The Unraveling of Japan Inc.: Multinationals as Agents of Change

Japan is losing its Inc. The interests of Japan and its giant corporations, for so long the same, are diverging. The Mitsubishis, Toyotas, and Matsushitas -- the pride of Japan's postwar rebirth -- are joining the great multinational Diaspora. During the 1990s, the nation's best companies have been shifting production overseas faster than ever before. And the trend is likely to become more pronounced: capital investment abroad, a precursor of offshore production, has grown at a blistering pace over the decade. According to the Bank of Japan's semiannual survey of business, annual growth rates broke into double digits only in 1993, but probably topped 30 percent in 1996, while capital investment at home has lagged far behind. Partly this is pure economics, a response to the high yen and the maturing of Japan's economy, as well as the ever stronger pull of the global marketplace. But the numbers also represent a stinging corporate rebuke to Tokyo. The message of the multinationals is this: The low productivity and growth of this overregulated marketplace no longer work for us. Japanese firms across the board have seen dramatic deterioration in the break-even points and efficiency of their Japan-based operations.

CAPITAL LEARNS TO FLY

Today these companies must obey a new taskmaster -- not Tokyo's fractured alliance of businesspeople, politicians, and bureaucrats, but a global marketplace that has become, for many key industries, merciless toward the provincial and unproductive. It is a marketplace changed utterly by lowered barriers to capital, goods, and services, by ever more complex and expensive technology requiring strategic alliances across borders -- witness the "multimedia" melding of Japanese consumer electronics and American software -- and by the rise of opportunities and would-be challengers everywhere as capitalism burgeons universally. Just as important, it is a marketplace in which a slew of new Asian "economic miracles" has emerged to take Japan's place as the low-cost producer of manufactured goods. Japanese companies, opening up daylight between themselves and the home economy, have identified their interests with these foreign economies (in Malaysia, more than four percent of GNP is derived from Matsushita alone).