West Germany v. Japan

If World War II had ended differently, Germany and Japan today might be waging a cold war for military-political supremacy in other countries. Instead, their rivalry is commercial. Thanks to the first postwar "economic miracle," the Germans got a long head start in penetrating world export markets. Even in 1968, West Germany's total exports of almost $25 billion were nearly double Japan's exports of not quite $13 billion. But generally lower-priced Japanese goods have been slicing into the German lead so sharply in so many areas of the world that some Germans are anxious about what they call the "yellow peril" to their foreign sales.

The Japanese gains have been greatest in the U.S., the world's richest market. Ten years ago, West Germany shipped 30% of all foreign electrical goods sold in the U.S., Japan very little. Today, the Japanese share has climbed to about half, while the West German share has shrunk to 6%--and even that 6% is being threatened. Japanese firms, having nearly taken over the U.S. market for foreign-made radios, TV sets and tape recorders, are beginning to challenge the traditional German dominance in heavy electrical machinery as well. Volkswagen remains the most popular imported car in the U.S., but its sales through November slipped 5% below the 1968 period. One reason: phenomenal sales gains of 80% for Japanese-made Toyotas and of 52% for Datsuns.

Kimonos in Duesseldorf. The Japanese challenge has left the Germans far behind in steel production and shipbuilding. Japan's yards now build more than half the world's shipping tonnage, German yards less than 9%. The Japanese say that some of the German orders come from shippers who were turned down by Japanese yards that are booked to capacity for years to come. German exporters are losing their markets in China and the rest of Asia to the Japanese, and are being pushed increasingly hard even in Europe. For example, an official of Zeiss Ikon says that Japanese Pentax cameras sell in Switzerland, Holland and Sweden for 5% to 7% less than the comparable Zeiss Icarex-35. Export prowess has planted a flourishing Japanese business colony in Germany itself. More than 100 Japanese companies have opened European sales headquarters in Duesseldorf. The city now boasts a first-class Japanese restaurant, the Nippon-Kan, complete with kimono-clad waitresses.

The Germans complain, as do many U.S. businessmen, that much of the Japanese competition is unfair. They say that Japanese manufacturers earn high profits selling in a home market that is virtually closed to foreign competition, then use these profits to subsidize cut-price export sales. The Japanese exporters also get more government help. JETRO, a government-financed trade-promotion agency, conducts extensive surveys that the Germans say pinpoint markets vulnerable to Japanese salesmanship. The Japanese reply that the Germans have simply been complacent.

Next, the Yen? Japan's export success is giving the country some of the currency troubles that became all too familiar in Germany during the past two years. The October revaluation of the mark left the yen as the currency that bankers consider to be the world's most undervalued. Japan has tried various expedients to reduce its embarrassingly large holdings of foreign money and avoid a yen revaluation, which would raise Japanese export prices. For example, the government has increased the amount of foreign currency that Japanese firms can invest overseas without specific permission. So far, speculators have shown no tendency to buy yen in anticipation of a boost in its official value. But moneymen foresee a distinct possibility that speculation will soon begin.

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