IP: On the US-Japan Summit

[Dave Farber <farber () central cis upenn edu>]

Date: Tue, 16 Apr 1996 19:28:12 +0900
To: Dave Farber <farber () central cis upenn edu>
From: anderson () glocom ac jp (Stephen J. Anderson)
Subject: On the US-Japan Summit
Cc: fukuzawa () ucsd edu


Since you asked for my opinion from Tokyo, here's a report.  Very little is
being made this week of the differences between Japan and America, but we
might expect this spin of public relations.  Common interests of our
respective political leaders in getting reelected mean that this week's
summit will hardly mention many unsettled issues of economics or security.


The economic conflicts have dropped off the agenda.  Clinton is trying to
show his leadership during this election year, and critical to his
reelection are Japanese investors around Wall Street.   Observers of this
summit should think more about finance than trade in recent US-Japan relations.


On finance, Taggart Murphy's new book is on target; all US presidents will
require Japanese money to sustain the sale of US Treasury Bonds, and the
stable long-term interest rates that support US economic growth.  The
president's men (such as Robert Rubin and Larry Summers) engineered the fall
of the yen last summer (going from 85 yen to 108-109 yen to the dollar now)
in order to assure that Japanese investors would not leave Wall Street.
This is the lesson of1987's Black Monday, discovered first by Nicholas
Brady, and learned now by our current Democrats at Treasury.  Namely, one
cannot ignore requests of the Japanese insurance companies and banks lest
they stop buying US Treasury bonds.   This is now a cornerstone of our real
world interdependence and as critical to our survival as the Security
Council is at the United Nations.


On trade, too, expert opinion is actually very consistent.  The rules of the
game are very different in Japan, and so solid for long-term thinking, that
major Japanese companies and their international strategies will remain
critical for all American and other overseas' competitors.  This requires
respect for Japan, and demands that reports of economic woes be discounted.
I think  that "Japan passing," or the idea that Japan is falling behind, is
very, very wrong.  At worse, it is downright scary because American firms
will not be prepared for the strengths of Japanese science and technology.
Furthermore, Americans will be ignorant of the most advanced products and
key innovations when these develop in the Japanese home market.  If American
firms are not in Japan to compete on the home ground, then such firms won't
stand a chance when the leading Japanese businesses go after them in
Southeast Asia, or India, or Brazil, or any other emerging market.
Following that, what if!
  the Japanese firms decide again to move in electronics, computers, or
network hardware in the US market itself?   The road past Japan leads to
ignorance, and away from hidden threats to business.


On security, I agree with keeping the treaty alliance, but argue that
Americans need a rebalancing of security relations.  Closing one base in
Okinawa is a trivial change.  I think that the treaty can remain, but the
renegotiation of the agreements that follow should reduce US ground troops
and lessen American lives facing exposure in the region.  Right now, a magic
number of 100,000 US troops are in East Asia.  This number is not needed
(except perhaps for Pentagon and State Department negotiators to use as a
symbol), and it earns little credit for America in the emerging democracies
of this region.  In short, the peoples of these countries want the Yanks to
go home, but their governments keep negotiating for American mercenaries to
protect local stability.  My view is that I do not want America's young
people fighting another ground war in Asia, though I can understand how
America's security and economy might be hurt by a PRC invasion of Taiwan (a
world PC and IC industry !
 leader) or a North Korea attack on the South (another electronics leader).
I simply believe that the Navy, backed by Marines based in California at
Camp Pendleton or in Hawaii, can do the job of response to threats.  Just
like in Saudi Arabia, forward deployment of equipment and use of friendly
bases will make these jobs possible, and I think the Pentagon planners are
disingenuous with arguments to the contrary.  There is much conservatism
among such planners, both in the Pentagon wanting to keep its high subsidies
from the Japanese, and in the ruling Liberal Democrats (same party that took
over in 1955) wanting to avoid spending money and lives on defense.


But I doubt that any of this is going to be in the papers.  Instead, Bill
Clinton and Ryutaro Hashimoto will look like the best of buddies, each
getting ready for the next election.  Clinton's race is in November,
Hashimoto's poll is likely in January 1997.   Our economic futures are tied
together, and I pursued my career on a recognition of this unavoidable link.
Our security futures are also common, but I am afraid in ways that are not
as stable as they should be.  At any rate, none of these stories will make
it to the papers, and I trust that this report from Japan will stimulate a
few of my Net colleagues.


Regards from Tokyo,


Stephen J. Anderson
(speaking only as an independent academic)


Associate Professor 
International University of Japan