Era of Japanese Economic Pre-eminence May Be Ending

PARIS _ Only a few years ago, somber warnings were being heard that many major U.S. commercial banks were on the verge of collapse. That didn't happen.

Now Japan's largest bank, Sumitomo, has become that country's first financial institution in 50 years to post a year-end loss. Sumitomo is only one of a number of Japanese banks facing severe problems because of huge real estate losses and other bad debts.

Last week, General Motors _ the giant U.S. car-maker that many experts earlier had predicted might be heading off the highway because of heavy losses _ announced worldwide net profits of $1.9 billion, its first gain since 1989.

Meanwhile, Japan's car exports dropped by more than 11 percent in 1994, the ninth consecutive year they have fallen compared with the preceding year. In Europe, sales of Japanese makes were off by more than 14 percent, the fourth straight year of decline. Only a portion of the decline resulted from transferring manufacturing facilities to countries outside Japan.

International economic experts concede that these developments _ or even the fact that the Japanese, for the first time, imported more television sets in 1994 than they sold abroad _ are not conclusive proof that Japan has passed its peak.

But some like Kurt Littler, a Paris-based specialist on global trade, claim evidence is beginning to accumulate that Japan is slipping and will experience increasing difficulty in clinging to its position as an export colossus in the late 1990s.

"It reflects the changing times that European auto makers are now less worried by future inroads into their domestic markets by Japan than by other Asian manufacturers and the U.S. Big Three," he said.

He also doubts that, given the continuing shaky state of Japan's real estate and equity markets, its banks will be able to hold onto the pre-eminent influence they have exercised in world financial centers since the 1980s.

"The (banks') overwhelming international power is likely to prove ephemeral," he said. "As bankers and financiers, the Japanese have never really displayed the same talent they do as industrialists and salesmen."

All of this is likely to have significant political as well as economic impact, according to some analysts.

They foresee an end to the era in which the United States and Europe have regarded Japan as the "economic enemy" because of its seemingly unstoppable march toward near-total domination of world markets.

The West's "economic Cold War" with Japan may be drawing to a close, predicts Jean-Louis Sandoz, a French specialist on Western relations with Asia.

"For more than a decade, fear and dread of Japanese economic power has shaped Western policies," he pointed out. "This has been most obvious in Washington because the United States has been the most sensitive to Japan's economic expansion. But Europe equally has felt threatened. The sense of menace often has been so great as to be almost irrational."

Now, Sandoz says, the Japanese no longer look unbeatable.

By coincidence, the Kobe earthquake had the effect of reinforcing the West's slowly changing view of Japan, he adds.

"The initial bungled response to the quake, the poorly organized relief work and sheer incompetence shown by some officials came as an eye-opener to many Westerners," he observed.

"The muddle demonstrated that the Japanese aren't invariably efficient and even lack some of the organizational skills that are taken for granted in America and Europe."

The psychological consequences are likely to be lasting on all sides, Sandoz claims.

"Even before the earthquake, the Japanese showed signs of losing some of their self-confidence and sense of superiority," he said. "The aftermath of the Kobe tragedy has accelerated this process."

At the same time, he added, the West also is taking a more realistic view, recognizing that "the Japanese are not supermen."

Copyright 1995
Provided by ProQuest Information and Learning Company. All rights Reserved.