JPRS ID: 9933 JAPAN REPORT

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CIA-RDP82-00850R000400040045-4
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APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 FOR OFFI('IA1, IISF. ONI,Y JPRS L/9933 25 August 1981 Ja an Re ort p p cFOUO 5ois > > Fg~$ FOREIGN BROADCAST INFORMATION SERVICE FOR OFFICIAL USE ONLY APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 NOTE JPRS publications contain information primarily from foreign newspapers, periodicals and books, but also from news agency transmissions and broadcasts. Materials from foreign-language sources are translated; those from English-language sources = are transcribed or reprinted, with the original phrasing and other characteristics retained. Headlines, editorial reports, and material enclosed in brackets are supplied by JPRS. Processing indicators such as [Text] or [Excerpt] in the first line of each item, or following the last line of a brief, indicate how the original information was � processed. Where no processing indicator is given, the infor- mation was summarized or extracted. Unfamiliar names rendered phonetically or transliterated are enclosed in parentheses. Words or names preceded by a ques- tion mark and enclosed in parentheses were not clear in the original but have been supplied as appropriate in context. Other unattributed parenthetical notes within the body of an . item originate with the source. Times within items are as given by source. The contents of this publication in no way represent the poli- cies, views or at.titudes of the U.S. Government. COPYRIGHT LAWS AND REGULATIONS GOVERNING OWNERSHIP OF MATERIALS REPRODUCED HEREIN REQUIRE THAT DISSEMINATION OF THIS PUBLICATION BE RESTRICTED FOR OFFICIAL USE ONLY. APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00854R000440040045-4 FOR OFF[CIAL USE ONLY .7rR;; i~/9~3:3 25 August 1981 JAPAN REPORT (FOUO 50/81) CONTENTS ECONOMIC FY-80 Business Performance of Major Industries Analyzed (NIHON KEIZAI SHIl~UN, 14, 15, 16 Jul 81) 1 SCIENCE AND TECHNOI~OGY FY ~1 Projected Sales of Computer Industr~,~ ' (NIKKAN KOGYO SHIl~IDIJN, 16 May 81) 11 MITI Guidelines, Industry Biotechnological Activities Zisted (Vaxious sources, various dates) 13 Government Policy . Toyobo Co Ztd Takeda Chemical Industries Asahi Chemical Industry ~ Toyota-Ford Tie-Up Talks Unfruitful (TOYO KEIZAI, 18 Jul 81) 17 Business in Seamless Steel Pipe for Drilling Booming (TOYO KEIZAI, 18 Jul 81) 20 Government-Industry 1}iscord Seen in Japan-Saudi Project (TOYO KEIZAI, 18 Jul 81) 23 - a - [III - ASIA - 111 FOUO] ' FOR OFFICIAL USE ONLY APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2407/42/09: CIA-RDP82-40850R000400440045-4 FOR OFFICIAL USF. ONLY ECONOMIC FY-80 BUSINESS PERFORMANCE OF MAJOR INDUSTRIES ANALYZED Tokyo NIHON KEIZAI SHIMBUN in Japanese 14, 15, 16 Jul 81 [14 Jul 81 p 15] [TextJ Expansion of Direct Financing for Plant and Equipment Investment; Marked - Advance in Efficient Management; Internal Reserves Increase to 1.5 Times the Amount of the Previous Year; Switch to Active Posture of Expanding Personnel If we analyze the FY-80 financial reports of companies listed on the Tokyo Stock Exchange, it is clear that Japanese companies are greatly expanding their plant and equipment investment and they have taken a new direction in using their own funds for this investment. 'They are not reverting to operations based on outside borrowing. Their operations are characterized by balance, and the overall self- financing rate is increased by obtaining a high level of profit and conducting vigorous direct financing by means such as capital increases. Based on the con- fidence attained in successfully weathering the sgcond oil shock, they have increased personnel for the f irst time in 6 ycars. A switch from "defensive" to - "offensive" management can be seen in the attempt to come out ahead in interna- tional competition. The plant and equipment investment of 1,550 listed companies (excluding financial ~ instl.tutions and insurance and securities companies) in FY-80 was 9,001,600,000,000 yen, a 26-percent increase over 1979 and the largest growth since the first oil shock. In addition to increased investment for energy and labor conservation in order to rationalize industry, there has been an increase in forward-looking plant and equipment investment connected with a surge of technological innovation. The overall number of employee~ in industry has continued to decrease through reduced operations from a peak of 4.33 million in 1974 to a low of 3.87 million in 1979. In 1980, the number increased for the first time in 6 years to 3.907 million persons. Industrial operations are actively being expanded. The recovery of manufacturing industries is startling. Plant and equipment invest- - ment began to grow in 1979, and the rate of increase has expanded from 20 percent in 1979 to 25 percent, going f rom 4.3 trillion yen in ].979 to a new peak of 4.5 trillion yen. Another important development in the manufacturing industries was the increase in the number of personnel for the first time in 7 years. Also, these industries, which had been concentrating on repayment of long-term loans since 1977, have begun to borrow more. . 1 FOR OFFICIAL USE ONLY APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 FOR OFFIC'IAI. USE ONLY Long-term borrowing for all industries r~ached a low point in FY-78 and then began to grow. By FY-80, it had incre~sed 8.9 percent. This is because industries with surplus f unds moved from a phase of rushing to repay loans to a more efficient use of funds, and depressed industries increased their borrowing. This renewed increase in personnel, plant, and �unds came about because these companies were able to come through two oil shocks successfully and reach the highest profit levels in history. The recurring profit rate of total liabilities and net worth for all industry grew to 4.7 percent, more than *_he previous peak ~f 4.6 percent (in FY-73) along with improvements in the rate of profit and asset efficiency. Although the unpaid balance of borrowing has risen, financial conditions continue to improve. The :.iversification of financial procurement accompanying the inter- nationalization of Japanese industry and the issue of stock at current prices for capital increase brought tha amount obtained through direct financing to 1.71 trillion yen, 1.6 times the amount of the previous year. Internal reserves have grown 1.5 times. The amount of self-financing for all industry rose to 9.59 trillion yen, far exceeding plant and equipment investment. The rate of self- financing grew from 102.1 percen~ (in 1979) to 106.5 percent. The net worth ratio for all industry rose from 18.4 percent in 1979 to 19.6 percent, and in manufac- turing industries, from 23.1 percent to 24.6 percent. The electrical industry is one of the representative industries experiencing this favorable cycle. Active plant and equipment investment is continuing mainly in electronics areas such as semiconductors and VTR. Executive Managing Director Miyauchi of Hitachi Ltd says the company has adopted a policy of "investing with- out reserve in growth areas, making a plant and equipment investment of 75.9 billion yen. Internal reserves plus depreciation and profit for FY-80 easily exceeded this at 100 billion yen. Looking at th~ entire electrical industry, we see that total plant and equipment and investments and loans rose 32 percent, to - 1.08 trillion yen, breaking the 1-trillion-yen barrier. Funds raised through capital increases and higher income increased by 2.2 times and the amount of self- financing rose to 1.4 trillion yen. - The automobile industry rapidly increased its plant and equipment investment in order to meet the challenge of GM's "world car" and reached a financial turning point. It utilized high profits and liquid assets and increased the emphasis on direct f inancing to get through the crisis. The Nissan Motor Company liquidated approximately 100 billion yen worth of short-term securities and CD's (certificates of deposit) and avoided borrowin~ in raising money for a 150-billion-yen investment. All automobile companies have expanded direct financing in Japan and abroad this year by increasing capital and issuing convertible debentures. They are attempting to strengthen their international competitiveness by balanced and vigorous manage- ment, not by rushing to rely on borrowing. - On the other hand, the materials industries which are weaker in international com- petitiveness such as chemicals and paper pulp have again been forced to increase borrowing. They have begun to take the same path as they did during the recession following the first oil shock, when income fell and inventory rose due to poor sales. 2 , , APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 FOR OF'FICI~?L [,'SE ONLY - The competitiveness of the chemical industry has suffered due to the rising price of naphtha. The obsolescence of petrochemical plants has almost reached the limit. "We have no other choice." (Mitsubishi Chemical Industries) These industries cannot move resolutely in investment and fund procurement because of their slow recovery in performance. Therefore, they are being left out in the current trend of balancing and expanding operations. _ _ _ ~ 1) ~3~~0~#~'~'#~ ( 2 ) ea~~tra~ ( 3 )~~~ex ( 4 ) c~> (6)c�hR;, (7~ (9)=t~c(~k~r~~r~ ~~~55~.~ G~~r~G~~S~r~lr~r~~~~~}~~ ~i d'~ ( 86) 143.� t48.6 ~ 218.335 2t5.51d 1.23 �1.25 23.06 24.73 (i9) ~it 4~ ( B1; t04.5 183.2 176.937 itt.604 1.76 1.87 41.62 46.65 ~i4)~!C .'e ~ 32) t~C.3 94.~ 178.31t ~5C.775 1.Y0 i.�3 57.88 53.82 (~o)~! ii27' 115.8 I~d.B 488.595 456.459 1.05 1.92 47.71 d6.31 .~c ( 34~ t?~.C ;86.? 90.2d5 7~.d49 2.~~ ~.81 ?8.7q ~?.22 (~J) ~ t 13i ~~4.6 i22.3 ~~4.367 t~6�B37 J.d2 ~~.91 16.98 ' 4~.90 (~3~ y~( 52) 108.6 132.2 2St,681 150.383 2.2~ 2.a2 at.73 ~2.61 f~u` i~ 9q c 60) '.65.6 t56.9 593.817 584.t53 i.79 1.i0 48.95 50.63 UsJ 81? 125.1 t35.7 tA9.08? ~58,802 t.o7 1.55 48.31 47.06 - ~ 61! ii59) 181.8 156.5 257.29Q 116.~47 2.51 2.11 5i.'S~ � 5d.34, ~ai1 t~ c155) 162.2 '72.5 829.71d 569.094 1.11 1.84 20.06 21.7b- (~y,~~ ':0) 75.2 ItS.i 136.dC0 71.580 i.95 , d.31 12.20 45.id !,tr, ~ 3h ~t ( 52) tt7.? 135.1 737.t14 505~852 i.Ct 1.17 + 18.20 ~ 20:0't (3e~ ~it i ~2) 216.5 145.4 101.541 ;3.210 2.29 2.40 23�95 29.38 (3~)'~ 8 ftC1071) 139.8 14T.7 4.499.813 3.585.2T2 1.64 1.77 38.83 38.05 (~zlSi ~ i127) ?63.4 157.0 17d~457 113.�67 2.:5 2.52 25.15 25.85 i~ ~6 2G) 8~.7 BC.d 63~563 55,640 5.1d S.E~t3 61.51 62.~J8 /j,~~.t~i ~ i10T, 244.5 313.1 115,518 �4,G65 0.60 0.65 C5.23 4d.04 ($51�oa�, Y~ 21i 56.5 54.4 Z7b.871 294~915 3.51 3.96 65.60 65.26 ~ i 27) ~8.2 i11.3 205,506 t37.O5t 2.14 2.55 53.09 Sd.45 �y, j7. ( 9; St.S 25.5 2~177~011 2.i92,��28 0.82 ~~.81 69.2? 71.56 ~~j~#~~SRt C479) 73.5 59.4'4.501,775 3.819.228 0.9T 1.04 48.53 4B.M 3~ atC1550) 106.5 102.1 9.001.588 7.404.500 1.2T 1.38 42.42 43.03 (y~~ ~ -v'$i~9tt:~4e�!Z^~II[9l'!~$ffirt~llf~'9Q ~ 'M~F~~:~ � 'fA~+~AfJ~7i~~~~'7fC3fiE !Qt'_^~1~>~~G~o pc~A[9'~:~. %1y~Ri`. 'J~tf~'6 ' ~A)+ t j7F-~~~C~~~B1:~ff,-'y3~E~7~:"~~~~ ?lt~:~~791. ?t~89~, ~eP~~ I ~~~d~s!! l, , !~J~~43~~?li,~. (~l'~l~~t#+ $~t~f~:~ ~r'r7G~.~c~~o d~k~iiSt~~(4~~}!~~~Vt~ : !l~4t~Xfi: + ~~tlt � ~'E~oBt+$~3t~W;~1 c~=~~~~dcf~fx~t~~~0~atto ~7c~ib ; ~I~ ~ i~~~f~'3i) . 1. Management Targets of Major 16. FY-79 - Industries 17. Food 2. Self-Financing Rate 18. Textiles 3. Plant and Equipment Investment 19. Paper, Pulp 4. Available Liquidity Rate 20. Chemicals 5. Borrowing Dependence Rate 21. Pharmaceuticals 6. 10,000 yen 22. Petroleum 7. Monthly 23. Glass, Earth, Stone [Building 8. Number of Companies Materials] 9. FY-80 24. Steel 10. FY-79 25. Nonferrous Metals - 11. FY-80 26. ,tachinery 12. FY-79 27. Electrical Equipment 13. FY-80 28. Shipbuilding ' 14. FY-79 29. Automobiles 15. FY-80 30. Precision Instruments [Key continued on following page] 3 FOR OFFICI.~L USE ONLY APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 FOR OFFIC[AL USE ONLY 31. Manufacturing Industries Total 36. Marine Transport 32. Construction 37. Electrical Power 33. Real Estate 38. Non-manufacturing Industries 34 ~ Co~nerce Total 35. Electric Railroads 39. Total of All Industries 40. Note: The self-financing rate is the amount of self-financing divided by the amount of plant and equipment investment. The self-financing amount is the sum c~f capital increase, depreciation, internal reserves, and increase in special reserves. The amount of plant and equipment investment is the sum of the increase or decrease in tangible fixed assets. The liquidity rate is determined by the formula: (cash and deposits + securities included in liquid assets) + monthly sales and operating income ~ The rate of dependence on borrowings is determfned by the formula: (liabilities with interest + endor~ed and transferr~ed notes receivable) + (total of liabilities and capital + discount on notes receivable and endorsed and transferred notes receivable) [15 Ju1 81 p 13] ' [Text] U.S.-Japan Earning Power Gap Narrowing; Japan Moves Ahead in Electrical Equipment, Etc; Investment for Rationalization and Increased Production Takes Effect The gap between the United States and Japan in both earning power (cash flow) and financial position (stock) has rapidly begun to shrink. The deterioration of industrial resilience due to high inflation has caused a drop in the earning power of American industry. In contrast, the competitiveness of Japanese industry, which cut back operations and concentrated on plant and equipment investment for rationalization, has increased markedly. In steel, automobiles, a~nd electrical equipment, Japanese industry has already moved ahead of the United States. U.S. industry has begun expanding plant and equipment investment to regain its lead, but for the time being, this effort is leading to deterioration of its financial - position. Following the first oil shock, the gap in earning power between U.S. and Japanese industry actually widened. In 1975, the recurring profit rate on applied total liabilities and net worth in the United States was 13.2 percent. In Japan it was only one-third that figure, 4.3 percent. Subsequently, however, the earning power of Japanese industry slowly began to recover and the same recurring profit rate in FY-80, following the second oil shock, was 6.7 percent, close to the previous peak of 6.8 percent (1973). The rate for American industry dropped to 13.0 per- cent from the 14.8 percent of the previous year, so the pattern was opposite that following the first oil shock. 4 , APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2047/02/09: CIA-RDP82-00850R000404040045-4 FOR OFFIC'IAL USE ONLY The shift in earning power was particularly dramatic in the auto industry. Until 1978 the U.S. auto industry overwhelmed the Japanese in earning power. However, in 1979, the recurring profit rate on applied total liabilities and net worth for Japan was 8.5 percent, which was in line with the U.S. rate. As the price of oil shot up, the fuel efficiency of Japanese cars became attractive. In 1980, the U.S. auto industry went into the red, and the superiority of the Japanese industry was clearly established. The rapidly advancing electrical industry also moved ahead of the U.S. industry in earning power in 1979 and 1980. In machinery and chemicals, U.S. industry has boasted high earning power, but due to developments in mechatronics technology and other fields, the gap is narrowing. In materials industries such as fibers, paper and pulp, and chemicals, there is no change in the overwhelming superiority of the United States. But even in materials, Japan moved ahead in 1979 to show its strength in international cr,mpeti- tiveness. What is behind this narrowing of the gap? Before the first cil shock, Japanese industry, especially the materials industries, invested heavily in plant and equipment. This resulted in increased ~epreciatiox~ and interest burden and slowed down earnings. However, as this burden lightened, plant and equipment investment for rationalization and increased production moved ahead, especially in manufac- turing industries such as the automobile industry, and this caused a steady improve- ment in earning power. In U.S. indust_ry, on the other hand, management emphasized quick profits and mad~ little plant and equipr~ent investment in the late 19b0's and early 1970's. In the late 1970's, obsolescence hit U.S. plant and equipment, causing a drop in labor and equipment efficiency and a weakening in international competitiveness. In order to overcome this, U.S. industry has recently begun giving more attention to plant and equipment investment. Beginning in 1977, U.S. investment in plant and equipment has increased and companies such as GM ha~re launched large-scale investment programs to regain lost ground. However, because of the drop in U.S. earning power, dependence on borrowing has increased. As a result, the owned capital rate, an indicator of financial position, has been dropping since 1976. In 1979 it was 45.4 percent. This is still far ahead of the rate in Japanese industry (19.6 percPnt) but the gap is narrowing. Of course, there is no telling whether the gap between Japan and the United States will continue to shrink in the years to come. Some see the present situation as resulting from the plant and equipment investment cycle. As U.S. investment increases and begins to take effect, the gap may widen again, putting the U.S. in a more favorable position. In view of this situation, the Japanese auta indus- try is clearly carrying out a policy of vigorous investment to compete w~th GM. It will be very important for Japanese industry to conduct vigorous, buld, and effective investment in research and development as well as plant and equipment in order to move ahead of the United States. ~ - FOR OFF[CIAL I1SE ONLY APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-04850R000400040045-4 FOR OFF[C[AL USE ONLY Note: The data used in the analysis below was obtained from 1,550 companies in NEEDS (the Nippon Keizai Shimbunsha Comprehensive Data System) and 400 companies in th~ Standard and Poors Index. The data by industry for the United States wea taken from 1,516 cowpanies listed in Standard and Poors. (1) ~~o~~~~t~1550#fo~~4~tf~~f 55~1~~% - ~;.~t~ (3) t12) :2:~ f ~2~ ~~if~i38.8 (l~) ~~`54'~~~ �;s:~qi,4 I R~ p ,~.9 - 01.5~0 '81.3�0 I (1 )`to 2 ~ .+~x~~~.~ ' S) ~-;,~..=i~~~s.o ' xe.~ ' ~ ~l~Y~i~ ~C%1~~.Y ~6~ 26.3` i5.4 ~s.:�~i~~ a~'sf#?~~i~0.d8 :..,.,d. 38.1 I~ . _~T~Y~.9 ~ (9 ~t~f~~~11.2 18.1, rk~!'~r3.3 - I (IQ)wili[~Y0.03 ;~;~~~89.5 ~24~r3~~t~~ 0.8 25)~# OO~to~S~f~~f~~E 55~~~x ~27~ ~!.~ffit .3 (Z�,~ ~~i~~~n.o (34) ~~,a~~ ^,.D�i A'# +~~t3 4.3 ~ 40.3��, 54.6~, 12�~ 28 ~~~k~.1.c k~Q~ y ~~te~~t 2 ~~'E1.3 s,K. '6 17.1 (3~~ 21.9~y~ ;c~+e10. ~t;a~~t:~ 43 1t~~a.e 18.8 i ~44,~+~~~~ _ 59.1 45,~ ~ 35~5 ( 3 i.3 ;n~3.6 � 6~~t1~5.1~ 1. Balance Sheet for 1,550 Listed 13. Purchasing Debt 22.0 ' Companies (end of FY-80) 14. Short-term Borrowing 12.9 2. Current Assets 61.5 percent 15. Miscellaneous 19.2 3. Deposits 38.8 16. Debentures 6.1 4. Inventory 17.8 17. Fixed Liabilities 26.3 S. Other Current Assets 5.0 18. Long-term Borrowing 15.9 6. Fixed Assets 38.4 19. Miscellaneous 4.3 7. Tangible Fixed Assets 26.8 20. Total Capital 18.1 8. Intangible Fixed Assets 0.4 21. Capital 5.9 9. Investments, etc 11.2 22. Capital Reserves 3.3 10. Deferred Assets 0.03 23. Other Surplus 9.5 11. Liabilities 81.3 percent 24. Special Reserves 0.8 12. Current Liabilities 54.1 [Key cor_*_inued on following page] 6 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 FOR OFFICIAI, USE ONLY .25. Balance Sheet for Standard and 35. Current Liabilities 26.6 Poors Major 400 U.S. Companies 36. Pt~rchasing Debt 10.3 (end of FY-80) 37. Short-term Borrowing 4.3 26, Assets 40.3 percent 38. Miscellaneous 12.0 27. Deposits 22.0 39. Fixed Liabilities 27.9 28. Inventory 17.0 40. Long-term Barrowing 17.4 29. Miscellaneous 1.3 41. Miscellaneous 10.5 30. Fixed Assets 59.7 42. Capital 45.4 31. Tangible Fixed Assets 48.8 43. Capital 4.8 32. Investment 7.3 44. Other Surplus 35.5 - 33. Miscellaneous 3.6 45. Capital Reserves ~.1 34. Liabilities 54.6 percent Comparison of U.S.-Japan Earning Power in Ma~or Industries (Recurring Profit Rate on ~.pplied Total I:iabilities and Net Worth, expressed as a percentage) FY-72 FY-74 FY-76 FY-78 FY-80 Automobiles Japan 7.7 3.3 8.1 6.9 8.1 U.S. 16.7 6.0 15.2 14.5 5.6 Electrical Japan 8.9 7.0 7.2 7.1 9.2 Equipment U.S. 7.1 6.7 8.1 8.1 7.6 ' Machinery Japan 5.7 7.4 5.0 4.2 7.3 U.S. 12.6 14.4 14.7 16.5 15.1 Steel Japan 6.6 8.5 5.2 6.2 8.4 U.S. 5.7 15.4 5.9 7.2 5.9 Chemicals Japan 5.7 9.0 5.2 5.0 6.5 � U.S. 10.2 15.8 13.6 12.0 10.4 (16 Jul 81 p 15] [Text] Changing Structure of Plant and Equipment Investment; Shift to Manufac- ' turing Leadership; Support for Higher Added Value The structure of plant and equipment investment by Japanese industry has changed a great deal. Materials industries such as steel and chemicals which played a major role in the late 1960's and early 1970's are receding, and manufacturing industries such as electrical equipment and automobiles are rapidly increasing their plant and equipment investment. This change supports the move toward 7 FOR OFFICIAL USE ONLY APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 FOR OFFICIAL USE ONLY higher added value in Japanese industry occasioned by the two oil shocks. The industrial structure seems to be changing in a way appropriate to a national economy ba~ed on a hig~ degree of processing and trade. In the high growth period of the 1960's and early 1970's, the raw materials indus- tries were highly motivated to invest. The plant and equipment investment of all industry in 1976 was 5,143,700,000,000 yen. Of that, 3,045,800,000,000 was inve~zted by production industries. Amcng the production industries, an over- whelming 60 percent of investment was made by major materials industries (six major industries: steel, chemicals, fiber, paper and pulp, petroleum and non- ferrous metals) and 29 percent by manufacturing industries (six major industries: electrical equipment, automobiles, machinery, precision equipment, shipbuilding, and pharmaceuticals). The materials industries were the leaders in plant and equipment investment. This structure began to change markedly in the late 1970's. Under the influence of the rapid planned increase in electric~.l power investment, there was a drop in the relative weight of plant and equipment investment in the production indus- tries. But even within the production industries, the investment motivation of the materials industries hss fallen off rapidly in comparison to that of the manu- facturing industries. In 1978 the share of the six ma~or materials industries in total production industry investment fell belora 50 percent, to 48 percent. In 1979, when the economy began to recover, the plant and equipment investment of the materials industries rose for a short time to 45 percent, but in 1980, affected by the second oil shock, the six ma~or materials industries' investment was 1.71 trillion yen, compared to 4.5 trillion yen for all production industries, a drop to 38 percent. ` In their place, the manufacturing indusltries began to invest actively. In 1971 the six ma~or manufacturing industries accounted for only 29 percent of the total production industry investment. However, in the late 1970's there was steady growth. In 1978, their sYiare grew to 44 percent, exceeding th~a 42 percent of the six major materials industries. This trerid speeded up in 1980, rising to 48 per- cent. The structure of Japanese industry had :.learly shifted in favor of the processing and manufacturing industries. The second oil shock speeded up the structural change in plant and equipment investment. While the materials industries were trying to survive through opera- tional cutbacks as raw material costs rose, the manufacturing industriea undertook a policy of vigorous expansion under conditions of greater international competi- tiveness. This difference appears clearly in the plant and equipment investment of the two industrial sectors. A wave of technological innovations in fields such as electronics and mechatronics is surging through the electrical equipment and machinery industries. They are doing some streamlining, but at the same time they are actively investing in plant and equipment. New products are appearing, such as VTR and numerically controlled machine tools, and this leads to a more favorable environment with greater earning power and further growth in plant and equipment investment. 8 , APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000400040045-4 FOR OFFtC1AL USE ONLY For example, the recurring profit rate on applied total liabilities and net worth . of the electrical equipment industry in 1980 was 9.2 percent, close to the peak figure of 9.5 percent (1973). The machinery industry is also up to its previ.ous maximum standard. The recurring profit rate on applied total lia~ilities and neC worth for automobiles and pharmaceuticals exceeded the peak figure of the late 1960`s and early 1970�s. _ On the other hand, the materials industries have all been slow in responding to the oiI shock. Excluding steel, which has tightened up on production and is making pro~ress in coping with market changes, industries such as chemicals, paper and pulp, and fibers suffered from poor domestic demand caused by the deflationary effect of the oil shock and their inc~me fell. Naturally, they have no motivation for investment. These materials industries have excess equipment and their international competi- tiveness is weak because of the current raw materials situation. There are thasE who believe that a recession will continue in the medium ~~ange in the chemical and paper and pulp industries. All companies streamlined their operations after the first oil shock, but they are now at the stage of streamlining operations on an industrywide basis by making structural improvements. ` While Japanese industry has problems in such areas as paper and pulp and,c:zemicals, overall it is moving toward more efficient management and greater international competitiveness. Plant and equipment investment is becoming more active and a financial structure is being built which is suited to a national economy based on trade in processed goods c,rith high added value. 1. Comparison of Plant and Equipment Investment in the Production Industries 2. Steel 3. Chemicals ~1~~~~~~~~ 4. Automobiles i~~ -2 ~ y~ 5. Electrical Equipment yo ~ ~ ~q;4 6. Miscellaneous 3E s.~a 7. E'Y-71 60 '~S ~ 9tAi t~�~ lh 8. ~-80 d~ ~5 z 9. Fibers f: (1a Z~ ~ ~ ~ 10. ~1on�errous Metals = U ~ - ~6 ;o~~e s.~~ 11. Petroleum ~ ( , 12. Paper and Pulp 13. Shipbuilding 14. ~Iachinery 15. Pharmaceuticals 16. 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(81) 5.30 6.14' 17.26 15.69 1._5 1.22 ~a; g~ +1lt?.. c159~ 7.53 b.56 28.~0 25.74 0.91 0.93 .~1i55) 1.14 7.30 33.21 32.00 5.28 1.23 ~ ,~E} ; ~~0) 3.C6 0.46 9.23 t0.G5 0.55 0.53 a,r ~~Ut :52) 4.28 d.69 38. d5 37.25 1.90 '.81 ~~s~ ~}~g~~ ~b2` 9.30 9.6i 41.07 34. t9 22 1. 22 ~~gt}