Japan: Big New Lender

Willie ("The Actor") Sutton used to say that he robbed banks "because that's where the money is." The same reasoning -- though not the same modus operandi--is prodding foreign businessmen and government representatives toward Tokyo in quest of loans and investment money. They get a warm welcome from Japanese bankers, businessmen and government officials, who face the unusual problem of reducing an embarrassingly enormous pile of cash.

In less than a year, Japan's foreign reserves more than doubled, to almost $17 billion. The money has been attracted by the nation's solid success at selling goods abroad, and even more by its having what is perhaps the world's strongest currency, the yen. Many Japanese fear that the money flood will bring intense new foreign pressure for still another upward revaluation of the yen. They also believe that it is high time to export not only merchandise but also money.

Japanese companies' investments in overseas factories, mines, bank branches and the like now are only $3.6 billion but are rising rapidly. Leaders of the Ministry of International Trade and Industry (MITI) predict that by 1980 the total may reach $26 billion. In the U.S., the Japanese are investing in everything from noodle making to home building. A partial list: Sony is building a $1,000,000 color-TV plant in San Diego, and Nisshin Food Products Co. has put up a noodle factory in Gardena, Calif. Matsushita Electric is about to begin producing color-TV sets in Puerto Rico, and Toyota Motor is considering building an auto assembly plant there. Last month Mitsubishi Estate formed a joint venture with Morgan Stanley & Co. to build new communities in the U.S. The first will probably be a 1,000-home, $30 million development near Williamsburg, Va. Several states have sent delegations to Tokyo seeking more investment. Governor Linwood Holton of Virginia visited recently and conferred with Kenichiro Komai, chairman of Hitachi, and Iwao Iwanaga, chairman of Mitsui Petrochemical, among others.

Japanese loans and stock investments are also flowing more freely to foreigners. Five Japanese banks recently joined with Manhattan's Morgan Guaranty Trust Co. in lending $13.8 million to a Gulf Oil subsidiary in the U.S. Last month the Tokyo government granted permission to three Japanese securities houses to underwrite bond issues totaling $90 million for three U.S. firms: North American Rockwell, International Utilities Overseas Capital Corp., and General Cable Overseas Inc. Canada's Hydro-Quebec and the governments of Australia and Mexico are shopping in Tokyo for bond loans.

On the stock side, a group of Japanese banks last month put up $5,000,000 to buy a 90,000-share block, or .2% of the stock, in First National City Co., parent company of Manhattan's First National City Bank. Chrysler Corp. is considering selling to Japanese investors a million shares of its stock--worth about $35 million--to raise money for a joint automaking venture with Mitsubishi Motors Corp.

Government Help. The Tokyo government is spurring these trends. Last month it repealed the key measure in the maze of exchange controls that have kept Tokyo from developing an international capital market. For the first time in 40 years, private bankers and other capitalists in Japan can keep, spend or lend any foreign currencies that they accumulate, rather than being compelled in most cases to sell them to the government for yen. In addition, at the urging of MITI Minister Kakuei Tanaka, government technicians are now working out details of a plan to shift from $5 billion to $9 billion of the government's foreign-exchange reserves into a fund for making long-term loans to Japanese companies investing overseas.

The rise of Japan as a global lender and investor seems healthy. Asia's richest country certainly has the financial power to play a far larger role in the world economy than that of exporter. Many foreign companies and governments could use a new source of capital. Direct Japanese investment could create needed jobs in quite a few countries, not least the U.S.

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