HOW JAPAN DOES IT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88B00443R001003870076-3
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 4
• Document Creation Date: December 20, 2016
• Document Release Date: March 7, 2007
• Sequence Number: 76
• Publication Date: March 30, 1981
• Content Type: OPEN SOURCE

onoy & Business
COVER STORY-
The work 's toughest comp et for stirs a U.S. trade storm
54 TI.MME. MARCH 30. I981
km
Budget Director Davtd Stoc an, a
argued with aprotectionist-minded group Katsuji Kawamata, chairman of Nissan plants operating. In addition, Detroit is
? u e a uaicu afV UICCUUI3 Yiaucugaaa- .i..a...,?.... ,,, ????~??r??? ~??_--- -
er trying to call time out in themid- Drew. Lewis over whether to press Japan ; they might accept some compromise in
- die of a round, Americ'.s automak to: restrain imports "voluntarily."' Attor- order to head off even tougher U.S.. ac-
ers have-been pleading formonths: :ney General William French Smith added tion. Said he "We cannot continue to act.
for relief from-the pummeling they have -to the confusion last week by releasing a as if we couldn't care less what is hap-
been taking from Japan. While sales of - - memo arguing that any such deal would peeing over there."
American made carshave been slumpif& - violate U.S. antitrust rules..The Cabinet What is happening, of course, is the
Japanese-made Datsuns and-. -'T'oyotas, - Iast'Thursday discussed a report that pre- rapid deterioration of a major American
Mazdas and Hondas have been streaming seated options ranging from legal limits- industry. Detroit's automakers last year
through U.S. ports at the rate. of some on Japanese auto imports to no action at lost more than $4 billion, and during the -
6,000 vehicles a day. The import flood has all, but it reached no decision. - past three years, U.S. annual auto produc-
given Japan 2390 of the entire U.S. car . . Meanwhile in Japan, the Suzuki gov- tion has slumped by 30%, to 6 million ve-
market. General Motors Chairman Rog- - - ernment tried to pressure its auto com- hicles. Today almost 200,000 American
er Smith last week urged a "short-term panies to restrain exports. Fcreign Min- autoworkers are unemployed, and many
voluntary" --cutback in - imports and ister Masayoshi Ito. said that he was of them have little hope of ever returning
warned that the alternative was a trade "determined" to keep the issue from de- to work in their industry. To them and to
war with Japan. In Washington and To- veloping into a more serious political one. most U.S. auto executives, the problem is
kyo the Reagan Administration and the The Japanese fear that the auto confron- Japanese imports. Since 1975, annual
government of Prime Minister Zenko Su- tation will upset Prime Minister Suzuki's sales of Japanese cars in the U.S.. have
zuki worked determinedly to settle the visit to Washington in early May. As an jumped from 800,000 to 1.9 million.
most festering trade issue the two coun- advance man for that visit and a concil- The trade issue has taken on such im-
tries have faced since World War U. - iator on the auto problem, former Prime portance because of the auto industry's
During the 1980 presidential cam- Minister Takeo Fukuda traveled to Wash- key role in the economy. One out of five
paign,'Reagan assured autoworkers that ington last week and met with President American workers is employed either di-
he would give relief from the onslaught. Reagan. rectly or indirectly in making, servicing
But the Administration is now deeply split The Japanese car companies so far or selling cars; and industries like steel,
over the question. Free traders, including have been resisting all government pres- glass and rubber are heavily dependent
h ve sure to hold down exports to the U.S. But upon automobile sales to keep their own
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 75w they conduct business.- The nation
as an insatiable hunger for foreign tech-
nical and scientific manuals. Universities
and corporations stockpile them and re-
fer to them assiduously, and businessmen
and engineers eagerly use their best ideas.
CONSENSUS. For all their cross-cultural
borrowing, the Japanese have remained
astonishingly unchanged. One of the most
important of-their native characteristics
is a willingness to achieve consensus by
compromising. Asian Scholar Edwin Lee
of Hamilton College suggests that a clue
to this might be found in the Japanese
word ie, a concept that can be inter-
changeably applied, to everything from
self to home to family. A person is an ex-
tension of his immediate family members,
his company, his community and his na-
tion as a whole. All are bound together
in an encompassing common purpose.
Japan feels itself to be a "family" because in a real sense nearly everyone has
at least some voice in running society. No
matter what the group-from the smallest
upstart enterprise to the largest multibil-
lion-dollar multinational--nothing: gets.
done until the people involved agree. The
Japanese call this nemawashi (root bind-
1 ing). Just as a gardener carefully wraps all
the roots of a tree together before..he at-
tempts to transplant it; Japanese leaders.
bring all members-of society together.be-. fore an important decision is made:
The result is an: often tedious;::and
sometimes interminable, process of cortt-
promise in the pursuit?of consensus. But -
in the end the_group-as.a whole-benefits--
because all members 'are- aligned .behind
FUTURISM. Japanese society is for-
ward looking in a manner that is
stand. Individuals are seen to
Lion of the group-as a whole;
corporations are -noL.after
the quick payoff or-big..-
quarterly jumps, in
shareholder divi
dends, but a solid
market position
that will be re-
warded over the
Businesses and government look five, ten,
even 20 years ahead and try to build a
prosperity that can last. Says Eishiro Sai-
to, president of Nippon Steel: "Executives
in Japan must constantly do their utmost
to provide employees and their families
with a stable life and hope for the future."
One reason that the companies are
not under constant pressure for fast prof-
its is that much of Japanese industry is
owned by banks and not by individual
shareholders. Major holdings of many of
the country's biggest and best-known
companies, such as Toshiba, Fujitsu and
Nippon Steel, rest with banks that are less
interested in short-range dividend in-
creases than in seeing their firms' profits
TIME. MARCH 30.1981
2007/03/07:. CIA'RDP88B00443f 3003870076-3
i iives-ted to ensure future growth.
This long-haul mentality is reflected
in Japan's dedication to savings. Noth-
ing has given more momentum to the Jap-'
anese economic juggernaut than the pro-
pensity of its citizens, no matter how
wealthy or modest their means, to save
their money. Their deposits have given
the nation's industry the capital it has
needed to keep Japanese plants modern
and productive. Says James Abegglen of
the Boston Consulting Group, which has
conducted numerous studies on Japanese
business: "The thing that has enabled Ja-
pan. to get to the top and stay there is sav-
ings. Savings of all kinds-government,
corporate, personal." During 1980, Jap-
anese workers saved an estimated 20%
of their individual and family incomes,
more than three times as much as the
Americans.-
. QUALITY. Two decades
pan-were synonymous with shoddy work-
manship, and Japanese products were
marketed mainly in 50 and 10o stores.
Yet today firms like Sony and Datsun sell
their products principally on the basis of
high standards. Says Masao Kanamori,
president of Mitsubishi Heavy Industries:
"The existence of our company would be
impossible if we failed to reassess our per-
formance in quality, production and cost."
This change is a result of the country's
preoccupation with quality control, a
management concept that until quite re-
cently had been insufficiently considered
in the U.S. Yet it was American academ-
ics who helped the Japanese improve their
products and change their image. One
proposcodevice was quality-control cir-
cles, where workers and their supervisors
discuss ways to improve output and stan-
dards on the job. Statistician W. Edwards
Deming gave a proselytizing speech in To-
kyo in 1950 on the virtues of quality con-
trol as a manufacturing technique. Since
that time, Deming has been elevated in
Japan to the status of industrial folk hero.
The Deming quality-control award is now
one of the most sought-after prizes among
Japanese firms.
In Japanese plants and factories,
workers are not only encouraged, but ac-
tually expected, to make quality control
-their top priority. At Matsushita Electric,
the country's second largest electrical
company (1980 sales: $13.7 billion), work-
ers are instilled with the notion that each
one of them is a quality-control inspector.
process, they are encouraged to shut down
the whole assembly line to fix it. Pressure
to improve quality reaches beyond the
shop floor and often pits entire plants, of
Sony in. furious statistical battles to pro--
The Japanese today look' down on
what they regard as the. poor quality of
American products. Kenichi Odawara,
professor of economics at Sophia Univer-
sity in Tokyo, recently published a book
on the problems of the U.S. economy and
workmanship entitled The Great Ameri-
can Disease. One example of that. disease
is familiar to any Japanese car dealer at--
tempting to sell an American-built auto-
mobile in Japan: the cars have to be given
an additional coat of paint before they can
satisfy the demanding Japanese. -
COMPETITION, While Western business-
men often regard Japan as a giant cartel,
competition is actually fierce. Japan's
thriving domestic market is the principal
battleground for most Japanese compa-
nies. The products shipped abroad have
such high quality and low price in large
part because they have already survived.
the domestic Japanese market. In 1955,
for example, the leading motorcycle com-
pany in Japan was Tohatsu, while Honda
was a distant No. 2. By 1964 the more-
competitive Honda dominated the local
market and Tohatsu had begun moving
into other fields. Today the company is -
principally a manufacturer of small en-
gines and snowmobiles. Says one Amer-
ican economist living in Japan: "Their
idea of competition is different from ours,
yet they compete furiously. It is all done
within the context of being very Japanese
-orderly."
New products hit the domestic Japa-
nese market with dizzying frequency. In
the electronics industry alone, eight major
and a dozen minor semiconductor firms
are battling for a lead in the manufacture
of microprocessors and so-called comput-
ers on a chip. American firms pioneered
this technology in. the late 1960s, but Jap-
anese companies have, already captured
30% of the world market for computer
memory chips:
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 Approved For 7103107: CIA-RDP88B0 4'43 0100387 076.3
Economy & Business-.
The rush to use the chips has pro-
pelled the nation's automakers into head-
long competition to come up with new
applications. When Toyota last year in-
troduced the world's first chip-operated
1oice synthesizer to warn drivers of low
fuel and fluid. levels in their cars, Nissan
Motor hustled out its competing versions
within weeks. .
Taken -together, these five qualities
have furthered a national spirit of com-
promise and cooperation and a willing-
ness to endure short-term setbacks for the
long-term good of the nation, company or
family as a whole. Says. Shiro Miyamoto,
an official of the powerful Ministry of In-
ternational Trade and Industry: "Our sys-
tem is born of the traditions and history of
this country, a small nation with few re-
sources. Without our way of doing things,
there would be continual conflict and
nothing would ever get done.". . .
. When these Japanese characteristics
are brought into the modem factory, the
result is a smoothly functioning enterprise
that produces quality goods. This is most
clearly seen in the easy working relation-
ship of management and labor. Japan has
fewer strikes and less labor unrest than
any other major industrial power. In 1978
Japan lost 1.4 million workdays because
of strikes, while the U.S. lost 39 million.-t:
To a Japanese worker, his company is
not an oppressor but rather the source of
his income and the expression of his place'
in society. Says Ryutaro Nohrnura, 57,'
who owns a tentmaking firm in Osaka:
"Employees in Japan view their company
as an extension of their family life..indeed
many of them equate the importance of
their company with that of their own life-"
The workers trust their bosses to make
the right decisions because there is a per-
vasive sense that both labor and manage--
ment-are working together. In Japanese
+~- . .r anu.uewcauun to the company- i urmg the IV 1.2- n reces-;
Consensus.in an Diego sion, when TV. sales dropped.and-production slowed dras
they carry that management skill, with-them to other coup was opened The.- Japanese managers were stunned when.
Sony television manufacturingplant in San Diego where Jap- Richard Crossman; , the- .plait's :human relations expert =_
anese exeeutivev helpsupervise 1.80f1workers Herreport "They came to me. and, wanted to" know what- they had
T imeclocks: are bannW from the premises. Managers and is sometimes in Southern. California..
workers converse on a first-name basis and eat lunch to--= : -,- This personnel policy has clearly been a success. Several
gether in the company cafeteria. Employees arebriefed once..:.._ attempts. to unionize the work force have been defeated by
,_ . ROBERT euRROUCNa margtnsashigh as 3 to 1. Says Jan Tim-
a mont1t by-,a,?top- executive on sales'
and
I.mer' member .,'of,, the Retail Clerks
aged to air their complaints Four tiaaes
,41fn, ti 1 em
parties- Says Betty Price;, 54, as assem benefits were probably better. But base ;
Y
bly-line. person:-,`Working for Sony is call y I'm more satisfied here "
Her express ion,. echoed. by dozetiY ? oms on American workers- Though
story plant,: where: bothl.the