, in short, “try harder” if they expect to succeed. But a recent article in the Washington Post tells quite a different story.

The Post profiled a Japanese-American businessman who was born in Japan and had spent the first quarter-century of his life there. There was no question of his being thoroughly familiar with both the language and the customs of his former homeland. Nor was there any question that he was offering a useful, high-quality product at a competitive price. Yet he found no buyers. As he complained to the Post:. “The Japanese like harmony. You say, ‘Buy ours, it’s cheaper,’ and they won’t. And you say, ‘Why not?’ And they say, ‘Because we’re happy. You’re destroying our harmony. Everything was harmonious until you came along.’” This is the System at work.

Japanese consumers pay a stiff price for the “harmony” they prize so much. If Japanese corporations conquer American markets by subsidizing exports, they must recoup these subsidies somewhere else. Usually, it is by charging higher prices at home. Because consumers are conditioned by the System to “buy Japanese,” they accept the price differential with equanimity. The upshot, as van Wolferen points out, is an economy skewed to exports at the expense of domestic consumption: “The Japanese economy is basically dependent on one market—that of the United States, which absorbs roughly 40 percent of all Japanese exports. Agriculture, heavily protected, is in worse shape than almost anywhere else among the advanced industrial economies where this sector still plays an important role. Industries that serve only the domestic economy are highly inefficient.”

A genuinely open market would give Japanese consumers more choices, and better quality goods at lower prices. But it would also undermine the existing social order. Accordingly, the System resists free trade.

This, then, is contemporary Japan—a runaway economic locomotive hurtling down the tracks at full speed with no one’s hand on the throttle. For how long?

Certainly not for much longer. Despite much silly talk that Japan has displaced the United States as the world’s leading economic power, the fact remains that Japanese “dominance” is exceedingly fragile. Japan’s prosperity depends to a great extent on the continued willingness of the United States to shoulder the burden of that country’s defense, and to accept Japanese penetration of American markets. Pushed too far, Congress might withdraw the American shield or enact retaliatory trade barriers—or both.

Is a showdown inevitable? Van Wolferen thinks it more likely that the System will grudgingly make whatever concessions it must to avoid an all-out trade war. But he sees a better alternative—“turning the System into a genuine modern constitutionalist state, and Japanese subjects into citizens.” Such a transformation would not be easy to effect, but it would probably receive a significant boost from freer trade and more open markets.

Mr. Gordon is a corporate speech writer.