NO. 31 &emdash; August 15, 1997


Feature Article


For Americans and other outsiders, big manufacturers like Toyota Motor Corp. and Sony Corp. symbolize Japan's global economic challenge. Often overlooked, however, is the abundance of small and medium-sized manufacturers and their central role in production, even in such technologically advanced, internationally competitive product areas as motor vehicles, electrical machinery, and consumer and industrial electronics. Indeed, Japanese economists frequently have said that small and midsized businesses are so important that they form the economy's backbone.

Whatever their size, Japanese manufacturers are struggling to adapt to a period of soft domestic demand, increasing competition abroad and at home, and the host of other problems that emerged as Japan evolved into a high-cost economy. Small and midsized suppliers, however, face these pressures with fewer financial and managerial resources than the top tier of manufacturers and little hope of a government bailout. This report will examine why small and midsized firms became so important in the manufacturing sector and how today's increasingly severe competitive environment is likely to shape their future place in the economy.

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Weekly Review

Japan Biggest Contributor To IMF Thai Bailout Plan by Eric Altbach

Japan and the International Monetary Fund, together with other Asian nations, have assembled a $16 billion relief package for financially strapped Thailand. While Tokyo is the single biggest contributor, the government left it to the IMF to set the conditions for the activation of the loans it will make. The United States praised the plan, but neither Washington nor any European capital will provide funds directly to help Bangkok weather the current financial crisis.


Debate In Japan Heats Up On Defense Guidelines Review by Barbara Wanner

As American and Japanese defense officials near the conclusion of more than a year of discussions aimed at expanding bilateral defense cooperation, debate in Japan and elsewhere in Asia is heating up about the implications of some of the proposed revisions to the 1978 U.S.-Japan defense operational guidelines. The so-called guidelines review has focused on how American forces and Self-Defense Forces would cooperate in the event of an armed attack against Japan or an emergency in an area near the Asian nation as well as in peacetime. An early June interim report included 40 examples of collaboration in response to military, humanitarian or other emergencies in areas "surrounding" Japan.


Japan's Current Account Surplus Swelled In Spring by Douglas Ostrom

Japan's external imbalances again are on the upswing. That conclusion, tentatively established three months ago, was affirmed in decisive fashion with the release of the April-June current account statistics. The broadest measure of the nation's external surplus jumped 91.4 percent in the spring. Together with a 0.6 rise in the previous three months, the new figure boosted Japan's current account surplus in 1997's first half 40.4 percent above the comparable period of 1996.


Tokyo Misses Deadline For Port Liberalization Plan by Jon Choy

Despite Tokyo's pledge to have a plan to liberalize port practices in hand by July 31, the Ministry of Transport was unable to forge a compromise between shipping interests and an association of dockworkers and warehouses. The failure to produce a blueprint by the self-imposed deadline cast doubt on whether Japan would be able to resolve the differences before a more important date set by the Federal Maritime Commission &emdash; September 4. If the government has not come up with a liberalization plan by then, the FMC says that it will begin fining three Japanese shippers $100,000 each time one of their vessels docks at an American port. While U.S. shipping firms operating in Japan are pessimistic about the chances of resolving the disputed issues, their Japanese counterparts are more upbeat.




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