Analysts on both sides of the Pacific agree that a dynamic market economy requires the periodic infusion of fresh blood in the form of new firms in order to develop innovative products and to promote competition among existing companies. In sufficient volume, this mobility can foster overall economic growth.
In this century, the United States has experienced a nearly complete turnover in the ranks of big companies as a result of technological change and differing degrees of managerial competence. While early postwar Japan had many companies like Sony Corp. that were either brand-new or eager and able to grow in the free-for-all environment of the time, in recent years the coterie of newcomers and ambitious small companies seems to have shrunk dramatically.
The U.S. economy appears to have done a much better job during the last two or three decades of spawning new firms that have quickly assumed leading roles in industries as diverse as retailing and personal computers. Equally important, the ascent of these pioneers has forced the laggards out of established niches or even into bankruptcy. This dynamic process has contributed to America's strong economic performance. The Japanese and global economies will both benefit to the extent that entrepreneurs in Japan can replicate this experience.
TOKYO GEARS UP LOAN-GUARANTEE PROGRAM by Douglas Ostrom
For at least a year, analysts have worried that Japanese financial institutions are unwilling (or unable) to do the lending that is almost universally regarded as critical to reigniting economic growth. Policymakers have come up with at least three initiatives bank recapitalization, increased lending through government financial institutions and a bigger loan-guarantee plan designed to alleviate the "credit crunch." Some experts worry, however, that as these programs expand, they may create serious problems of their own.
RENAULT'S BID FOR NISSAN STAKE SPOTLIGHTS JAPANESE ACCOUNTING PRACTICES by Jon Choy
The consolidation of the global automotive industry continued March 16 when executives of France's Renault S.A. authorized an offer valued at about $4 billion for roughly 35 percent of Nissan Motor Co., Ltd. as well as a significant stake in its diesel truck affiliate. Nissan President Yoshikazu Hanawa had made it clear in the past few months that Japan's number-two car and truck manufacturer saddled with at least ¥2 trillion ($16.7 billion at ¥120=$1.00) in interest-bearing debts was looking for a white knight. The novelty of a top Japanese industrial concern publicly courting a suitor was heightened by the fact that the potential rescuers were all foreign companies. While experts debate whether Renault's bid for Nissan will be a boon or a bane for the two vehicle makers, the proposed deal has focused attention on Japanese accounting practices.
OBUCHI, KIM STRIVE TO BRIDGE DIFFERENCES ON NORTH KOREAN POLICY by Barbara Wanner
Criticized by some for a diplomatic flip-flop and lauded by others for his show of flexibility, Prime Minister Keizo Obuchi told South Korean President Kim Dae Jung during March 19-21 meetings in Seoul that Tokyo supports South Korea's "sunshine policy" of engagement with North Korea. But in keeping with the Obuchi administration's statements earlier this year to both South Korean and American officials, the Japanese leader gave no indication of when he would relax sanctions that were imposed on the closed, Stalinist regime of Kim Jong Il in response to Pyongyang's firing of a rocket over Japan last August (see JEI Report No. 34B, September 4, 1998).
JAPAN TO CONSIDER MORE ASSISTANCE FOR EAST ASIA; EXTENDS NEW LOAN TO SOUTH KOREA by Marc Castellano
Vice Finance Minister for International Affairs Eisuke Sakakibara announced at a March 18 meeting of the Association of Southeast Asian Nations that Tokyo is willing to provide assistance to countries not included in the Miyazawa Plan the $30 billion fund introduced last October to help the crisis-hit economies of East Asia (see JEI Report No. 6A, February 12, 1999). The senior Ministry of Finance official, known as Mr. Yen for his reputed ability to influence foreign exchange markets, was in Hanoi with a Japanese delegation to attend a meeting of what is called Asean + 3. Asean groups Brunei, Cambodia (participating as an observer until formal admission), Indonesia, Laos, Malaysia, Myanmar (formerly Burma), the Philippines, Singapore, Thailand and Vietnam, while the "+ 3" refers to Japan, the People's Republic of China and South Korea. Deputy finance ministers had gathered a day ahead of an Asean finance ministers' meeting, which was held March 19 and March 20 to discuss economic development issues.
Tokyo's choice of a seemingly prohibitive duty for above-quota imports of rice under its pending tariffication regime is being challenged under World Trade Organization rules. Interestingly, Washington the most vocal critic of how Japan arrived at a tariff of ¥351.71 ($2.93 at ¥120=$1.00) per kilogram on foreign rice exceeding the threshold volume of 644,300 metric tons (milled) in the year starting April 1 and the levy of ¥341 ($2.84) per kilogram on imports over 682,000 metric tons (milled) in the April 2000-March 2001 period (see JEI Report No. 2B, January 15, 1999) did not seek arbitration. Instead, three marginal or potential rice exporters (Uruguay, the European Union and Argentina) joined Australia, which ranks third after the United States and Thailand as a rice supplier to Japan, in protesting Tokyo's move before the March 21 WTO filing deadline.