Wishful thinking in Washington and a refusal to discuss basic matters in Tokyo are threatening to turn a troubled relationship into one in which both parties will be guided by metaphors of villainy.

Washington's wishful thinking is composed of the self-flattering view that Japan was more or less remade in the American image during the early years after World War II, and the belief that whatever stands in the way of a relatively free and equitable exchange of economic opportunities will eventually be removed through mutual resolve. On the Japanese side, one finds a consistent denial of fundamental problems other than the necessity for Americans to "try harder to compete," and a vehemently negative reaction to any attempt at serious political analysis. Japan's bureaucrats and business interests are simply not ready to discuss with the outside world how their economy and informal power system interact.

This ominous situation would not exist if media and intellectuals, both within and outside Japan, were more thorough in scrutinizing Japanese conditions. The United States is incessantly studied, as if under a microscope, for motives and purpose, and justifiably so, for it is the world's most important economic power. Nothing remotely comparable takes place for the world's second-largest economic power.

An important reason for this hiatus is the world's great dependence on the Japanese press for information and speculation on Tokyo and its foreign relations. This principal source of information about Japan does not engage in a true dissection of its own political habitat. Japanese media rarely offer analytical reporting on the informal relations and transactions among government bureaucrats, business bureaucrats of the industrial federations, political power brokers and other clusters of powerholders that determine Japanese policies. Japanese editors themselves are part of this informal political structure, and where issues cut too close to the interests of the Japanese sociopolitical elite, the news media are not sufficiently independent to offer a variety of views.

Conforming to the human inclination to project one's own habits and thoughts onto others, Americans assume that something comparable to their own policy debates takes place in Japan. Thus the erroneous impression is widespread that the Japanese people are engaged in a discussion about their country's purpose and future role in the world. The problems of U.S.-Japanese relations are often presented as if dependent on the Japanese voter, who only needs to be won over before the government can make the concessions demanded by the United States. The fact is, the Japanese electorate has no say in bilateral controversies and could not, even if it wanted to, influence their outcomes in any way. If the Japanese electorate actually did have a mandate, the United States would have an easier task: an opinion poll by the economic daily Nihon Keizai Shimbun suggests that a majority of Japanese understand that their interests are championed by an American government pleading for structural reforms benefiting the consumer.1 The United States is sometimes even half-jokingly referred to as Japan's only authentic political opposition party.

Japanese newspapers could not ignore the results of this survey, but in acknowledging domestic deficiencies they did not embark on coherent analyses of cause and effect or the international repercussions. A few Japanese voices sympathetically explaining the U.S. position do not begin to compare to the veritable chorus of lobbyists and academics, as well as Japanese official spokesmen, that influences American opinion with a view of the universe propagated or endorsed by Tokyo's officialdom. Just how unaware Americans are of this imbalance in opinion formation was shown by their shocked surprise at the samizdat English-language version of The Japan that Can Say No, written by a prominent businessman, Akio Morita, and a well-known politician, Shintaro Ishihara. In fact the contentions and tone one finds in this book are very common in Japanese magazines and major newspapers; for over a year now, hardly a day has passed without the public being reminded by the media that the United States is "bashing" Japan.

The Japanese media have created a situation in which the Japanese people take it almost for granted that the rest of the world begrudges them the fruit of their hard work, and that Washington's words and actions concerning bilateral disputes are unreasonable and based on anti-Japanese, even racist, sentiment. Japanese popular opinion is corrupted to such an extent that the same consumers who would benefit greatly if American wishes were fulfilled readily accept the interpretation that they have become victims of American mismanagement and overspending.

It must be remembered that the Japanese public accepts as a matter of course that it cannot influence outcomes (unless it bands together in semi-violent radical activism). A majority vote for an opposition party would not bring down the de facto one-party system; there is no voter control over the bureaucrats and large business interests that have more power than the politicians. The sense of the nation being "bashed" combined with a sense of powerlessness cause a frustration that one sees reflected in the newly aggressive, self-righteous and hurt manner in which the United States is taken to task, and the superiority of Japan is implied if not openly stated. Ishihara offers explanations and justifies national pride in the eyes of a confused public, which basically does not know what to believe about its own authorities, but does know that it has no choice. While the U.S. role as advocate of consumer rights is now grudgingly admitted, it is at the same time still easy to see Washington in the role of villain.

Both the Japanese and the American sides are frustrated. These frustrations can only grow, and could well grow out of hand, since the solutions offered for the bilateral problems are so far essentially the same as those that have not worked in the past.

Temporary respite is sometimes gained when the Japanese bureaucracy compromises on some small matters after strong pressure from Washington. We are currently in such a phase, with the results of the Structural Impediments Initiative negotiations being presented by the U.S. administration as a major breakthrough. The SII has been unusual in that it focused attention for the first time on a number of informal structural arrangements that help shield the Japanese market against foreign participation. It can thus be compared with the 1982 campaign of the European Community, when the EC planned to invoke Article 23 of the General Agreement on Tariffs and Trade (GATT) against Japanese trade practices. But after almost a year of indignant allegations in the Japanese press that the United States wants to "change Japanese culture," the final Japanese commitments are unlikely to provide Americans with the economic opportunities they hoped to gain.

II

The SII euphoria is the most recent instance of American wishful thinking. Japanese promises of greater infrastructural spending dovetail with the pork-barrel interests of a number of Liberal Democratic Party (LDP) politicians, but they can hardly benefit American exporters of finished products. Those items that seem most promising, in the areas of antitrust and distribution measures, are not implementable. One of the most respected observers of Japanese economic developments, Kenneth Courtis, Deutsche Bank's senior economist and chief strategist, says that aside from official spokesmen he knows of no knowledgeable person who believes that the United States will benefit significantly from the SII results.

In private conversations some Japanese officials are skeptical, and even cynical. Several have already commented publicly that the outcome of the negotiations may actually increase the trade imbalance, as some of the measures will increase the competitive capacity of Japanese industry and trade. The SII campaign has been used by some power groups in the Japanese business world to overcome internal obstacles to their expansion. The potential increase of their political control over the market hardly promises significantly better market access for foreign firms.

The view that American pressure has created a climate of opinion in Japan to shift the emphasis from production to consumption demonstrates the depth of Washington's wishful thinking. Japanese newspapers have not started anything that could be called a political debate on such a shift.

The common suggestion that the Japanese public will at some point grow tired of subsidizing exports (by paying the world's highest prices for consumer products), and thus help bring about major structural changes, shows how little is understood in the West about the informal political arrangements that serve to prevent such a development. Any of the structural changes desired by Washington would, in the eyes of Japanese powerholders, introduce an intolerable degree of disorder and threaten their world.

Take, for example, the Japanese policy of bid-rigging (dango) in the construction industry, which Washington wants to stop. This would mean, among other things, the destruction of the most important part of the grass-roots foundation on which electoral success for the LDP rests. Another major structural impediment on which U.S. negotiators have set their sights is the system of distribution-keiretsu. Many Japanese retail outlets for manufactured goods are not independent entrepreneurial entities, but are locked into subcontractor-type relations monitored by dealer associations that give the most powerful manufacturers political control over the market. There is every political reason for the powerholders involved to preserve this system. Two of Washington's other demands-the enforcement of the antimonopoly law and the monitoring of informal transactions among the members of industrial groupings-would be tantamount to taking away the cornerstone on which the entire postwar Japanese economic edifice rests.

Whatever formal Japanese concessions emerge from negotiations, informal arrangements will spring up to preserve the status quo in every case. This will bring the United States back to square one, or to an even worse position, with increased American frustration and fresh evidence in the hands of Japanese nationalists that the United States is bent on "changing Japanese culture."

III

The ineffectual American approach toward Japan is based on a proliferation of illusions. Much comfort is derived from the belief that Japan and the United States are bound together by democratic values and common national objectives. This is correct in the sense that both countries believe in limiting arbitrary power, and that both believe in the benefits of the international free trade system.

But regarding the substance of the curbs on power, and the way they ought to be applied, American thinking and that of the Japanese power elite have little in common. And the international free trade system is undermined by the very methods Japanese business interests use to help preserve the advantages of their controlled domestic economy.

The American-designed Japanese constitution does not define a political system in which laws prevail over authorities. Japan is ruled through highly informal structures of governance and bureaucratic authority, which dovetail with the so-called jinmyaku (personal network) relations and transactions, unregulated by law, among clusters of the elite. Control over a potentially very disorderly world is the essential goal of Japan's bureaucrats. Even judiciary bureaucrats will not leave it up to the courts to decide in matters that affect the political system. Elections in Japan do not help shape or change concrete policies.

In its economic objectives, the United States wants to convince the world of the virtues of the market as an instrument for deciding the most efficient allocation of resources, thereby achieving the greatest good for the greatest number. In Japan, the market plays an ordering role, but is ultimately not allowed to determine the course of economic processes. Indeed, Japan's powerholders would be horrified if they had to leave the future up to the market. Market forces are seen as useful instruments to influence desired outcomes, but never as ends in themselves.

American wishful thinking causes blindness to the fact that Japanese political and economic behavior is meant to accomplish aims that are fundamentally different from those assumed by the United States. When realization of this fact sets in among those who have not wanted to believe it, existing frustrations are likely to reach a critical point, leading even to conjecture that Japan is run by reprobates; the U.S.-Japanese relationship is ultimately most vulnerable to moral indignation.

While it may be politically tempting to explain bilateral problems by attributing villainous motives to Japan's governing elite, those who are tempted by such diagnosis should consider the world as it appears through the eyes of that elite. Japanese powerholders grow up in a social setting where the law does not ultimately regulate affairs or provide the means for resolving conflicts. Nothing in their experience at home gives them any assurance that treaties or agreements with foreigners can in the end be reliable. Instead they seek international "special relationships," comparable to the domestic highly informal jinmyaku, as protection and to maintain maximum control through economic self-sufficiency.

Japanese popular imagery has long viewed the nation as surrounded by an unreliable and capricious world, and as a potential victim of uncontrollable external forces. A frequently used term for this phenomenon is higaisha ishiki, or victim consciousness. Higaisha ishiki can hardly be exaggerated; it colors everything. American suggestions and requests, even those acknowledged as having merit, are nonetheless automatically presented as yet another instance of the Japanese being made to pay for the faults of others.

Today the "special relationship" with the United States appears endangered in the eyes of many prominent Japanese, while the latent belief in the world's ill will toward Japan seems vindicated by ubiquitous new foreign pressures, demands and criticisms. All this gives greater purpose to Japan's further frantic economic expansion.

The common cliché about Japan's place in the world is that even the Japanese themselves do not know what it should be. But many Japanese in high positions seem to know very well. Japanese manufacturers and financial institutions that operate internationally, and the domestic industries and industrial federations tied to them, indicate what they consider to be their international tasks by their striving for ever greater global market shares. Rather than passing on the wealth that Japan has amassed to employees and consumers or putting it into badly needed infrastructural improvements, it is relentlessly plowed back into more investment and increased production capacity.

The Ministry of International Trade and Industry sees its role as coordinator of a newly emerging structure of subcontractor economies in Southeast Asia-the beginnings of a yen-bloc bulwark against American and European economic power. The Ministry of Finance coordinates the important international moves of the banks, security houses and insurance firms, each consisting of the largest organizations of their kind in the world, operating in informal cartels. All these Japanese institutions with international dealings are essentially in the business of national security. International domination in as many industrial areas as possible is part of an uncoordinated and never delineated yet powerful campaign to make the world safe for Japan.

What appears at first sight to be the result of a grand national conspiracy is, in fact, the result of the unequaled skill of individual Japanese power clusters in seizing opportunities for their own advancement. Aiding this purpose are their extraordinary institutional memories coupled with equally impressive institutional motivations-characteristics that distinguish them from institutions in the West.

Membership in a government agency, trade association or other Japanese institution is never casual. To Western sensibilities, the collective sense of shared traditions, quasi-sacred purpose and the need to impress society with the merits of the institution can be compared only to that of an elite military organization like the U.S. Marine Corps. Members of Japanese institutions need not be given detailed instruction or engage in lengthy tactical planning to know what must be done under any given circumstance to further the interests of their group. The international behavior of the Ministry of International Trade and Industry, the Ministry of Finance or the Keidanren must be seen in this perspective. Their activities affecting overseas markets supplement each other quite naturally.

These same parallel operating groups, to which Japan owes so much of its economic vitality, are the great weakness of the Japanese political system. Their institutional memories are highly developed because they must provide the guidance for the intricate informal methods with which these groups preserve order among themselves. They do not bow to anyone among them as the final arbiter. No person or group holds a mandate to make binding decisions for all of Japan's institutions as part of a national effort. Thus there is no center of accountability, no one who can explain to the Japanese public or to the world what Japan is doing. The problem with the informal get-togethers between American presidents and Japanese prime ministers is that they strengthen the illusion that the prime minister speaks for his country. He cannot speak for Japan in any practical way that is significant for U.S. purposes.

IV

Japan's political elite is resolutely uninterested in discussing how its system of informal relationships and transactions produces the politically protected economic might that affects other countries. It is also extremely skillful at changing the subject-a mastery necessary for minimizing conflict in the Japanese domestic setting. This tactic receives much unwitting help from Americans who have been invoking Japan-first as an example to be emulated and more recently as a threat to be met-in support of an agenda of self-repair.

It is unfortunate that an American agenda for "first putting our own house in order" has become almost inextricably linked with discussions about the bilateral relationship, for this has greatly muddied the discussion. The theory justifying the linkage is that if the United States greatly improved its competitiveness, the industrial threat from Japan would vanish. But this wrongly assumes that purely economic determinants are at work. Even if the American budget were balanced, the savings rate increased, the education system greatly improved and an ideal investment climate were created, the United States would still face an often hopeless competition against Japanese manufacturers and banks immune from bankruptcy because of their political protection.

Another obfuscation is the shift of the discussion from present problems to an imagined and dramatically different Japan of the future. Western media have spread much misinformation encouraging the belief that major changes are imminent, especially since the spring of 1989. The effects of the Recruit scandal, the result of the Upper House elections and the decline of the Tokyo stock market have been seized on as small watersheds in postwar Japanese history. The LDP and two prime ministers tainted by scandals were supposedly held to account by the public, Japanese women were supposedly beginning to play a more prominent political role and the consumers were supposedly "fed up." None of this was accurate. None of these developments has had a lasting effect on the way Japan is governed or does business. The undoubted changes taking place in Japanese society do not include the lifting of the political control over economic processes that the United States has been seeking.

Japan's bureaucrats generally endorse conclusions about structural change, especially concerning their own supposed gradual loss of control, because it matches their claims that Japan is adjusting to become a more responsible trading partner. They are not necessarily disingenuous about this; many believe that such changes do take place in areas other than those they know personally. The bureaucrats in the Ministry of Foreign Affairs see it as their duty to help preserve the status quo, which entails dissuading anyone from taking a fresh look at Japan. Representatives of Japanese government and business organizations react vehemently when such analysis is produced by foreign scholars and journalists, and engage in public campaigns to exorcise what is viewed exclusively in terms of a threat. This is understandable since the informal relationships on which they thrive cannot withstand scrutiny without losing their informality.

A Japanese public relations machine effectively amplifies what government agencies and the Keidanren want Americans to believe. Indeed these organizations derive support from many voices in the United States who wittingly or not relay their messages. No comparable American effort has gone into swaying Japanese opinion. The United States has from the outset believed that one could leave the formation of Japanese opinion to reasoned discourse among Japanese themselves. But there exists no sizable number of Japanese intellectuals, comparable to the Atlanticists in Europe, who genuinely believe in internationalist ideals and common purposes, other than the containment of communism. The few who do profess shared ideals in personal contacts with foreigners or in international forums still tend to conform to mainstream Japanese intellectual opinion in a domestic setting, so as not to be thought of as "un-Japanese."

V

Time may be running out for establishing a stable modus vivendi between Japan and the United States or, for that matter, Europe. Officials in Tokyo have privately warned Washington that perennial demands in the context of the bilateral trade conflict abet the proliferation of nationalistic sentiment in Japan, and that this sentiment could get out of hand. They are right. While the U.S. administration must contend with a Congress that is increasingly restive on the subject of Japan, Japanese bureaucrats today must take into account a newly emerging and intimidating right-wing force.

Right-wing Japanese activism is no longer confined to extremist groups noisily cruising cities in their banner-festooned sound trucks. A much more polished right-wing clique is making its presence felt, with a network of sympathizers, reaching into the press, the universities and the ruling party, and setting the tone for major articles in the serious monthly press. Most important, whereas right-wing activism in past decades directed its symbolic hostility primarily against Japan's communist neighbors, it has today become resoundingly anti-American. And numerous right-leaning intellectuals who were once pro-American are now speaking out against the United States.

Each time Washington exaggerates the tiny compromise concessions made by the Japanese bureaucracy in bilateral negotiations, rightist voices help create a strong impression that Tokyo gives in too easily and gives up too much to American demands. Alongside the victimhood imagery runs a strong message that the world does not sufficiently appreciate Japan's power or the superior model of social organization it has to offer.

A variety of views has reemerged on the uniqueness of Japanese culture and notions of strong exceptionalism that were part of the family-state ideology before 1945. This intellectual program and the rejection by Japanese authorities of genuine political analysis give free rein to a profusion of national illusions and guarantee a deepening of the nation's spiritual isolation. The new arrogant assertiveness, and unwillingness to consider the possibility that other countries might have a reason for thinking about Japan the way they do, remind seasoned observers of the 1930s. Strikingly similar to that period are the superb tactical skills with which Japan expands its international power without subordinating these skills to a grand national strategy that serves an attainable goal.

A basis for hope that economic developments will restore good relations between Japan and the United States is the possibility that the trade imbalance may eventually diminish and perhaps even disappear. But this, if it happened, would take care of only one symptom of a troubled relationship. Although it has gained an overwhelming symbolic significance, the enormous Japanese trade surplus has not caused the vanishing of entire U.S. industries and is only tangentially related to the new Japanese dominance in international financial and capital markets.

One school of thought on the U.S.-Japanese relationship holds that the two economies are becoming so intertwined that "misunderstandings" will be smoothed over while both countries prepare for a future of mutual benefit. The basis for this overly optimistic view is the escalation of Japanese investments in the United States and the growing number of joint ventures in sectors where American corporations cannot maintain themselves unless they hook up with Japanese firms. The Japanese bureaucracy and business interests have clearly been encouraging these links, partly as a hedge against possible economic reprisals.

While Japanese investment is likely to play a welcome revitalizing role, the rapidly increasing reliance on Japanese supplies is bound to stimulate American fears over the loss of entrepreneurial independence. In the end the strands that "intertwine" the two economies could be easily broken in a political hurricane of American moral indignation.

So far the administrations of both countries have given little reason to hope that they can cope with a saturation of frustrations and fears. There has been no political discussion between them that has produced a solution. And the kinds of "dialogue" that currently take place among academics, public figures or government representatives are leading nowhere.

VI

What can be done without aggravating the long-term relationship any further?

It is too late for America to correct the information/propaganda imbalance. Whereas the means for a propaganda war are commercially available to the Japanese in the United States, the reverse is not the case. More Americans could, nonetheless, make use of channels that are available for countering some of the more immoderately spurious arguments in Japanese newspapers and magazines that now go almost totally unchallenged. Ordinary Japanese readers tend to be cynical about their own political system and are receptive to alternative explanations.

More Americans must become involved. On an intellectual and academic level, the United States should not be predominantly represented by people who depend professionally on the Japanese institutions they are expected to analyze, and who tend to switch to the need for Americans to "put their own house in order" when the subject of Japanese structural incompatibilities is raised. But contradicting erroneous Japanese views about the relationship and American motives will have only a mild stopgap effect.

A long-term solution begins with the realization that the United States must have a Japan policy. The current approach based on wishful thinking lacks the consistency and attainable goals that are the minimal requirements of policy.

A genuine Japan policy would require an unambiguous indication by the U.S. government that it realizes the enormity of the problem and is ready to address its fundamentals. It would require recognition that the political relationships among the participants in the Japanese economy have created conditions that are incompatible with Western aims and practices. It would require a recognition that these incompatibilities cannot be corrected by market mechanisms, but that they necessitate major international institutional adjustments.

At the same time, it must be made very clear that the politically protected economic system of Japan is not an evil entity. It is, rather, a system driven by different motives that must be reckoned with in the foreign policies of other states. Washington must address the deep, underlying sense of insecurity that helps shape Japan's motives. Various symbolic actions are available to help Japanese powerholders believe that the world is not against them, such as giving Japan a permanent seat on the U.N. Security Council. Such a move, however, should only be considered as part of a larger covenant.

One perspective that is becoming widely accepted as the Cold War era draws to a close is that the bipolar arrangement based on nuclear arms is being replaced by a tripolar arrangement, consisting of the United States, an integrated Europe, and Japan, based on economic prowess. It is also accepted that this situation is fraught with the potential for new conflict. It would thus seem obvious that multilateral safeguards are needed to ameliorate the types of conflict already exemplified in the U.S.-Japanese relationship.

Fragmentation of the world into three partially exclusive trading blocs would mean more than ending the relatively free international trading system that, largely under U.S. auspices, has brought much prosperity to the postwar world. Such a division would be inherently unstable, with each bloc permanently nursing suspicions about the joint intentions of the other two. Moreover an Asian bloc would in itself be very unstable, as it is highly doubtful that the expanding Southeast Asian economies would long accept the subcontractor position that Tokyo's businessmen and bureaucrats have in mind for them.

The GATT is not equipped to cope with late twentieth-century international economic realities. Its founders in 1946 could not even imagine the emergence of the politically driven economic power Japan represents today. The Uruguay Round does not begin to address the issues that need to be resolved for a relatively stable international order to develop. It is, in fact, detrimental to U.S. interests to the extent that it sustains the illusion that these negotiations are addressing the major international economic problems.

Efforts such as the SII, aimed at changing the way Japanese organizations do business, are bound to fail in the long run. They may even make conditions worse. Rather than trying to change Japan, a viable program would be to devise multilateral agreements on new international rules that take the political realities underlying Japanese economic power into account.

In the United States there is movement toward various forms of bilateral restrictive trade arrangements. If the political will exists to counteract this trend-which together with similar moves in Europe is beginning to compartmentalize the world trading system-the United States could still make a major difference by taking the initiative for reaching new multilateral provisions. Doing so, it would also maintain its stature as an international economic leader.

A clear signal from the White House that the need for a Japan policy has been understood would go a long way toward a solution. There are sufficient indications that the European Community would support an unambiguous American initiative in this matter, if this could lead to a new international discipline safeguarding a global trading and financial system. In Japan there would very likely be considerable behind-the-scenes support among senior and still-influential retired officials for a new international discipline. These Japanese are apprehensive about current trends but lack the political means to produce voluntary adjustments on the part of Japan. Most clusters of Japanese powerholders would probably also prefer the certainty of new international guarantees to the volatility of the present situation.

The new institutional framework would have to be either a completely overhauled GATT or some substitute for it. The substance of the new rules would have to depend on what all the parties to a new international discipline can agree is worth preserving in what is left of the international free trade system.

Such agreement would be the best guarantee against the dangers of mutual moral indignation and vilification in Japan and the United States. It may be the only means to prevent an ugly clash. It will probably also be the only way to forestall worldwide protectionism. Not least, it is likely to be the best insurance against Japan and the Western countries becoming enemies a second time.

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  • Karel van Wolferen, East Asian correspondent for the Dutch newspaper NRC Handelsblad, has lived in Japan since 1962. His most recent book is The Enigma of Japanese Power.
  • More By Karel van Wolferen