The Scramble for Supplies

The fabulous growth rate of the Japanese economy--projected at 10% for this year--has long obscured its fragile foundation. Japan is almost totally dependent on overseas sources for raw materials. A 20-day supply of such items is all that Japanese industry is apt to have at any given time, and it is becoming increasingly tough to maintain the necessary flow of imports.

Acutely aware of their vulnerability, Japanese companies are sending teams of geologists and businessmen all over the world to scout for new sources and bid aggressively for existing supplies. The first of two new high-level missions, headed by Wataru Tajitsu, chairman of The Mitsubishi Bank, Ltd., will leave Japan this month to search out new oil sources in Australia, Papua and New Guinea. Japanese crews are exploring for oil--or preparing to do so --from the Persian Gulf to the Gulf of Siam, in Alaska, Colombia and

Japan's own coastal waters: drilling began last week off the southern end of Honshu Island. Japanese industries buy copper from Chile, Zambia, Brazil and the Congo, nickel and iron from Australia, coal from Canada and the U.S. Far more is required. By 1975, Japan expects to need imports for 58% of its lumber, 83% of its copper, 85% of its coal and 90% of its iron ore.

Reluctant Sellers. Japanese companies are increasingly offering long-term development loans to be repaid in ore, and directly investing in their overseas sources of supply. In Queensland, Australia, Mitsubishi has signed a long-term coal contract: in return, it is lending the developer enough money to help build a small town for the workers, a dam and reservoir, roads and a rail line. Despite this, Australia is one of several countries that have acted outright to discourage the sale of some raw materials. It has urged Australian corporations to stop selling bauxite to the Japanese in ore form, arguing that, to create jobs at home, the mineral should be processed into alumina before export.

The problem for the Japanese is that they are latecomers in foreign investment, at a time when nations are more aware than ever of the value of their resources. They are also sensitive to the danger of arousing local resentment, as has been the case in the U.S. Exports of timber in log form from the Pacific Northwest and Alaska have been restricted by Congress, and American steelmen complain that huge coal purchases by Japan are driving up the price of fuel and tying up rail cars. Some top U.S. businessmen, worried about the steady inroads of Japanese finished goods into American markets, have suggested that U.S. companies should withhold raw materials altogether, as a means of thwarting that drive. Partly to anticipate such trouble, the Japanese government recently warned its businessmen in a pamphlet: "We must be careful not to give the impression that Japan is interested only in plundering natural resources. Any operation the Japanese engage in must be mutually beneficial."

The urgency of tapping overseas resources has propelled the Tokyo government into a direct role that goes far beyond the customary low-interest development loans. The government sometimes helps finance private speculation in overseas raw materials. Tokyo is setting up a $1 billion fund for that purpose with an unusual feature that absolves unsuccessful prospectors of any risk. If a project such as drilling for oil turns out to be a flop, the government will simply write off the loan as a loss. If it is a success, the private developers will repay the money that they borrowed for the venture at a high interest rate to replenish the fund. No less an effort, and probably a far larger investment, will be needed if Japan's economy is to triple in size by 1980, as the government plans.

This file is automatically generated by a robot program, so reader's discretion is required.