Japan, Inc.: Winning the Most Important Battle

IN 1953, a young businessman named Akio Morita made his first trip outside Japan to investigate export prospects for his struggling little electronics company. He was dismayed to find that in the sophisticated markets of the U.S. and Europe, the words Made in Japan were a mocking phrase for shoddiness. But in The Netherlands, he recalls, "I saw an agricultural country with many windmills and many bicycles, and yet it was producing goods of excellent quality and had worldwide sales power. I thought that maybe we Japanese could do it too."

Indeed, they could. A month ago, Morita took off on his 94th or 95th transpacific trip (he has lost exact count). This time he came as the self-assured export chief and primary owner of Sony Corp., the firm that as much as any other has made Japanese goods synonymous with high quality as well as low price. In Chicago, he told security analysts that Sony last year rang up sales of $414 million, more than half from exports to 147 countries of radios, tape recorders, TV sets and other products. In London, he went over sales projections for the color TV sets that Sony began marketing in Britain last month: the company expects to sell 50,000 the first year at $480 each, v. $600 for the lowest-priced British-made sets. On the Continent, Morita checked on construction plans for a multimillion-dollar Sony distribution and service center to be located, fittingly, in The Netherlands.

The trip was not all triumphal procession, however. In the U.S., Morita ran into a storm of ill will, stirred up by a Government finding that "Japanese manufacturers" have been dumping TV sets--selling them in the U.S. at prices below those charged in Japan. For the time being, Morita says, Sony must post a 9% deposit with Washington on every TV set that it imports. Morita concedes that some Japanese TV makers practice dumping, but he insists that his company is not among them and contends that 'U.S. Treasury officials admitted as much to him. "Although we are innocent," he says, "we are being forced to act as if we were guilty."

The Power and the Danger

Merita's trip thus symbolized both the power and the peril of Japan's rising position in the modern industrial world. Starting from a postwar pile of rubble in a nation almost devoid of raw materials, Japan's businessmen have built an economic superpower. Today it is flooding markets from Manila to Milwaukee with shoes, ships and steel, cameras, cable, cloth and cars, transformers, TV sets, tape recorders and, of course, the ubiquitous transistor radios. To many admiring but fretful Westerners, Japan has become a corporate state, and is even referred to as "Japan, Inc."

The Japanese economy is the third most productive in the world, exceeded only by those of the U.S. and the Soviet Union. The gross national product has multiplied from $26 billion in 1956 to more than $200 billion today. Japan produces one-sixth of the world's steel and half of its ships. The Japanese treasury, almost bare 13 years ago, now bulges with more than $5 billion worth of reserves. The country's exports have almost doubled in four years to more than $19 billion last year, and have risen 20% or more in each of the past three years.

The Human Sea

Every day, thousands of neatly dressed, briefcase-toting Japanese businessmen, technicians, engineers and salesmen swarm over the globe--inspecting, surveying, planning, advising, bargaining, buying and selling. One group is now in Hanoi, working on an agreement to help the North Vietnamese set up a shipping firm, textile plant and garment factory. In Zambia, geologists are surveying copper fields. On Vancouver Island, lumber men are demonstrating a new technique for cutting timber that used to be considered waste. Other groups are supervising production of Honda motorbikes in Brussels, studying sites for a hotel in Alaska and building a steel mill in South Africa, where the Japanese are considered honorary-whites. In any market that arouses their interest, the Japanese use jinkai senjitsu (human-sea tactics), inundating the area with trade delegations and survey groups. Local businessmen sometimes feel that they are being overwhelmed by sheer force of numbers.

Fearful and resentful, European nations have built a daunting array of barriers against Japanese goods; Italy alone has 46 import quotas directed specifically against them. Asian leaders also complain. Antonio Villegas, mayor of Manila, recently inveighed against the "insidious Nipponization of the Philippines"--then excused himself to greet a visiting delegation of Japanese advertising men. Says K.S. Yossundara, an official of the Bank of Thailand: "The average Thai wakes up to the call of a Japanese alarm clock and probably brushes his teeth with Japanese dental cream. His car or motorcycle is Japanese, and so are his shirt and trousers. Even the movie he watches on a Japanese TV set may well be Japanese."

The deluge of Japanese imports is arousing an angry protectionist reaction in the U.S.--Tokyo's wartime conqueror turned No. 1 trading partner (see Symposium, page 90). Fully 30% of Japan's exports go to the U.S. As recently as 1964, Japan bought more than it sold in U.S. trade. Since then, the popularity of Sony TVs, Nikon cameras, Panasonic radios, Toyota and Datsun cars, and Honda and Yamaha motorbikes has turned the picture upside down. Materials-short Japan is a big and growing consumer of American coal, lumber and even soybeans, but in each of the past three years its sales to the U.S. have exceeded its purchases by more than $1 billion. The American shoe, textile, electronics and other industries have not only lost sales and profits to the Japanese but jobs as well. A member of the Nixon Cabinet voices the alarmist view held in some high Government circles: "The Japanese are still fighting the war, only now instead of a shooting war it is an economic war. Their immediate intention is to try to dominate the Pacific and then perhaps the world."

The business backlash stings Japan in many ways. The U.S. is negotiating tighter quotas on Japanese steel and has just agreed on a quota for stainless-steel flatware. Many businessmen want the Government to go much further. Last year protectionists raced through the House a bill authorizing quotas on any foreign product that won as much as 15% of a U.S. market. The chief target: Japan. The bill died in a Senate adjournment rush, but the import debate has resurfaced this year in a way that could poison U.S.-Japanese political relations.

Closed-Door Policy

The most incendiary battle centers on imports of Japanese textiles. Last year they accounted for only 1.3% of total U.S. textile sales, but they have been heavily concentrated in certain segments of the market. Japanese sweaters and woolen fabrics increasingly infiltrate the U.S. market, and imports of man-made fibers from the Far East soared 75% in the first two months of this year; probably a third came from Japan.

President Nixon in 1968 promised protection to the politically powerful Southern textile industry. Two months ago, the Japan Textile Federation offered to limit shipments to the U.S. for three years starting July 1; they would rise only 5% the first year and 6% in each of the next two years. Those limits were not stiff enough to satisfy U.S. trade hawks, and Nixon turned the offer down. The President then further tangled the textile situation by mixing it up with international politics. He decided to submit to the Senate a treaty returning Okinawa to Japan, rather than handing it back by administrative action as he had led Tokyo to expect. If the Southern textile bloc can sew up 34 Senate votes, it can defeat the treaty. Okinawa is such an emotional issue in Japan that a defeat could topple Prime Minister Sato's government.

As the political snag over textiles shows, the dangers of a U.S.-Japanese trade split go far beyond economics. Japan has been the greatest force for postwar stability and progress in Asia, largely because its industrialists have channeled the vigor of the Japanese people into peaceful pursuit of markets. If that Japanese trait is denied commercial expression, it could explode in frustration. Averting a U.S.-Japanese blowup will require a much deeper understanding of the nature of the friction than either side has shown so far. Many Japanese leaders play down the American resentment as being largely a consequence of the 1970 U.S. recession, and they figure that it will fade as business continues to revive. Even Sony's Morita, who knows the American mind well enough to have outguessed some U.S. marketing men as to what products would sell well, takes that line. "I have been a salesman for 20 years," he says, "and I know that whenever a salesman's customers do not want to buy, he starts blaming someone else."

In fact, the U.S. reaction reflects more than pain in the pocketbook. American executives are enraged by what they regard as Japan's refusal to observe the rules of the game of world trade. Many American businessmen contend, with some justification, that the Japanese dump not only TV sets but also steel, textiles, float glass and radio tuners. U.S. industrialists also complain bitterly (and enviously) about the special help their Japanese rivals get from the Tokyo government: official blessings for cartels formed to win big foreign orders, lavish and extensive government-financed studies of which overseas markets might be easiest to crack, low-interest loans to exporters from the government-dominated banking system, and the lowest corporate taxes in the industrial world.

Most of all, Americans are incensed by the way that Japan, while invading foreign markets, has closed its domestic economy to many foreign goods and most foreign capital investment. Supposedly, that situation is changing. In 1969, Tokyo maintained quotas or other barriers against 120 categories of imports. Last January, the number was cut to 80, and this month it is supposed to go to 60; the Japanese have pledged to reduce it to 40 by September. They also promise to open nearly all their "pureblood" industries to either 50% or 100% foreign ownership by Aug. 1.

Clogs, Not Cars

Even after the next stage of liberalization, foreigners will not be able to send in many products--including unlimited quantities of oranges and some airplanes and machinery--or to invest in the manufacturing of large computers, certain electronic items and petrochemicals. The Japanese government rejects many investment applications, stalls on others, attaches unacceptable conditions to still others. Ford and Chrysler have been delayed for years in attempts to buy into the booming Japanese auto industry, and General Motors has won permission for only a limited investment: 35% ownership of a joint venture with Isuzu Motors, a truck maker. Says James Adachi, president of the American Chamber of Commerce in Japan: "We can set up a factory to make geta [Japanese wooden clogs], or open a supermarket, so long as it is smaller than 500 square meters."

Inscrutable Economics

The real cause of the present strain is that the U.S. is confronting something totally new in the world: a mighty industrial economy that has been shaped by Oriental history and psychology. If Japan does not follow the gentlemanly trade rules, it is not because of simple greed but because it does not adhere to Western principles on much of anything. To outsiders the Japanese economy seems inscrutable in ways alternately amusing and shocking.

Industry is cartelized to a point that would make John D. Rockefeller envious. Companies carry a burden of bank debts that would drive a U.S. executive to drink--or his company to the brink. Above all, every part of the Japanese economy is directed toward a national goal, and almost everybody feels a sense of participation in achieving it. Bureaucrats, bankers, business executives, workers--all labor hard to make Japan a world power through economics.

The economy is an expression of a society that values order, security, harmony and industry. Japan has become the world exemplar of what in the West is called the Protestant ethic. The reasons behind Japan's work ethic lie not in its Buddhist and Shinto religions but in its history and geography. The mountainous nation has always been a tough place to scratch out a living. The peasant who did not labor hard simply starved, partly because medieval lords took as much as 80% of his rice crop in taxes. Necessity was transmuted into virtue: the busy man is a good man. To this day, it is considered respectful to greet superiors by saying, "O-iso-gashii desho [You must be in an honorably busy state of affairs]."

Single-minded dedication to a goal is easier to achieve in Japan than in the West because Japan is the largest homogeneous society on earth; there are only tiny racial or even linguistic minorities among its 104 million people. Harmony and order are also essential because the Japanese have always been jammed together on small patches of arable land. The physical proximity of the Japanese breeds tension, which can be discharged by hard work, but there is literally no room for aggressively individualistic behavior. There is a violent undercurrent that sometimes leads to street demonstrations or parliamentary brawls, and the Japanese struggle to contain it. Akira Suzuki, a leading scholar, regards the renowned ambiguity of his country's language as a manifestation of the need that Japanese feel to try to get along with one another. "If we spoke more clearly to each other," he says, "we might end up clashing in fistfights all day long."

This characteristic finds an echo in business conduct. Western executives are often perplexed and sometimes misled by the extreme reluctance of the courteous Japanese to answer any suggestion with a flat no. Japanese are equally shocked by Western bluntness. Yoshio Terazawa, executive vice president of U.S. operations for Nomura Securities, a giant brokerage house, recalls the dismay of a colleague who watched an American lawyer spend hours haggling over the fine print of a contract. In Japan, such matters would be settled by gentlemen's agreement.

Another element in Japan's economic psychology is its long history of cultural isolation. When the nation was finally opened to the West a century ago, the Japanese felt a morbid fear that they were behind the rest of the world and a compulsive drive to catch up. In that drive, the World War II defeat and the U.S. occupation turned into a major plus. Occupation authorities purged the old, politically oriented heads of Japanese businesses, replacing them with well-trained technicians who had learned many lessons during the war. (Today's superb Japanese camera lenses, for example, are the end result of wartime research into range finders.)

Advantages of Being in Hock

Forbidden by the American-imposed constitution to buy modern weaponry, Japan has been able to concentrate investment on automated industry. The destruction of its factories by wartime bombing left it free to rebuild with the latest technology. To do that quickly, the new industrialists bought patents and licenses from everywhere. Says Shigeo Nagano, chairman of Nippon Steel, which today produces more tonnage than any other company in the world: "So long as we had to start from nothing, we wanted the most modern plant. We selected the cream of the world's technology. We learned from America, Germany. Austria and the Soviet Union, and adapted their methods in our own way." In particular, the Japanese developed a strategy of looking for "technological gaps"--advances that were not being fully exploited in the West. The oxygen steelmaking process, for example, was developed in Austria, but Nagano and his colleagues were quicker to appreciate its quality and cost-saving features than their Western rivals were. More than 80% of Japan's steel is now made in oxygen furnaces, the highest proportion in the world.

Faced with a severe postwar capital famine, all industry had to borrow heavily from government-regulated banks. Even today, Japanese companies generally get more than 80% of their financing from loans and less than 20% from sale of stock--about the opposite of the ratio in the U.S. Nagano estimates that Nippon Steel's debt is equal to what four or five American steel companies would owe. To a Western executive that might seem to leave the economy extremely vulnerable to a Penn Central-type collapse. Japanese find that being in hock has its advantages: corporate Pooh-Bahs do not have to worry about paying high dividends or showing plump profits to keep stockholders happy.

To a large extent the Japanese worker has financed this system. His phenomenal savings rate, a product of the desire for security, has fed funds to the industrial machine. Last year the Japanese saved 19.4% of their incomes; in the U.S., a 7% savings rate is considered startlingly high. Observes Morita: "Saving is a hobby of the Japanese people."

The Charm of the Company Union

In order to help industry produce inexpensively and expand quickly, workers long had to accept low wages. In return, they received an implied guarantee of lifetime jobs in the companies that they joined fresh out of school. That security has bred one of the world's most contented work forces. Japanese workers rarely strike, and absenteeism is almost unknown. Unions lately have become more vocal. Wages climbed an average 18% last year--but, incredibly, productivity rose 14%. Japan's average wages, now 94-c- an hour, passed Italy's in 1969 and France's last year.

One reason that productivity is soaring is that unions have not resisted new technology. If a man's skill becomes obsolete, his company retrains him for something else, with no loss in pay. Employers thus have great freedom to shift workers from one job to another and can invest huge sums to train them without worrying that they will jump to competing firms. As a result, workers tend to identify with the company rather than with a particular skill, a fact that is reflected in union organization. Says Morita, smiling: "Our labor situation is better than yours, because in the U.S. your unions are independent. In Japan, all our unions are company unions."

For both worker and executive, the company is the center of life. Workers often display a quaint family spirit, referring to "my" company, and my is written with the same Japanese character that represents family. They often cheer each other when changing shifts, like baseball players applauding a teammate who has just hit a home run. It is rare for a major executive to leave on a business trip without getting a rousing send-off from the entire office staff at the airport. At Matsushita Electric, Nissan Motors and other firms, the day begins with everybody assembling to sing the company song. At Toyota the day opens with five minutes of supervised calisthenics. There is a vast range of fringe benefits: discount meals at plant cafeterias, cut-rate vacations at company resorts, cheap rental in company apartment houses (roughly $10.80 a month for a two-room flat in one Nippon Kokan building in Yokohama).

The head of a Japanese company is bowed and scraped to by gaggles of company-smocked office girls, drivers and flunkies. The company-paid geisha party for executives is still common, though some newer firms are getting away from it. Almost always, the businessman's wife must accept a new form of concubine: the company. In a recent survey, 68% of the Japanese managers polled said that business was more important to them than their families.

Banzai for Swapping

The executive spends much time talking with officials of other companies, because the tradition of cooperative effort has resulted in a clubby Japanese-industry organization. The prewar zaibatsu cartels of Mitsui, Mitsubishi and Sumitomo were broken up under the U.S. occupation and supposedly have come together again only loosely. But presidents of the 27 Mitsubishi companies meet one Friday every month; it is an open secret that they plan common strategy at "the Friday Club." The 17 Mitsui presidents meet one Thursday every month, and the 17 Sumitomo presidents one Monday a month. The big borrowers from the Fuji Bank have a council known as Fuyo Kai, which includes the heads of Hitachi (electrical machinery), Nissan Motors (autos) and Nippon Kokan (steel). The clubs divide up markets like so much sukiyaki. When Communist China recently decreed that it would not trade with Japanese firms that do business with South Korea or Taiwan, the clubs quickly reached an understanding: Mitsui and Mitsubishi decided to concentrate on South Korea and Taiwan, while Sumitomo took China.

Japanese shipyards can overwhelm foreign competitors partly because their engineers regularly swap technological ideas--so completely that no one remembers and no one cares which company originated a certain important welding process. Says Masashi Isano, 71, chairman of Kawasaki Heavy Industries: "By closely emulating each other, our engineers constantly improve themselves and the industry as a whole. All I have to say to that is banzai!"

Those Helpful Bureaucrats

Nowhere in the non-Communist world do business and government coexist so closely. Prime Minister Eisaku Sato heads the Trade Conference, which sets national export goals and coordinates business efforts to achieve them. Most of the government's influence is exercised by the all-important Ministry of International Trade and Industry (MITI), which issues gyosei shido, or administrative guidance. For instance, MITI may "advise" a Japanese company to buy a domestic computer rather than one from IBM. A few years ago, many Japanese petrochemical concerns planned to build big plants. MITI experts advised that the foreseeable foreign and domestic demand would justify only six such plants and that construction would have to be spread over three years. The petrochemical-industry trade association quickly decided which six companies should build them--and when.

Japan's competitive strength derives from much more than the government's hothouse care. The nation is developing a new generation of inventive, competitive executives quite able to capture foreign markets on their own. Their exemplar and leader is Sony's Morita.

Unlike older Japanese firms, Sony sells through its own marketing network rather than through the trading companies that contact overseas buyers for most Japanese manufacturers. Its basic financing is not through bank loans but the sale of stock, 31% of which has been bought by foreigners. Morita, personally and through a family investment company, is the largest shareholder, with 10.3% worth $130 million. Slender, white-haired Morita, now 50, is a mixture of Japanese and Western patterns. Amid the woofers, tweeters, exponential horns and other electronic gadgetry crammed into the den of his Tokyo home stands an authentic American nickelodeon that he plays delightedly with nickels brought back from the U.S. As Morita told TIME'S Tokyo Bureau Chief Edwin Reingold: "Americans like to come to Japan and take home Japanese antiques. I go to America and bring home your antiques." Morita spends about a third of his time on the road, jetting so often to the U.S. and Europe that he jokes, "It's a long commute." At home or abroad, he regularly arrives at Sony's offices by 8:30 a.m. and works for twelve hours or more. In off hours in foreign cities, he likes to stroll about checking on store displays of Sony and competing products and jotting observations in a notebook. "Business is my hobby," he says.

Products of Their Own

Son of a manufacturer of soy sauce and sake, Morita started out as an engineer. As a wartime navy lieutenant he was assigned to help an engineer named Masaru Ibuka develop a heat-seeking bomb. After the defeat, Ibuka opened a communications-equipment business in a Tokyo shed, and Morita joined him. The two begged and borrowed $500 to start Tokyo Telecommunications Co., later Sony. Ibuka, who was Mr. Inside, developed the products and became president; Morita, Mr. Outside, specialized in marketing and became executive vice president. Sony succeeded because its chiefs were among the first Japanese businessmen who did not copy Western products but used Western technology to develop new products of their own. Ibuka read about transistors and, in 1952, went to the U.S. to look at them. He became convinced that they could be used to make a radio. Morita visited the U.S. the next year and returned certain that the radios would sell fast in the U.S. He was amazed by the number of American radio stations and concluded that "everybody in the family will want to listen to his own program on his own radio." The radios were an instant success abroad.

Sony on the Moon

A long string of Sony products followed: the first small transistorized TVs, the world's smallest AM radio, even the video-tape cassette recorders used by U.S. astronauts on Apollo moon flights. Their development is a tribute to Ibuka's inventiveness and Sony's highly flexible operating methods. The company, says Morita, is not constricted by a formal research and development budget; it simply pours as much money as seems necessary into a promising idea. Sony's top managers also frequently tear up the organization table, assigning people from throughout the company to work on what looks like the next hot new product.

A key part of Merita's marketing strategy has been to target carefully specific products toward individual foreign markets. In the British color-TV market, for example, he has chosen to compete on price instead of screen size. The least expensive British-made set is a 19-inch model, and only 10% of the TV households have color. By importing a 13-inch set, Morita figured that he could save enough on production and shipping costs to get the price down to $480 and bring color TV into the reach of many more British families.

Morita is acutely aware--as many Japanese leaders still are not--of the intense foreign anger provoked by Japan's closed-door policy at home and invasion of markets abroad. Although he expects U.S. protectionism to fade eventually as business improves, he fears that Japanese-American relations temporarily will get worse. That is one of the more optimistic views among the experts; many foresee a long period of mounting resentment, tension and perhaps outright hostility leading to swiftly rising trade barriers and exchange controls.

What can be done to prevent such a trade war? Certainly the solution does not lie in appeasing protectionist sentiment. Apart from the economic and political implications of business isolationism, the interests of the consumer should rule, and Morita and his fellow Japanese are giving consumers quality products at reasonable prices. The solution should rather be an equalization of the rules of competition.

As a first step, Japan must quickly take down the bamboo screen that blocks high-technology imports and foreign investment. Many Japanese industrialists tirelessly contend that their economy is an "adolescent" that needs protection against the big, rich, "mature" competitors of North America and Europe, but that argument clearly is not valid today. Japanese manufacturers also have an unnatural price advantage in world competition because their currency, the yen, is undervalued. Tokyo economists reluctantly concede that the yen must be revalued upward; there is likely to be a 5% revaluation within a year.

On the U.S. side, the prime requisite is to develop a coherent trade policy aimed at expanding the flow of world commerce and investment and protecting only those domestic industries that are necessary for the nation's economic or military security. As a painful corollary, the U.S. may have to permit some nonessential industries to be overwhelmed by foreign competition. Washington at present has no overall policy, but tries to tackle trade problems one by one as they pop up. A sensible step would be to accept the Japan Textile Federation's unilateral offer to restrict cloth shipments to the U.S. It is absurd for the U.S. and Japan to squabble fiercely over textiles, because that industry is not vital to the economy of either nation. Simultaneously, the U.S. could crack down harder on dumping in several industries, perhaps by flatly embargoing shipments, though it would be much wiser to do that on a company-by-company basis rather than by blanket rulings as in the TV case.

President Nixon's ability to develop a comprehensive policy is severely limited because he lacks legislative authority to negotiate new U.S. trade concessions in return for a lowering of foreign barriers. That authority expired in 1967; the Administration should demand that Congress renew it. Armed with such power, Nixon could call for a new world trade conference similar to the successful Kennedy Round of 1964-67, this time aimed at elimination of nontariff barriers to trade and investment. This conference would be an ideal forum in which to press the Japanese to remove their remaining restrictions. In return the U.S. should try to persuade European nations to wipe out their restrictions on Japanese goods.

The West's Turn to Copy

A mutual lowering of barriers will temporarily make Japanese competition more intense but also more equitable. Sooner or later Japan will have to temper its export drive because its economy is already operating under some severe strains. For one thing, the country is running out of labor. A decade ago, there were two job openings for each high school graduate; this spring there are 7.7. Japan has also bought export growth largely at the price of skimping on internal investment in housing, roads and pollution control. The country's industrial pollution is perhaps the world's worst. Says Nippon Steel's Nagano: "We need more roads, harbors, bridges, housing. People are living two families to a six-mat (9 ft. by 12 ft.) room. In advanced Western countries, industrial production and the production of social capital have been balanced, but we have been so busy exporting that we have not balanced these things."

Instead of fighting the Japanese, U.S. businessmen can join with them in some mutual projects to make money and, incidentally, help out the have-nots of the world. Harold Scott, director of the U.S. Bureau of International Commerce, believes that as Japan's labor shortage worsens, its industrialists will gradually shift their stress from exports to American-style overseas investment. U.S. companies could speed the process by proposing joint ventures with Japanese firms in third-country markets. Scott envisions, for example, a combination of U.S. and Japanese timber companies to develop the huge lumber resources of the Upper Amazon.

U.S. businessmen could also learn a few lessons from the Japanese system. Its labor practices, for example, are both humane and efficient. Some of them might be tried in the U.S.--not lifetime one-company employment, of course, but perhaps some training practices. Japanese industrialists train many of their workers in several skills rather than insisting on greater specialization as their Western counterparts do. A Japanese engineer is encouraged and even expected to learn something about accounting, finance and personnel work. This seems to help produce better-rounded, more mobile and more highly motivated workers than are found in many Western factories and offices.

A society as heterogeneous and individualistic as the U.S. probably cannot rally most of its people behind a national economic goal in the Japanese sense. But Japan has shown that busi ness and government do not have to consider each other as adversaries, as they often do in the U.S. Though the U.S. certainly should not cartelize its industry Japanese-style, Japan's success might stimulate some thinking in Washington as to whether the antitrust laws should be liberalized to promote the nation's competitiveness in world markets.

Needed: More Japans

In any program of trade cooperation with Japan, the U.S. can count on support from some of the biggest Japanese businessmen. Morita has been calling for Japan to open its industry more rapidly to U.S. investment, though he gives the idea a characteristic Japanese twist of self-interest. "If we allow more U.S. investment, we will not need a security treaty," says Morita. "Of course the Americans will protect us then. Everybody protects his property."

Morita also proposes international harmonization of product standards, safety regulations, antipollution laws and food standards in order to equalize costs and guard against the possibility that differing national rules will be used to keep out foreign goods. Beyond that, he has begun to believe that the world's industrial leaders have been too narrow in their trade thinking. "There are three big industrial areas: the U.S., Japan and Europe," he says. "Now we have manufacturers trying to sell each other the same things. It doesn't make sense. Two-thirds of the world's people are still living under low standards, and because of that they do not yet constitute a viable market. Just as the U.S. helped Japan rise from nothing, we should all join to try to make more Japans in other parts of the world." That is a sound if ambitious program, and an example of the kind of thinking that may well solve U.S.-Japanese trade difficulties. The issue--and the real Japanese challenge--is nothing less than whether the two mightiest trading nations in the world can learn to live in commercial peace.

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