The Chrysanthemum and the Eagle

The Future of U. S. -Japan Relations

Ryuzo Sato

• Publisher: NYU Press
• Year: 1994
• ISBN:
  9780814741474
• Topic: Business
• Subtopic: International Business
• Index: Business

Whether in the form of the ongoing automotive wars, books and films such as Michael Crichton's Rising Sun, or George Bush's ill-fated trip to Japan in 1991, frictions between the United States and Japan have been steadily on the rise. Americans are bombarded with images of Japan's fundamental difference; at the same time, voices in Japan call for a Japan That Can Say No. If the guiding principle of the Clinton administration is indeed new values for a new generation, how will this be reflected in U.S.-Japanese relations?
Convinced that no true solution to U.S.-Japanese frictions can be achieved without tracing these frictions back to their origin, Ryuzo Sato here draws on a binational experience that spans three decades in both the Japanese and American business and academic communities to do just that. In an attempt to bridge the communication gap between the two countries and dispel some of the mutual ignorance and misunderstanding that prevails between the two, Sato addresses the following questions:

--Is Japan really different?
--Has America's sun set?
--How have conflicting views on the role of government affected U.S.-Japan relations?
--What are the real differences in American and Japanese industrial policies?
--What is the anatomy of U.S.-Japanese antagonisms?
--What effect has the collapse of the bubble economy had on relations?
--What is Japan's future course? Is it truly a technological superpower? Can it avoid international isolation?

An incisive personal look at one of the most important political and economic global relationships, written by a major player in the world of international business and finance, THE CHRYSANTHEMUM AND THE EAGLE provides a readable and engaging tour of U.S.-Japan relations, past and present.

ONE

THE RISE OF REVISIONISM

The “Hawks” and the “Chrysanthemum Club”

A New Containment Policy? Early in 1991, I had a discussion with James Fallows, the Washington editor of the Atlantic Monthly, who is calling for drastic changes in U.S. policy toward Japan. During the course of our conversation he made a remark that helps explain the mixed feelings Americans have toward Japan. When General Douglas MacArthur returned to the United States after heading the Allied occupation of Japan, Fallows said, the general was certain he had made Japan into an American clone, a notion that was apparently shared by most Americans in those days. In the course of subsequent Japan-U.S. negotiations, however, it soon became clear that, far from having been re-created in America’s image, Japan had emerged as a country poles apart from the United States. The illusion and its betrayal, Fallows pointed out, underlie the frustrations of the American people in their dealings with Japan.

Still, just as no two people look exactly alike, no two countries are the same. Each country has its own culture and traditions. Even the occupation authorities knew that; all they hoped to redesign in the American image were Japan’s political institutions and economic systems. The drastic reforms they launched—land reform, dissolution of the zaibatsu (big financial and industrial combines) and the old class system, women’s suffrage, equal opportunity in education, and freedom to unionize—did indeed make Japan totally different from what it had been before the war. Today, a half century after Pearl Harbor, the democratic political system and the capitalist economic system the United States implanted on Japanese soil have been thoroughly acculturated and indigenized, rendering them completely different from their parent models. It is easy to understand why some Americans stress the need to drastically revise a Japan policy that was adopted by the United States at a time when it thought it was dealing with a country which had the same systems as its own.

I first came to the United States in the late 1950s as a Fulbright exchange student, and for more than thirty years I have spent part of each year in the United States and part in Japan. During that time I have watched American attitudes toward Japan and Japanese products undergo a profound change. When I was a student in Baltimore I remember going to look for a secondhand car. “What about that Japanese car over there?” I asked. The salesman, a big man about six foot three or four, put his foot on the bumper and shook the car back and forth. “You don’t want to buy this,” he said. “This isn’t a car; it’s a Japanese toy.”

No one talks about Japanese toys today. Although the atmosphere of fear and hostility has eased somewhat as the United States and Japan have both turned inward to deal with their respective domestic economic problems, many Americans have come to regard Japan’s economic success as a threat to their own way of life. Sensationalist accounts that imply Japan is out to dominate the world economically—although it has no such intention—merely increase Americans’ unease during a period in which the U.S. economy is being radically restructured.

Since World War II, the enemy, both militarily and ideologically, has been the Soviet Union. But the 1980s saw an extraordinary reversal in American feelings toward what President Ronald Reagan at the beginning of his term of office had called “the evil empire.” By the end of the decade Mikhail Gorbachev’s perestroika policy had led to a new detente, brought an end to the cold war, and ushered in a new era of East-West cooperation. Since then, the Communist party has been ousted from power in all the countries of the former Soviet bloc, including the Soviet Union itself. By the end of 1991, the Union of Soviet Socialist Republics had ceased to exist, and Russia and its former allies have begun experimenting with a free-market economy. Capitalism has triumphed over communism, and the policy of Soviet containment first articulated by George Kennan has been an overwhelming success.

In 1947 an article entitled “The Sources of Soviet Conduct” by Mr. X (later identified as George Kennan) appeared in the U.S. journal Foreign Affairs. The United States, Kennan wrote:

must continue to regard the Soviet Union as a rival, not a partner, in the political arena. . . . Russia, as opposed to the western world in general, is still by far the weaker party. . . . Soviet power . . . bears within it the seeds of its own decay. . . . Soviet society may well contain deficiencies which will eventually weaken its own total potential. This would of itself warrant the United States entering with reasonable confidence upon a policy of firm containment.

History has corroborated the truth of these views, written more than forty-five years ago. America’s “Russian containment policy” has proven to be a successful strategy against the Soviet Union.

What if, in the above quote, “Japan” were substituted for the “Soviet Union,” and “in the economic arena” for “in the political arena”? This may not have been what James Fallows had in mind when he wrote his article “Containing Japan” for the Atlantic Monthly in 1989, but such a statement would perfectly encapsulate a Japanese containment policy. If America regards Japan as an economic adversary, and if, as some maintain, concepts of democracy, capitalism, and a free economy and society are different in Japan from what they are in the Western world, then “containing Japan” would be strongly persuasive as an effective policy measure.

Implicit in America’s view of itself is the belief that the United States has the strongest military power, the richest economy, and the most desirable ideological system in the world. The collapse of communism has provided stunning corroboration for the first and third of these premises. But is America in fact the world’s richest country? How can one account for the fact that at the same time communism was in retreat in Eastern Europe, vast sums of “Japan money” were buying up America and that one U.S. institution after another passed into Japanese hands, including—to the great indignation of the American people—such American icons as Rockefeller Center and Columbia Pictures, which the October 9, 1989, issue of Newsweek called “a piece of America’s soul”? Or to put the question another way, why does America, the most powerful country in the world, with the most abundant resources and the most stable and desirable political system, suffer from twin budget and current account deficits, and why has it become the world’s largest debtor nation?

Clearly, Japan must be “unfair.” That is the easiest line of reasoning for the American public to understand. And, in fact, when one starts to reexamine Japan from this premise, a number of illogical or unfair practices begin to emerge—protection, controls, bid rigging, corporate groupings, winning bids of a single yen, insider trading, and disregard for the consumer. Such practices fueled the criticisms of a new school of thinking about Japan—revisionism—which began to make its presence felt in the United States at the end of the 1980s.

The views of the revisionists can be summed up as follows: For a long time America has believed that Japan is a country which has the same values as itself. That, however, is only an illusion. As the Japanese themselves assert, Japan really is unique. The American concept of free trade does not hold true for the Japanese, and the various attempts to get Japan to change have been fundamentally mistaken. From now on America should shift policies and adopt radically different measures to deal with this very different country. The effect of these arguments has been to elevate Japan to the status of an ideological opponent of the United States.

The Hawks, the Apologists, and the Japanologists. The Newsweek article described the two schools of thought on “the Japan problem” as a debate between the hawks and “the Chrysanthemum Club” and identified the leading members on both sides. The trade hawks, pejoratively referred to as “Japan bashers,” advocate that the United States adopt a tougher stand on trade and economic issues. In addition to Fallows, they include Richard Gephardt, the Democratic whip in the House of Representatives; John Danforth, the Republican senator from Missouri; Clyde Prestowitz, a former trade negotiator with the Commerce Department and the author of the book Trading Places; Karel van Wolferen, a Dutch journalist who wrote The Enigma of Japanese Power; and Chalmers Johnson, a professor at the University of California at San Diego who wrote MITl and the Japanese Miracle.

What most of these men have in common is that they are hard-liners who know Japan well. Their criticisms are based on a thorough knowledge of Japanese history and Japanese institutions. Clyde Presto witz, for example, as an official in the Department of Commerce, had direct experience in dealing with the Japanese Ministry of International Trade and Industry (MITI). Karel van Wolferen and James Fallows have both lived in Japan. Their experience lends substance to their criticisms and gives their observations greater validity. Naturally, this has had a strong impact on the American people.

The traditionalists who espouse orthodox views on the importance of the U.S.–Japan strategic alliance and the value of a free-trade economy have been called “the Chrysanthemum Club” or labeled “apologists” for Japan because they defend the Japanese position. Former ambassador to Japan Mike Mansfield is a prime example. During his tenure as ambassador, Mansfield insisted that the United States and Japan have “the most important bilateral relationship in the world, bar none” and maintained that the chief problem between the two countries was the U.S. budget deficit. James Baker, Richard Cheney, Richard Darman, and Michael Boskin were members of the Bush administration who believe that little is to be gained by being overly critical of Japan. Others named in the Newsweek article as members of the Chrysanthemum Club include Ezra Vogel, author of Japan as Number One; Professor James Ableggen of Sophia University in Tokyo; lobbyist Stanton Anderson; and Elliot Richardson, attorney general during the Nixon administration.

These two groups, for good or ill, have the greatest influence on policy- and opinion-making in the United States today. But in addition to the hawks and the Chrysanthemum Club, there is in fact a third group in America who are fluent in Japanese, have a profound knowledge of Japanese history and culture, and are regarded as having a sympathetic understanding of Japan. Perhaps the best known of these scholars and researchers would be the late Edwin Reischauer, the former ambassador to Japan, who wrote:

Certainly much of what the revisionists have pointed out is true. But they take a short-term view of Japan. When they claim that Japan does not change, they are speaking about the period after the Second World War. If one looks at Toku-gawa Japan [1600-1868] or Meiji Japan [1868-1912] or Showa Japan [1926-1989], one can see that Japan has changed radically. I believe Japan is a country of enormous flexibility and resilience; as the times change, it will inevitably change as well and will be able to avoid even seemingly unavoidable frictions. In this respect the assertions of the revisionists are mistaken.

Although these comments, which I have translated from an article in Japanese by Professor Reischauer in the February 28, 1989, Asahi Shimbun, are certainly pro-Japanese, not all Japanologists should be thought of as members of the Chrysanthemum Club.

Japanologists are first and foremost scholars and not mainstream American policymakers. Until recently they have tended to be individuals with a personal interest in Japan, those who were born there perhaps or who lived there in their childhood. Because they do not represent ordinary American interests, they may lecture about Japan or show their understanding of matters Japanese or participate in seminars on Japanese subjects, but with a few notable exceptions—Reischauer himself being one of them—they are in no position to exert any influence on actual government policy-making.

Herein lies the major difference between Japanologists and the members of the Chrysanthemum Club. Whether or not the latter can speak Japanese or have any deep understanding of Japan, they are mainstream politicians or political advisers who can affect the U.S. government’s Japan policy. People like Michael Boskin and Richard Darman know almost nothing about Japan. But others like Mike Mansfield have a thorough knowledge of the country. What these people have in common is that they are part of the American political mainstream and understand its logic. The pro-Japan argument boils down to this: U.S.–Japan relations are based on mutual advantage, so disputes must be resolved in an objective and realistic fashion. Nothing productive can come of Japan-bashing. Bashing on the one side merely invites bashing on the other, and each country ends up hurting its own cause.

Under the Bush administration, the Chrysanthemum Club was in the ascendancy; the Clinton administration is more hawkish toward Japan. The current head of the Council of Economic Advisers, Laura Tyson, is widely considered to be a hawk. As mentioned earlier, many of the hawks are experts on Japan. Most of them have had “Japanese experience” and are the very people one might expect to be sympathetic to Japan because they understand the potential harm that will result if U.S.–Japan relations deteriorate any further. That makes their arguments all the more convincing to the American public, who feel that “if people who have lived in Japan say so, then Japan really must be different.” That they have become outspokenly critical is a tragedy for Japan.

The Conflict between Feelings and Logic. Members of the Chrysanthemum Club come to Japan’s defense out of a sense of rational self-interest. The hawks’ view of Japan, on the other hand, is both more emotional and more deeply grounded in experience because it is derived from what they have actually encountered first hand. This basis in fact, not theory, has helped to strengthen the persuasiveness of their arguments. Japan, too, has a number of America specialists who regularly air their views about the United States, but few of these self-styled experts have actually had the experience of living in the United States with their families for several years. The arguments of Japanese who have no firsthand knowledge of America inevitably seem abstract and superficial and carry as little conviction as the claims that some Japanese commentators with no particular expertise in engineering or technology have made about Japan’s status as a technological superpower. As Professor Fumio Shimura of North Carolina State University noted in the February 1992 issue of This Is Yomiuri, Japanese mass-produced computer chips may be the best in the world, but like nails in the construction of a building, they are not of much use by themselves.

In America today the quarrel between the hawks and the Chrysanthemum Club has evolved into a head-on collision between two groups in the political mainstream responsible for formulating U.S. policy. U.S.–Japan relations have gone far beyond the stage when those who knew something about Japan clashed with those who did not. This fact has extremely serious implications for understanding the true nature of Japan-U.S. frictions. As Japan has emerged as a major world economic power, Japan-U.S. relations have come to be included among America’s main policy concerns. For that very reason, a single misstep in policy on the part of either Japan or the United States could have dire consequences.

From a different perspective, the quarrel between the hawks and the Chrysanthemum Club might be regarded as a conflict between emotional and logical arguments. Against the more emotional hawks, the Chrysanthemum Club resorts to logic to make its point. Which, then, will prevail—feelings or logic? Reason teaches that logic should win, but emotional arguments have often carried the day, and sometimes in the long run the choices based on them have worked out for the best. What, for example, was the rationale behind the Japanese automobile industry thirty or forty years ago when it was still in its infancy? For a small country, with roads little better than farm tracks, an attempt to promote an auto industry flew in the face of reason. That was the logic of the economists of the time, not to mention the Ministry of International Trade and Industry (MITI). But the people making cars felt differently. No matter how farfetched their plans seemed to others, they had faith that they could make the Japanese automotive industry the best in the world. Today, it is clear their faith was justified.

Economic logic, in other words, does not always produce the right results. In relations between countries, especially, emotional arguments often get the better of reason. In the conflict between the hawks and the Chrysanthemum Club, it cannot be assumed that rational arguments will win. Ninety-nine percent of the American people have never been to Japan and know nothing about the realities of life there. Logic is based upon knowledge, and emotional arguments thrive on ignorance. As the hawks’ propaganda penetrates grassroots America and emotional arguments dictate public opinion, the logic of a free-market economy is being overwhelmed by the Japan-is-different argument.

Is Japan Really Different?

Containing Japan. Just as many Americans overreacted to what they perceived as America-bashing in the pirated English version of The Japan That Can Say “No” by Akio Morita and Shintaro Ishihara (see chapter 2), many Japanese have overreacted to James Fallows’s article “Containing Japan,” which they regard as Japan-bashing. This trans-Pacific exchange of bad feelings seems to have been provoked by the titles of these two works rather than by their actual contents.

In English the nuances of the word contain are not nearly as strong as they are for the Japanese word fūjikome, which was used in the translation of Fallows’s article. Fūjikome has strong overtones—it would be used, for example, in describing the sealing off of a nuclear reactor where an accident has occurred. As a translation for the English word contain, it is a bit too strong. The meaning of contain is essentially defensive; the overtones of the word fūjikome are a hundred-percent offensive and imply a preemptive strike.

In one sense, America has already tried “containing Japan.” To counter the flood of Japanese imports in areas like textiles, steel, consumer electronics, and automobiles, it launched a containment policy that forced Japan to accept export controls and voluntary restraints. To counter a soaring trade deficit, it embarked on a containment policy that put pressure on Japan to open its markets and increase domestic demand. The 1985 Plaza Accord was yet another attempt at a containment policy. To redress the trade imbalance, the finance ministers of the five major industrialized countries (the United States, Japan, West Germany, Great Britain, and France) agreed to a currency realignment at a meeting held in September 1985 at the Plaza Hotel in New York. Despite a drastic downward revaluation, from 240 yen to 120 yen to the dollar between 1985 and 1988, the U.S. balance of trade with Japan improved a mere 15 percent, and Japan continues to maintain a healthy surplus.

Theoretically, if the value of the dollar decreases by half, prices of American goods destined for Japanese markets should also be halved, generating brisk sales that should lead to an increase in U.S. exports and a reduction in the trade deficit. Prices for Japanese goods, on the other hand, should double, causing a slowdown in sales. The resulting decline in Japanese exports should bring about a decline in Japan’s trade surplus. That, at least, is what the laws of economics dictate. And, in fact, this occurred in Europe, where a lower dollar led to an American-European trade balance. It did not happen in Japan, however. Foreign goods in Japan remained as expensive as ever, and Japanese goods sold abroad did not double in price. The annual trade deficit with Japan remained—and still remains—around $50 billion. Why? The answer must be that Japan is “different,” that structural differences are at work there that do not respond to economic laws.

This is the background against which the revisionists emerged with their call for a reexamination of U.S. premises about Japan. This is what set the stage in 1989 for the most recent round of U.S.–Japan trade negotiations, the Structural Impediments Initiative talks, which were haunted by the threat that Congress would invoke the Super 301 provision of the 1988 Trade Act and impose economic sanctions on Japan and other countries that engage in “unfair” trading practices. In this dangerous atmosphere the use of the word fūjikome in the title of the translation of “Containing Japan” was irresponsible. It evoked associations with the ABCD encirclement and the international isolation of Japan on the eve of World War II; it also angered and alarmed the Japanese people and stirred up nationalistic sentiments. No one could have been more surprise...