UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

Japan's behavior in foreign resource investments in the post second world war period Oyama, Ikuo 1972-12-31

You don't seem to have a PDF reader installed, try download the pdf

Item Metadata

Download

Media
UBC_1972_A4_5 O93.pdf [ 6MB ]
Metadata
JSON: 1.0101629.json
JSON-LD: 1.0101629+ld.json
RDF/XML (Pretty): 1.0101629.xml
RDF/JSON: 1.0101629+rdf.json
Turtle: 1.0101629+rdf-turtle.txt
N-Triples: 1.0101629+rdf-ntriples.txt
Original Record: 1.0101629 +original-record.json
Full Text
1.0101629.txt
Citation
1.0101629.ris

Full Text

JAPAN'S BEHAVIOR IN FOREIGN RESOURCE INVESTMENTS IN THE POST SECOND WORLD WAR PERIOD  by IKUO OYAMA B.A., Aoyama Gakuin U n i v e r s i t y , 1966  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION  i n the F a c u l t y of Commerce and Business  Administration  We a c c e p t t h i s t h e s i s as conforming to the required  standard  THE UNIVERSITY OF BRITISH COLUMBIA September, 1972  In p r e s e n t i n g t h i s t h e s i s an advanced  degree at  in p a r t i a l ' f u l f i lmeiit o f the  requirements  the U n i v e r s i t y of B r i t i s h C o l u m b i a , I agree  the L i b r a r y s h a l l make i t f r e e l y I f u r t h e r agree t h a t p e r m i s s i o n  available  for  r e f e r e n c e and  for e x t e n s i v e c o p y i n g o f t h i s  for  that  study. thesis  f o r s c h o l a r l y purposes may be g r a n t e d by the Head o f my Department o r by h i s of  representatives.  this thesis for  written  It  financial  i s u n d e r s t o o d that c o p y i n g o r g a i n s h a l l not  be a l l o w e d w i t h o u t my  permission.  Ikuo Oyama  Department ofQommerce and B u s i n e s s A d m i n i s t r a t i o n The U n i v e r s i t y o f B r i t i s h Columbia Vancouver 8, Canada  Date September ? 9 . 197?  publication  ii  ABSTRACT  T h i s t h e s i s seeks t o e x p l o r e Japanese f o r e i g n investment  c r i t e r i a i n resource i n d u s t r i e s , i n o r d e r to  determine what f a c t o r s may investment  i n f l u e n c e the Japanese  b e h a v i o r i n upstream investments.  Japan's  b e h a v i o r f o r o b t a i n i n g resources i s becoming i n c r e a s i n g l y important i n the world resource market because i t r e q u i r e s s u b s t a n t i a l amounts o f raw m a t e r i a l s . F i v e c r i t e r i a were h y p o t h e s i z e d to a n a l y z e Japanese investment  b e h a v i o r i n resource i n d u s t r i e s i n the p o s t -  Second World War  period.  These c r i t e r i a may  o n l y be  a p p l i c a b l e to Japanese r e s o u r c e i n d u s t r i e s . Japanese f o r e i g n investments government c o n t r o l u n t i l  were under t i g h t  the end of the 1960's, and  few s i z a b l e r e s o u r c e investments Although r e s o u r c e investments  were  undertaken.  have been I n c r e a s i n g over the  p a s t few y e a r s , Japan's r e s o u r c e investments p o l i c i e s are s t i l l  very  and  investment  i n transition.  Based on the country's own behavior, an attempt  was  c r i t e r i a and p a s t  made to determine  Japan's f u t u r e  behavior under the expected r e s o u r c e s demand-supply c o n d i t i o n s , expected changes i n the w o r l d .  economic c o n d i t i o n s and  political  Ill  TABLE OP CONTENTS  CHAPTER  PAGE INTRODUCTION , O b j e c t i v e s of the StudyO r g a n i z a t i o n o f the Study C h a r a c t e r i s t i c s o f Resource Industries Japanese A t t i t u d e f o r Resource Investments  II  JAPAN'S INVESTMENT MOTIVES Overview I n h i b i t e d Investment Upstream V a l i d i t y of Cost-Benefit Relationships Reasons f o r Investment Upstream (A) S t a b l e Resources Plow Hypothesis (B) Low Supply P r i c e Hypothesis (0) N a t i o n a l P r e s t i g e Hypothesis (D) Increased F o r e i g n Reserves Hypothesis (E) A s s i s t i n g the Development o f LDO's Hypothesis  III  JAPAN'S INVESTMENT BEHAVIOR Overview (I) F i r s t P e r i o d (1945 to 1 9 5 0 ) ( I I ) Second P e r i o d ( 1 9 5 1 throughout the 1960's) Overview (A) Economic P o l i c y Changes (B) T r a d i n g Companies and T h e i r Behavior (0) Manufacturers and T h e i r Behavior (D) Government and I t s Behavior  32  iv  ( I I I ) T h i r d P e r i o d (1970 t o September, 1972) Overview (A) T r a d i n g Companies and T h e i r Behavior (B) Manufacturers and T h e i r Behavior (C) Government and I t s Behavior  IV  JAPAN'S EXPECTED FUTURE BEHAVIOR Overview (A) Japan's Expected Reource Demand (B) Japan's Expected Behavior  77  V  SUMMARY  88  BIBLIOGRAPHY  90  APPENDIXES  97  V  LIST OP APPENDIXES PAGE A  Japan's Import S t r u c t u r e f o r S e l e c t e d Years  B  F o r e i g n Dependency of Major Resources f o r S e l e c t e d Years  97  98  C  Japan's Balance o f Payments  D  Monthly F o r e i g n Reserves Balance  E  Terms o f Trade Between Developed and Less Developed Countries Net Flow o f F i n a n c i a l Resources from Japan to LDC's and M u l t i l a t e r a l Agencies, 1966 - 1 9 7 0  102  G  Resources Demand Index f o r S e l e c t e d Years  103  H  Estimated Supply and Demand i n Major N a t u r a l Resources  F  99 100 101  104  CHAPTER  ONE  INTRODUCTION  Japan absorbs  l a r g e amounts o f f o r e i g n r e s o u r c e s and  i t s dependence on these r e s o u r c e s i s c o n s i d e r a b l e . country's t o t a l imports i n c r e a s e d from $2.4  billion in  to  #5.8  In  1970 , and o f these amounts more than t w o - t h i r d s  raw  b i l l i o n i n 1961,  The  |15 b i l l i o n i n 1969,  $18.8  1953,  billion comprise  1  resources. Japan's dependency on f o r e i g n r e s o u r c e s has  been  documented and data on t h i s a s p e c t o f Japan's economic s t a t u s a r e presented i n Appendix B.  Prom t h a t appendix  we  observe t h a t i t i s p r e d i c t e d t h a t by 1975 more t h a n 83$  of  major r e s o u r c e s , except l e a d , z i n c and n a t u r a l gas,  will  have to be imported from o t h e r c o u n t r i e s . Japan's r e s o u r c e o b t a i n i n g methods i n the postwar p e r i o d , j u d g i n g from the r e s u l t s o f today, were q u i t e successful.  D e s p i t e heavy f o r e i g n dependency, the needy  raw m a t e r i a l s were f e d i n t o the Japanese economy and  Japan  a c h i e v e d I t s economic g o a l s .  O b j e c t i v e s o f the Study The paper w i l l study Japanese f o r e i g n  investment  The data on imports came from Business JAPAN, November, 1971, and the data on import composition a r e contained i n Appendix A. 1  2  motives and behavior w i t h r e s p e c t to r e s o u r c e i n d u s t r i e s i n the post-World to  War I I p e r i o d .  F i v e hypotheses  a r e proposed  e x p l a i n Japan's a c t i v i t i e s i n t h e i r economic, p o l i t i c a l  and c u l t u r a l a s p e c t s .  I t w i l l be argued t h a t t h e c o s t -  b e n e f i t c o n s i d e r a t i o n s a r e o n l y a p a r t o f t h e group o f f a c t o r s t h a t the Japanese c o n s i d e r r e g a r d i n g investments i n resource i n d u s t r i e s . The postwar p e r i o d i s d i v i d e d i n t o t h r e e  sub-periods  c o v e r i n g 1) from 1945 to 1950, i n which no f o r e i g n i n v e s t ments were p e r m i t t e d , 2) from 1951 t o around 1970, i n which open market r e s o u r c e purchases  were the most common way  Japanese f i r m s a c q u i r e d raw m a t e r i a l s , and 3) from around 1970  to t h e p r e s e n t , September, 1972, i n which d i r e c t  investments  i n resource i n d u s t r i e s have r a p i d l y been i n c r e a s e d .  An attempt  w i l l be made to r e a c h a p o s i t i o n  r e g a r d i n g f u t u r e behavior, based  on p a s t behavior and  economic and p o l i t i c a l developments, both i n Japan and i n the r e s t o f the w o r l d .  O r g a n i z a t i o n o f t h e Study The study i s d i v i d e d i n t o t h r e e major p a r t s : t h e p r o p o s i t i o n o f hypotheses  as devices t o analyze  behavior,  an a n a l y s i s o f Japan's behavior i n resource I n d u s t r i e s s i n c e the end o f t h e war i n 1945,  t o date, and a p r e d i c t i o n f o r  3  the f u t u r e based on the two  previous p a r t s .  The  first  part  i s d i s c u s s e d i n Chapter I I , the second p a r t i n Chapter I I I , f o l l o w e d by the p o s s i b l e f u t u r e i n Chapter IV.  Chapter V  summarizes the whole work.  C h a r a c t e r i s t i c s o f Resource I n d u s t r i e s Investments i n resource i n t o two  aspects.  resources,  One  i n d u s t r i e s can be d i v i d e d  d e a l s w i t h a c t u a l development of  i n c l u d i n g the p r e l i m i n a r y g e o l o g i c a l and  geographical  s t u d i e s and mine v a l u a t i o n , f e a s i b i l i t y  and a c t u a l p r o d u c t i o n o f r e s o u r c e s .  I t requires a  studies,  lengthy  p e r i o d i n p r e l i m i n a r y s t u d i e s and a s u b s t a n t i a l amount o f c a p i t a l investments f o r a c t u a l development of  resources.  Sometimes i t r e q u i r e s investments i n i n f r a s t r u c t u r e s , such as r a i l r o a d s , roads, p o r t f a c i l i t i e s , and  others.  The  o t h e r a s p e c t Includes  and p r o c e s s i n g of n a t u r a l resources and purchased overseas. resource  schools, h o s p i t a l s smelting,  produced  extraction  domestically  The former i s c a l l e d upstream  i n d u s t r i e s , w h i l e the l a t t e r i s c a l l e d downstream.  The  g e n e r a l c h a r a c t e r i s t i c s o f Japanese  resource  investments are t h a t they a r e h e a v i l y concentrated stream, and  t h a t huge q u a n t i t i e s o f resources  down*  produced by  f o r e i g n upstream have been purchased i n the open markets fed  i n t o Japanese i n d u s t r i a l downstream.  ~  I n t h i s study,  and  4  resource Investments upstream  i n d i c a t e Japan's f o r e i g n investments  industries,  Japanese A t t i t u d e f o r Resource A fundamental  Investments  Japanese r e s o u r c e p o l i c y was  p r e f e r e n t i a l use o f domestic r e s o u r c e s . 2  the  Resources were  purchased overseas t o compensate f o r those not produced i n Japan, and f o r s h o r t a g e s . as raw as p o s s i b l e . four situations.  They were brought back to Japan  The r e a s o n f o r t h i s could be based  on  F i r s t , s m e l t i n g i n d u s t r i e s and o t h e r  p r o c e s s i n g f a c i l i t i e s a r e i n any case necessary i n Japan f o r f u l l u t i l i z a t i o n o f domestic r e s o u r c e s . abroad can be f e d i n t o these i n d u s t r i e s .  Raw  r e s o u r c e s from  Second, the s c a l e  o f these i n d u s t r i e s must be e n l a r g e d to such p r o p o r t i o n s t h a t they a r e c o m p e t i t i v e i n the world market. profit  Third,  any  earned i n the course o f r e s o u r c e s p r o c e s s i n g i s  earned by the Japanese.  I n a d d i t i o n , the development  of  raw matterial-saving technology not o n l y i n c r e a s e s the e f f i c i e n c y o f r e s o u r c e s , but a l s o minimizes the d r a i n on Japan's f o r e i g n r e s e r v e s .  And f i n a l l y , the q u a n t i t y o f ore  purchased by the Japanese from any p a r t i c u l a r country has been too  s m a l l to j u s t i f y s e t t i n g up s m e l t i n g and c o n c e n t r a t i o n  o p e r a t i o n s i n any f o r e i g n c o u n t r y .  Masami Tamaki,"Hitetsu Kinzoku Shigen K a i h a t s u no S e i j i K e i z a i g a k u ( P o l i t i c a l Economy i n Non-Ferrous Metal Resources Development), K e l z a l Hyoron, Vol.20, No.5, May, 1971, P.44. d  11  5  U n t i l quite recently,  Japan d i d l i t t l e more t h a n  purchase resources i n the open market.  T h i s Included l o n g -  term purchase agreements and spot purchases.  T h i s approach  to the a c q u i s i t i o n o f resources r e q u i r e d l i m i t e d or no c a p i t a l investment, and t h i s was i n d u s t r i e s , which had l i t t l e  s u i t a b l e to  Japanese  f i n a n c i a l c a p a b i l i t y and were  under t i g h t government c o n t r o l concerning the use o f foreign reserves. Only f o r the p a s t few y e a r s have independent investments upstream for  by Japanese  resource  i n d u s t r i e s been promoted  the reasons to be d i s c u s s e d i n the next chapter.  6  CHAPTER  TWO  JAPAN'S INVESTMENT MOTIVES  Overview There a r e three o b j e c t i v e s i n t h i s Chapter.  The  f i r s t i s to c l a r i f y the reasons why Japan i n v e s t e d h e a v i l y downstream.  The second i s t o e x p l a i n why  cost-benefit  r e l a t i o n s h i p s are poor c r i t e r i a to e v a l u a t e investment proposals.  And the t h i r d i s to propose reasons f o r Japan's  investment upstream,  and t o i n c o r p o r a t e f i v e hypotheses to  a n a l y z e Japan's p a s t and expected f u t u r e behavior i n the next c h a p t e r s .  I n h i b i t e d Investment  Upstream  Japan has a very l i m i t e d amount o f r e s o u r c e s and had little  o p p o r t u n i t y to experience s i z a b l e  upstream.  investments  There a r e t h r e e reasons f o r Japan's  downstream o f r e s o u r c e i n d u s t r i e s .  First,  investment  Japanese  i n d u s t r i e s had to e s t a b l i s h themselves out o f the war d e s t r u c t i o n , and had to c a t c h up to t h e i r Western counterp a r t s i n a s h o r t time.  T h e i r major source o f f i n a n c i n g  has been debt f i n a n c i n g , and investments upstream were o b v i o u s l y a l e s s a t t r a c t i v e a l t e r n a t i v e , because  they  r e q u i r e a l e n g t h y l e a d time and a l a r g e amount of funds,  7  but w i t h a very s m a l l p r o b a b i l i t y o f s u c c e s s 3 .  Japanese  i n d u s t r i e s had not grown s u f f i c i e n t l y t o undertake r e s o u r c e investments both f i n a n c i a l l y and t e c h n o l o g i c a l l y , w i t h t h e i r Western c o u n t e r p a r t s .  comparing  A l s o , i t i s top p r i o r i t y  f o r the Japanese management to a v e r t r i s k y investments to p r o t e c t i t s e x t e r n a l repu$atiOB.^.  Furthermore,  needy resources were a v a i l a b l e i n the market.  Japan's Therefore,  management d i d not have to choose r i s k y resource investments. Second, Japanese  resource i n d u s t r i e s d i d not have  enough human r e s o u r c e s to undertake investments i n different p o l i t i c a l ,  economic and c u l t u r a l  environments.  The r e c r u i t m e n t o f p e r s o n n e l i n Japan i s u s u a l l y made d i r e c t l y from s c h o o l s i n t o i n d u s t r i e s , and they are t r a i n e d w i t h i n the i n d u s t r i e s .  Since r e s o u r c e s were r e a d i l y  a v a i l a b l e i n the market, t h e r e was  l i t t l e incentive f o r  r e s o u r c e i n d u s t r i e s to t r a i n p e r s o n n e l who managing f o r e i g n investments.  were capable o f  Under these c o n d i t i o n s , they  put p r i o r i t y on c o m p e t i t i o n w i t h t h e i r Western f i r m s downstream I n the r e s o u r c e i n d u s t r y . T h i r d , Japan's postwar i n t e r n a t i o n a l balance of  3 For i n s t a n c e , approximately 30 companies have been engaged i n o i l development. Only two o f them have succeeded so f a r . Of. Nlhon K e l z a l Shimbun. June 10, 1972. 4 J . Q. Harty, Management D e c i s i o n i n the Japanese F a c t o r y , ( t r a n s . ed.), Diamond P u b l i s h i n g Co., Tokyo, 19bl, pp.bl-62.  8  payments was i n constant  d e f i c i t u n t i l 1964 .  In order to  save hard currencies, Japan's foreign investments were s t r i c t l y regulated u n t i l 1969, and each investment had to be licensed by the Ministry of International Trade and Industry, and approved by the Ministry of Finance.  Therefore,  the government's t i g h t foreign investment control r e s t r i c t e d resource Investments, which require extensive amounts^af foreign currencies.  V a l i d i t y of Cost-Benefit  Relationships  An investment's incentives are the benefits which are expected to be brought to the investor.  They can be of any  type of subjective values, monetary or otherwise.  In Japan,  the investment c r i t e r i a may not necessarily be the same as those of other countries.  Generally speaking, evaluation  of investment proposals using cost-benefit relationships are less meaningful when applied to Japanese i n d u s t r i e s . Their c r i t e r i a are based frequently on n a t i o n a l i s t i c objectives rather than on the company's own p o l i c i e s , as pointed out i n Fortune: T r a d i t i o n a l l y , p r o f i t s have been given a r e l a t i v e l y low p r i o r i t y as goal of Japanese businessmen. What counted most f o r them—and f o r the professional managers who have  5 The balance of payments w i l l be explained extensively i n Hypothesis IV.  9  taken t h e i r p l a e e — w a s b u i l d i n g up the business and " c o n t r i b u t i n g to the n a t i o n a l economy."" T h i s i s the r e a s o n t h a t Japanese i n d u s t r i e s c o o r d i n a t e business e f f o r t s to a c h i e v e t h e i r a c t i v i t i e s t o promote the n a t i o n a l economy.  Reasons f o r Investments Upstream For v a r i o u s reasons, Japan's r e s o u r c e i n d u s t r i e s had i n c r e a s i n g l y been r e q u i r e d to e n t e r a c t i v e l y i n t o upstream investments important  s i n c e the l a t t e r p a r t o f the 1960's.  f a c t o r was  the expanded  The most  Japanese economic  scale,  which ranks t h i r d f o l l o w i n g the U.S. and the U.S.S.R. l a r g e q u a n t i t y o f r e s o u r c e s must be f e d i n t o economy.  A  Japan's  However, t h e purchases o f huge amounts o f  resources i n t h e market a r e becoming i n c r e a s i n g l y  difficult,  and i t i s necessary t h a t Japan have i t s own resource supply sources to ensure t h a t i t w i l l have the r e q u i r e d r e s o u r c e s . Heavy f o r e i g n dependency  f o r the supply o f resources  i s not o n l y shameful t o Japan, as one o f the economic s u p e r s t a t e s , but may  a l s o endanger Japan's economic and  p o l i t i c a l autonomy.  The p o s e s s i o n o f i t s own supply  sources  upstream, however, w i l l b r i n g about a secure r e s o u r c e s f l o w and a d e s i r a b l e i n t e r n a t i o n a l r e p u t a t i o n .  6 Robert Luber, "The Japanese Giant That Wouldn't Stay Dead," Fortune, Vol.LXX, No.5, November, 1964, p.274.  10  Japan's economic success i n c r e a s e d e x p e c t a t i o n s o f o t h e r c o u n t r i e s t h a t Japan c o u l d share i n more r e s p o n s i b i l i t i e s i n i n t e r n a t i o n a l a f f a i r s , i n c l u d i n g those i n the economic and p o l i t i c a l s p h e r e s .  E s p e c i a l l y under the  e x i s t i n g i n t e r n a t i o n a l monetary system, Japan's s t a g g e r i n g f o r e i g n r e s e r v e s i n c r e a s e r e q u i r e s c e r t a i n measures to curb t h e i r accumulation.  Resource investments a r e a n i d e a l  a l t e r n a t i v e , among o t h e r s , to u t i l i z e r e s e r v e s , u n l o a d i n g s i z a b l e amountsdfctfeem. A l l o f these reasons a r e i n c o r p o r a t e d i n t o  five  hypotheses to a n a l y z e Japan's investment b e h a v i o r .  I:  S t a b l e Resources Flow Hypothesis Japanese i n d u s t r i e s had t o Increase t h e i r p r o d u c t i o n  c a p a b i l i t i e s r a p i d l y to meet s p e c i a l procurements by the Korean War,  created  i n a d d i t i o n to the postwar shortages  f o r domestic consumption.  Furthermore, the t e c h n o l o g i c a l  gap between Japan and the Western w o r l d was wide.  I n the  b r i s k market c o n d i t i o n s , the manufacturers had to i n c r e a s e t h e i r p r o d u c t i o n c a p a b i l i t i e s w i t h heavy c a p i t a l investment i n a s h o r t time to c a t c h up t o t h e i r Western c o u n t e r p a r t s . The most fundamental r o l e o f Japanese economic a c t i v i t y i s to convert raw m a t e r i a l s through l a n d , l a b o r , management, technology and c a p i t a l processes i n t o f i n i s h e d p r o d u c t s . F i x e d c o s t s i n Japanese i n d u s t r y a r e d i f f e r e n t from, and  11  h i g h e r than, t h e i r Western counterparts be  and  two  reasons  can  considered. First,  Japanese employment customs are such t h a t  there are p r a c t i c a l l y no l a y - o f f s i n the l i f e - t i m e employment system.  Employment i s i n c r e a s e d i n a n t i c i p a t i o n o f  i n c r e a s e s i n o p e r a t i o n s and p r o d u c t i o n , and a r e b u i l t i n t o the i n d u s t r y ' s personnel  those employed  f o r c e s , which cannot  be reduced i f and when the l e v e l of o p e r a t i o n s  i s trimmed.  Hence, i n c r e a s e d l a b o r c o s t s do not have downward as v a r i a b l e c o s t s .  This i n f l e x i b i l i t y  flexibility  r e q u i r e s i n d u s t r y to  t r e a t l a b o r c o s t s as f i x e d . Second, debt c a p i t a l f i n a n c i n g has and  been a commonly  e x t e n s i v e l y used method? o f f i n a n c i n g purchases o f  technology and p r o d u c t i o n  equipment, and  the debt s e r v i c i n g  requirements a r e a s i g n i f i c a n t f i x e d annual c l a i m  on  receipts. F i g u r e I i s presented a s t a b l e resources be considered  inflow.  to h e l p show the n e c e s s i t y Since Japanese l a b o r c o s t s  of can  as a p a r t o f f i x e d c o s t s , the m a r g i n a l cost i n  Japan i s s m a l l e r than i n f o r e i g n f i r m s , which t r e a t them as v a r i a b l e c o s t s .  7 Debt f i n a n c i n g p r o v i d e s s e v e r a l advantages: i n t e r e s t on debts i s t a x d e d u c t i b l e , equity f i n a n c i n g takes time to r a i s e , and f r e q u e n t l y t r y i n g to r a i s e c a p i t a l f o r each new investment i s too u n c e r t a i n , e s p e c i a l l y when most o f i n d u s t r y r e q u i r e s c a p i t a l e q u a l l y d e s p e r a t e l y .  12  Figure I  cost Vl=foreign firms V2=Japanese f i r m s f1=fixed costs f o r f o r e i g n firms f1+f2=fixed costs f o r Japanese f i r m s  Q  1  Q"  quantity  Assume t h a t Japanese and f o r e i g n f i r m s have the same production  c a p a c i t y , Q", and the same f a c t o r c o s t s , except  f o r the h i g h c o s t o f c a p i t a l t o the Japanese f i r m . VI r e p r e s e n t  OP and  the f o r e i g n f i r m w i t h lower c a p i t a l c o s t s ,  t r e a t i n g l a b o r c o s t s as v a r i a b l e c o s t s . OP* and V2 i n c l u d e l a b o r costs and h i g h c a p i t a l costs i n f i x e d c o s t s .  Since  the m a r g i n a l cost o f the f o r e i g n f i r m i s h i g h e r t h a n t h a t o f the Japanese, because o f l a b o r and c a p i t a l c o s t s , the s l o p e o f V1 i s s t e e p e r than t h a t o f V 2 . 8  The s m a l l e r  o  The c o s t f u n c t i o n s f o r the f o r e i g n and Japanese f i r m s a r e expressed by: where y1 = f + (L + M)x f = f i x e d c o s t s , such as p l a n t , y2 = f + Mx equipment, e t c . f*= f p l u s l a b o r cost (L) and i n t e r e s t above t h a t o f the foreign firm L = labor costs M = materials required f o r production 1  13  marginal  cost o f the Japanese f i r m i n d i c a t e s t h a t i t has  no  downward f l e x i b i l i t y : i t r e q u i r e s h i g h and f i x e d cash f l o w commitments f o r wage and debt s e r v i c i n g . to  meet these requirements,  To produce revenues  i t i s important  f o r a Japanese  f i r m to o b t a i n raw m a t e r i a l s to m a i n t a i n i t s h i g h l e v e l  of  operation. There a r e two a l t e r n a t i v e methods to o b t a i n a s t a b l e n a t u r a l r e s o u r c e s f l o w : one i s to purchase resources i n the open market, and the o t h e r , to make a f o r e i g n investment upstream i n r e s o u r c e i n d u s t r i e s .  These a l t e r n a t i v e s  will  be examined. A s t a b l e I n f l o w o f r e s o u r c e s can be a t t a i n e d by p u r c h a s i n g them i n the open market under c o n d i t i o n s of excess.  An example i s crude o i l i n the 196o's, the supply  c a p a b i l i t y o f which g r e a t l y exceeded the demand^. c o n d i t i o n o f oversupply p r e v a i l e d throughout  t h i s decade,  s i m u l t a n e o u s l y i n c r e a s i n g o i l r e s e r v e s from 116.5 b a r r e l s i n 1960  The  billion  to 526.8 b i l l i o n b a r r e l s i n 1969 . 10  Under  y1 = f o r e i g n f i r m s y2 = Japanese f i r m s Then take the f i r s t d e r i v a t i v e to o b t a i n the s l o p e o f these f u n c t i o n s . y 1 = L + M; y2' = M. T h e r e f o r e , the s l o p e of y1 i s s t e e p e r than t h a t o f y2. 1  9 The world o i l p r o d u c t i o n c a p a b i l i t y was 29 m i l l i o n b a r r e l s p e r day i n 1961. T h i s amount was the estimated demand a t the end of 1965, assuming the demand i n c r e a s e d a t a r a t e o f 5% a n n u a l l y . Of. World O i l , Vol.153, No.3, August, 1961, pp.71-72. 10  , Vol.171, No.2,  August, 1970,  p.70  14  t h i s market c o n d i t i o n , resources were r e a d i l y a v a i l a b l e and supply s t a b i l i t y was maintained. However, t h e f u l f i l l m e n t o f s t a b i l i t y o f resources Inflow may be very d i f f i c u l t under c e r t a i n market c o n d i t i o n s . The p r o d u c t i o n o f t h e world's key resources i s dominated by a few i n t e r n a t i o n a l e n t e r p r i s e s . produced  F o r example, 67% o f o i l i s  by seven companies, 7 1 $ o f copper by t e n companies,  67% o f aluminum by s i x companies, and 85% o f n i c k e l by only t h r e e companies 1 . 1  Investments by the Japanese I s an a l t e r n a t i v e toward a s t a b l e r e s o u r c e s i n f l o w , t o s u b o r d i n a t i o n t o the market and to o l i g o p o l i s t s . investments  Two methods have been used.  i n t h e form o f l o a n s s i m u l t a n e o u s l y c o n c l u d i n g  long-term purchase  agreements o f p a r t o r a l l o f produced  resources f o r a s p e c i f i e d p e r i o d . beneficial.  One i s  T h i s system i s mutually  The resource d e v e l o p i n g p a r t y can o b t a i n  f i n a n c i n g and the guarantee  o f a market.  The major  advantage to t h e Japanese i s t h a t Japan can o b t a i n a s t i p u l a t e d q u a n t i t y o f resources f o r a s p e c i f i e d p e r i o d . The other i s to make a d i r e c t investment  or e s t a b l i s h  a j o i n t venture w i t h t h e l o c a l government o r i n d u s t r i e s , or i n d u s t r i e s from a t h i r d country.  A j o i n t venture may not  only be a good device to a v e r t such pressures as government  Takeshi H i r a h a r a , "Shigen Gaiko no Tembo (Scope o f Resources Diplomacy)," K e l z a l t o Gaiko, No.590, J u l y , 1970, pp.5-7. 1 1  15  r e g u l a t i o n s , but i t may a l s o f a c i l i t a t e entry i n t o a c o u n t r y A d i r e c t investment  reduces  1  o r e l i m i n a t e s the q u a n t i t y o f  resources r e q u i r e d to be purchased  i n the market, and enables  Japanese i n d u s t r y t o o b t a i n r e s o u r c e s by backward i n t e g r a t i o n . A d i r e c t investment  w i l l r e q u i r e a l a r g e r sum o f c a p i t a l  than w i l l f i n a n c i n g the resource developing i n d u s t r y , but the t o t a l p r o f i t from the investment  w i l l be i n c r e a s e d by the  amount saved i n o b t a i n i n g r e s o u r c e s otherwise, assuming the s a l e s p r i c e o f the f i n a l goods i s the same. c o n d i t i o n , i t would be the same as i f the new  Under t h i s investment  y i e l d e d the same p r o f i t which t h e r e s o u r c e developer would have earned from s e l l i n g the r e s o u r c e s .  The resources supply  schedule can e a s i l y be a d j u s t e d , depending e n t i r e l y on Japan's demand s c h e d u l e . t h e r e f o r e , reduces and a v a i l a b l e  The p o s s e s s i o n o f supply sources,  the e f f e c t o f changes i n e x t e r n a l p r i c e s  quantities.  In s h o r t , t h i s h y p o t h e s i s has proposed  that a stable  i n f l o w o f resources i s necessary f o r Japanese i n d u s t r y because o f h i g h and f i x e d cash commitments.  Investments  a r e motivated by the s e a r c h f o r s t a b i l i t y , and u s u a l l y take two forms: l o a n s , and d i r e c t investments  f o r resources  e x p l o r a t i o n , i n c l u d i n g establishment o f j o i n t  ventures.  12 Raymond Vernon, Manager i n the I n t e r n a t i o n a l Economy, P r e n t i c e H a l l , Englewood C l i f f , K.J., 19bb, pp.207-208.  .  16  II;  Low  Supply P r i c e Hypothesis  The cost s t r u c t u r e o f manufacturers i s determined by the aggregate c o s t s o f such p r o d u c t i o n f a c t o r s as l a n d , l a b o r , c a p i t a l , technology, and raw m a t e r i a l s .  An i n c r e a s e  i n one o f them, the o t h e r s remaining c o n s t a n t , i n c r e a s e s the t o t a l c o s t o f p r o d u c t i o n . I n the Japanese economy, the r o y a l t i e s on technology s i g n i f i c a n t l y i n c r e a s e d from a prewar 1$ to around 10$ of s a l e s i n the postwar p e r i o d 3 . 1  However, t h e r e i s no  n o t i c e a b l e evidence o f r o y a l t y f l u c t u a t i o n .  Industries  were i n v i t e d to b u i l d p l a n t s i n i n d u s t r i a l s i t e s developed by l o c a l governments,  providing industries with favorable  terms o f purchase and b e t t e r f a c i l i t i e s r e q u i r e d f o r industrial  operations.  C a p i t a l c o s t s were r e l a t i v e l y s t a b l e throughout the years 14.  Labor c o s t s have been i n c r e a s i n g i n Japan,  e s p e c i a l l y i n the 1960's.  The a c t u a l wage index i n c r e a s e d  from i t s base y e a r o f I960 (1960=100) approximately 10 p o i n t s every two years u n t i l  1966, and i t has  rapidly  13 H i r o s h i Okumura, Galkoku Shlhon: Ninon n l Okeru Kodo to Riyon ( F o r e i g n C a p i t a l ; Theory and Behavior I n Japan). O r i e n t a l Economist P r e s s . Tokyo. 1969. pp.tt3-94. 14 The, average i n t e r e s t r a t e on loans o f a l l banks between 1956 and 1962 was from 8.00$ to 8.50$; s i n c e t h e n up to 1971 i t has dropped to 7.50$ and 8.00$. C f . Bureau o f S t a t i s t i c s , O f f i c e o f the Prime M i n i s t e r , Monthly S t a t i s t i c s o f Japan, J u l y , 1971, p.114.  17  Increased  since then, up to 164.6  i n 1968 . 15  accelerated i n the following years to 180.9 1  The speed was i n 1969,  196.6  f\  In 1970  .  increases.  There are many causes f o r the rapid wage In the annual spring labor offensive and semi-  annual bonus negotiations, labor's demands f o r wage and bonus hikes have been i n t e n s i f i e d .  This i s brought about, i n  a d d i t i o n to increasing productivity, by decreases i n the b i r t h rate and the high entrance rate into i n s t i t u t i o n s of higher education, economy.  reducing new  labor forces i n the expanding  The short supply to the excessive labor demand 7 1  pushed up the youth wage l e v e l , bringing about an o v e r a l l labor cost hike, since i n the s e n i o r i t y wage system of Japan, an increase i n a portion of the system requires simultaneous adjustments to the rest of the system.  An  increase i n the labor forces i s not expected i n the future. Under these circumstances, further labor shortages and  cost  hikes are expected. 1  5  1 6  17  K e l z a l to Gaiko. No.581, October, 1970, Op c i t . ,  p.78.  p.82.  The demand f o r secondary school graduates was 3 . 7 times greater than the supply i n 1 9 6 5 , and reached 4 . 9 times more i n 1 9 6 9 . The rate of supplement personnel required i n industry dropped from 24.7^ i n 1965 to \9A% i n 1 9 6 9 . The demand f o r high school graduates increased from 3 . 5 times to 5 . 8 times, and the rate of supplement personnel dropped from 24.9^ to 15.5$ respectively during the same period. Of. K e i z a i to Gaiko, No.597, August, 1 9 7 0 , or labor s t a t i s t i c s by Ministry of labor.  18  The f a s t i n c r e a s i n g l a b o r c o s t s r e q u i r e i n d u s t r y to s e a r c h f o r ways to p a r t i a l l y o f f s e t o r slow down the increase i n t o t a l costs.  The lower c o s t o f n a t u r a l resources  i s an a l t e r n a t i v e , among o t h e r s , i n c l u d i n g the development of l a b o r - and raw m a t e r i a l - s a v i n g t e c h n o l o g i e s . Another r e a s o n i s t h a t a s i g n i f i c a n t p o r t i o n o f the Japanese economy i s a f f e c t e d by resource p r i c e s .  The  costs  o f r e s o u r c e s i n the i r o n , s t e e l and aluminum i n d u s t r i e s a r e 30% to 40$ o f the t o t a l p r o d u c t i o n c o s t s , but they are 10% to more than 90% i n the o i l , uranium i n d u s t r i e s ! . 8  The  n i c k e l , copper and  o b t a i n i n g o f resources a t  lower  p r i c e s i s c r u c i a l to the e x i s t e n c e o f the l a t t e r I n d u s t r i e s to compete w i t h t h e i r c o u n t e r p a r t s i n the economic sphere. sources  internationalized  Japan's p o s s e s s i o n o f r e s o u r c e  supply  e l i m i n a t e s o l i g o p o l i s t i c p r o f i t s Included i n the  resource p r i c e s , assuming the technology and c o n d i t i o n s to be the same. r e s o u r c e supply reduces  other mine  The p o s s e s s i o n o f a cheaper  the average c o s t o f resources f o r  thie i n d u s t r y , even when a p o r t i o n of the r e s o u r c e must be purchased  i n the open market.  I n investments,  long-term purchase agreements w i t h  l o a n s are undertaken w i t h the e x p e c t a t i o n o f buying resources a t lower p r i c e s than i n the open market, i n r e t u r n  1 8  Economist, Vol.48,  No.42, October 6,  1970,  p.17  19  f o r the f i n a n c i n g o f the resource development.  Unless t h e r e  a r e advantages i n p r i c e , s t a b i l i t y i n supply, or both, i s no m e r i t to u n d e r t a k i n g t h i s form o f  there  investment.  D i r e c t investments upstream p r o v i d e Japanese i n d u s t r i e s w i t h c o n t r o l on supply p r i c e and q u a n t i t y , depending on the magnitude o f c a p i t a l i n v e s t e d .  As shown  i n the p r e v i o u s h y p o t h e s i s , a t a g i v e n s a l e s p r i c e , investment  i n c r e a s e s the aggregate  p r o f i t o f the manufac-  t u r e r s by the amount o f the developer's p r o f i t and mediate purchase  agent's  the  commission.  inter-  I f the mine r e s e r v e s  a r e s u f f i c i e n t l y l a r g e , the l o n g - r u n c o s t s can be a t low range by t o t a l c o n t r o l o f the investments  stabilized by  the  Japanese. I n b r i e f , t h i s hypothesis proposed  t h a t lower  resource  p r i c e s are an a l t e r n a t i v e t o p a r t i a l l y o f f s e t o r slow down the c o s t i n c r e a s e because o f the r a p i d r i s e i n l a b o r c o s t s . Investments w i l l be undertaken  to o b t a i n resources a t  low  prices.  Ill;  N a t i o n a l P r e s t i g e Hypothesis Japan i s a country t h a t has a very s t r o n g s o c i a l  system which i d e n t i f i e s r e l a t i o n s w i t h others by rank, as s u p e r i o r - s u b o r d i n a t e , s e n i o r - j u n i o r , r i c h - p o o r . I n t e r n a t i o n a l l y , Japan i s concerned about i t s r e l a t i o n s  such  20  w i t h o t h e r c o u n t r i e s by the magnitude o f i t s Gross N a t i o n a l Product^. Japanese . 20  A l s o , honor i s the c o n s t a n t g o a l o f the Respect from o t h e r s i s e s s e n t i a l .  Japan a c h i e v e d a major success i n the GNP 1968,  e a r n i n g #142  and the U.S.S.R. economic  race i n  b i l l i o n to rank t h i r d f o l l o w i n g the  U.S.  T h i s means t h a t Japan has become an  s u p e r s t a t e and has the c a p a b i l i t y to undertake  independent r e s o u r c e development  upstream.  However, Japan's  major r e s o u r c e s o b t a i n i n g method had been purchases i n the open market.  A demerit o f t h i s method became q u i t e  clear  i n the s o - c a l l e d " o i l war" i n 1970, which was a severe c o n f r o n t a t i o n between the O r g a n i z a t i o n o f Petroleum E x p o r t i n g C o u n t r i e s and major i n t e r n a t i o n a l o i l companies ^ 2  crude o i l t a x h i k e  2 2  .  over the  Japan i s one of the major consumers  9 M. Kimura, " K e i z a i Taikoku no Genso (An I l l u s i o n o f the Economic S u p e r s t a t e ) , " K e i z a i to Galko., No.584, January, 1971, pp.15-18. 1  Ruth Benedict, The Chrysanthemum and the Sword, Houghton M i t t l i n Co., Boston, 1946, p.171. 2  0  The former i n c l u d e s Saudi A r a b i a , I r a q , Kuwait, I r a n , Venezuela, Qatar and Lebanon; the l a t t e r , Standard O i l New Jersey, M o b i l O i l , G u l f , Texaco, Standard O i l C a l i f o r n i a , B r i t i s h Petroleum and Royal Dutch S h e l l . 2 1  O i l was c o n s i d e r e d to be a s u r p l u s r e s o u r c e . But the demand-supply c o n d i t i o n s were g r a d u a l l y changing i n the l a t e 1960's as a r e s u l t o f the i n c r e a s e d energy demand throughout the w o r l d . T h i s tendency i n c r e a s e d when the U.S. and the U.S.S.R. changed t h e i r o i l p o l i c i e s . The U.S. i s expected to i n c r e a s e i t s o i l import quota to meet i t s demand, more than 520 m i l l i o n tons i n 1971 a l o n e , w h i l e the U.S.S.R. i s expected to cut s u b s t a n t i a l l y i t s o i l export to the f r e e world from the c u r r e n t annual 100 m i l l i o n t o n l e v e l . Of. 2  2  21  o f Middle East o i l ,  i m p o r t i n g approximately 20% o f Middle  East o i l p r o d u c t i o n (88% o f Japan's i m p o r t ) ^ , but i t could 2  not r a i s e any v o i c e as a consumer i n o i l p r i c e n e g o t i a t i o n s . The OPEO won the o i l t a x h i k e , and Japan was g i v e n the burden o f the t a x as the t o t a l p r i c e i n c r e a s e by t h e o i l companies. The impact o f the o i l p r i c e h i k e on t h e Japanese economy w i l l be s i g n i f i c a n t , because 70.y%  o f t h e country's  primary energy source i s dependent on o i l , more t h a n 99.5$ o f which i s imported from f o r e i g n countries *-, 22  i t also  a f f e c t s many o t h e r I n d u s t r i e s , such as chemical, p e t r o chemical, i r o n , s t e e l , and so on. sharp g e n e r a l p r i c e  The r e s u l t could be a  increase.  The l e s s o n o f the o i l war was t h a t heavy  foreign  dependency i n t h e supply o f r e s o u r c e s endangers  Japan's  economic a c t i v i t i e s .  Now t h a t Japan has become the t h i r d  l a r g e s t economic power i n the w o r l d , i t i s shameful f o r Japan t o depend h e a v i l y on o t h e r s i n resource supply, and be d i r e c t l y v u l n e r a b l e to e x t e r n a l I n f l u e n c e s .  Y u i c h i r o Noguchi, "Sekiyu Senso; Korega Nihon no H a i i n d a ( O i l War: These a r e the Causes o f Japan's D e f e a t ) , " Chuo Koron, Vol.10, No.2, June, 1971, pp.202-212. 2  3  2  4  Ibid. Nihon K e i z a i Shimbun, June 6, 1972.  22  R e a l i z i n g t h a t Japan's economic  future  depends  g r e a t l y upon a s t a b l e i n f l o w of r e s o u r c e s , r e s o u r c e i n d u s t r i e s , government a g e n c i e s , and mass-media i n c r e a s i n g l y emphasized autonomous r e s o u r c e development  as the s o l u t i o n  to f o r e i g n dependency ^. 2  The M i n i s t r y o f I n t e r n a t i o n a l emphasized  Trade and I n d u s t r y  autonomous investment i n resources by  private  i n d u s t r i e s , but i t urged t h a t the government should p r o v i d e i n d u s t r i e s w i t h funds u n t i l the investment became s e l f s u f f i c i e n t , and thus f r e e p o t e n t i a l l y u n s u c c e s s f u l p r o s p e c t o r s from r i s k ^ . 2  subsidies  The argument f o r government  i s t h a t r e s o u r c e i n d u s t r i e s a r e dominated by a  few l a r g e i n t e r n a t i o n a l e n t e r p r i s e s  and new  Japanese i n d u s t r i e s i s extremely d i f f i c u l t , and t e c h n o l o g i c a l l y .  entry by both f i n a n c i a l l y  T h e r e f o r e , the government can motivate  resource i n d u s t r i e s to undertake investments as  national  p r o j e c t s without endangering t h e i r business and f i n a n c i a l activities. In s h o r t , are h i g h l y economic  t h i s h y p o t h e s i s argues t h a t the Japanese  concerned about t h e i r rank i n the i n t e r n a t i o n a l  sphere.  They seek an a p p r o p r i a t e p o s i t i o n and  5 Kenzo Ikusawa, "Ninon K e i z a i no Kukusaika to Shigen Mondai ( I n t e r n a t i o n a l i z a t i o n o f the Japanese Economy and Resource Problem)," K e i z a i Hyoron, V o l . 2 0 , No.5, May, 1971, p.8. . ; 2  26  ibid,  p.9.  23  p a t t e r n o f o b t a i n i n g r e s o u r c e s , f o r t h e i r honor and  dignity  i n comparison w i t h o t h e r s , I n the magnitude of t h e i r  GNP.  Japan's e n t r y i n t o upstream resource i n d u s t r i e s e l i m i n a t e s i t s v u l n e r a b i l i t y to e x t e r n a l resource supply c o n d i t i o n s . Since Japanese resource i n d u s t r i e s a r e latecomers  in  upstream i n d u s t r y , the government p r o v i d e s funds and  risk  absolvement to h e l p them a c h i e v e s u c c e s s f u l e n t r y .  IV:  Increased F o r e i g n Reserves  Hypothesis  Japan abandoned i t s m u l t i p l e exchange r a t e used i n f o r e i g n t r a d e s i n c e 194?, i n 1949 was  to 360  and s e t the value o f i t s currency  yen to the d o l l a r .  e s t a b l i s h e d i n 1949  The F o r e i g n Exchange  as a device to support  Law  Japan's  currency par value, to promote f o r e i g n trade and to improve i t s balance o f payments p o s i t i o n .  Japan's balance  payments s t r a i n continued u n t i l 1964, G.  of  as shown i n Appendix  Since then i t s balance o f payments has been i n a  s u r p l u s except f o r 1967, steadily.  steady  and f o r e i g n reserves have i n c r e a s e d  But the government, r e g a r d i n g the balance  of  payments and i n c r e a s i n g r e s e r v e s as temporary, d i d not make s e r i o u s c o n s i d e r a t i o n s u n t i l s p r i n g , 1971 ^. 2  Japan q u i c k l y formed an 8 - p o i n t yen measure i n June,  27  Nihon K e l z a i Shimbun, June 18,  1972.  24  1971  , to unload r e s e r v e s and thus a l l e v i a t e p r e s s u r e  on  the yen i n the s t a g g e r i n g monthly r e s e r v e l e a p , as shown i n Appendix D. the U.S.  Before the r e s u l t s o f these p o l i c i e s appeared,  took d r a s t i c measures i n August, 1971,  i n t e r n a t i o n a l monetary realignment difficulties?^.  toward  to improve i t s economic  The i m p o s i t i o n o f a 10$ s u r t a x was  such a  d r a c o n i a n measure to press Japan f o r r e v a l u a t i o n o f the  yen  and  U.S.  f o r trade concessions.  I n t r a d e , among o t h e r s , the  demanded t h a t Japan cut i t s t e x t i l e exports to the which account  f o r o n l y 2 to 3$ o f the U.S.  U.S.,  t e x t i l e market,  t h r e a t e n i n g to use the Trade w i t h the Enemy Act f o r quota I m p o s i t i o n , and a l s o the p o s s i b i l i t y of d e l a y o f r e v e r s i o n  They Include r e d u c t i o n o f Import r e s t r i c t i o n s , t a r i f f s , and o t h e r b a r r i e r s , c a p i t a l d e c o n t r o l o f i n v e s t ments i n t o Japan, p r e f e r e n t i a l treatment o f imports from l e s s developed c o u n t r i e s , and expansion o f f o r e i g n economic cooperation. 2  8  9 The U.S. balance of payments was extremely d e t e r i o r a t e d , as a r e s u l t o f i n f l a t i o n a r y economic p o l i c i e s s i n c e the Kennedy A d m i n i s t r a t i o n and the war i n V i e t Nam. F i s c a l and monetary p o l i c i e s f o r the p a s t years r e s u l t e d i n s t a g f l a t i o n — i n f l a t i o n under s t a g n a t i o n . I n a d d i t i o n , the U.S. g o l d r e s e r v e s were d e c r e a s i n g near to $10 b i l l i o n . These were the urgent reasons why the U.S. took d r a s t i c measures. Of. K i y o s h i T s u c h i y a , " K i r i a g e Fukyo ga Yatsute Kuru (The Upward R e v a l u a t i o n Depression i s Coming)," Bungel S h i n j y u , Vol.49, No.13, October, 1971, pp.92-94. 2  25  of  Okinawa to Japanese control-* .  Bowing to the p r e s s u r e ,  i n a d d i t i o n to some t r a d e concessions, i n c l u d i n g those i n t e x t i l e s , Japan f l o a t e d the yen, first  time s i n c e 1949,  d o l l a r , i n December,  then r e v a l u e d i t f o r the  16.88$ upward to 308 yen to the 1971.  However, as shown i n Appendix D, by e a r l y Japan's r e s e r v e s have not shown any  1972,  s i g n of d e c r e a s i n g ^ .  F a c i n g t h i s s i t u a t i o n , the government r e c o n s t r u c t e d 7 - p o i n t yen measure i n June, 1972,  another  to a v e r t another upward  currency r e v a l u a t i o n , but the e f f e c t i v e n e s s o f these measures i s regarded as being  minimal^ . 2  Time, October 25, 1971, p.43. The r e v e r s i o n o f Okinawa to Japanese a d m i n i s t r a t i v e c o n t r o l has been the p a t h e t i c wish o f the Japanese. Japan's t h e n prime m i n i s t e r Sato d e c l a r e d t h a t he stakes h i s p o l i t i c a l l i f e on Okinawa r e v e r s i o n , a d d i n g "Without Okinawa r e v e r s i o n , t h e r e w i l l come no end to the Second World War." Of. M a i n i c h l Shimbun, August 19, 1965. 31 Japan's r e s e r v e s decreased s l i g h t l y f o r the f i r s t time s i n c e J u l y , 1970, i n A p r i l , 1972. A major reason, a c c o r d i n g to the M i n i s t r y o f Finance, i s t h a t A p r i l i s u s u a l l y the month w i t h a slow i n c r e a s e i n e x p o r t s . In a d d i t i o n , the government d e p o s i t e d #200 m i l l i o n i n exchange banks and made o t h e r exchange procedure changes. These measures, however, w i l l not s o l v e the i s s u e o f i n c r e a s i n g r e s e r v e s u n l e s s a fundamental solution:: i s taken to normalize the balance o f payments. Of. Asahi Shimbun, A p r i l 26, 1972. 3 These new measures were almost the same as those announced a y e a r ago, except f o r the r e d u c t i o n of i n t e r e s t s on p e r s o n a l s a v i n g s by 0.5$ i n o r d e r to reduce g e n e r a l i n t e r e s t on bank l o a n s . However, these patch-up measures a r e expected to be of l i t t l e v a l u e f o r c u r b i n g the r e s e r v e s i n c r e a s e . Of. Ninon K e i z a i Shimbun, June 11, 1972. 2  26  Japan's f o r e i g n investments are an alternative, among others, such as export r e s t r i c t i o n s and taxes, to reduce i t s accumulating reserves.  In resource industries, the  government efforts to motivate resource investments went further than low interest development loans, as i t set up a $1 b i l l i o n fund to absolve unsuccessful prospectors of any risk33.  The government i s also working out d e t a i l s f o r  increasing foreign exchange reserves from $5 b i l l i o n to $9 b i l l i o n f o r making long-term loans f o r Japanese investments i n foreign c o u n t r i e s ^ . Foreign investments, especially resource investments, require long lead times, and the effectiveness of various government investment promotion p o l i c i e s has not yet been established. In short, investments i n resource industries are an a l t e r n a t i v e , among others, to unload staggeringly accumulating f o r e i g n reserves, especially since 1971. The foreign reserves unloading p o l i c i e s , contrary to the past foreign excnange drain controls, were counter measures to avert pressure on the yen, and severe external demands f o r c a p i t a l and trade l i b e r a l i z a t i o n .  Japan was forced  33  Time, March 15, 1971, pp.60-61  34  Time, May 15, 1972, p.70.  27  to r e v a l u e i t s currency 16.88$ upward b e f o r e i t s p o l i c i e s had a chance to work.  The second u n s u c c e s s f u l phase o f  r e s e r v e s u n l o a d i n g p o l i c i e s was  e s t a b l i s h e d , but  another  currency r e v a l u a t i o n i s imminent, u n l e s s Japan takes some s p e c i f i c measures to curb f u r t h e r r e s e r v e s  V;  accumulation.  A s s i s t i n g the Development o f Less Developed C o u n t r l e s  Hypothesis The economic s t r u c t u r e o f the world can be i n t o two  groups:  divided  one i s the h i g h l y i n d u s t r i a l i z e d c o u n t r i e s  i n the Northern hemisphere, and the o t h e r i s the l e s s developed  c o u n t r i e s (LDC's)35  S U  c h as A s i a , A f r i c a  and  L a t i n American c o u n t r i e s i n the Southern hemisphere. LDC's a r e c h a r a c t e r i z e d by t h e i r low per  capita  income, low e d u c a t i o n a l l e v e l , low c a p i t a l f o r m a t i o n , h i g h r a t e o f p o p u l a t i o n engaged i n a g r i c u l t u r e , and dependence on the export o f primary  high  products^.  The major d i f f i c u l t i e s b u i l t i n t o the economy of LDC's can be improved by such government and p r i v a t e economic a s s i s t a n c e from developed  c o u n t r i e s as:  35 LDC's cover 75$ of UN members, and 49$ o f the t o t a l w o r l d . p o p u l a t i o n , while they earn o n l y l 4 $ \ o f the t o t a l world GNP. MITI, K e i z a i Kyoryoku no Genjo to Mondaiten (Current P o s i t i o n and.Problems o f Economic C o o p e r a t i o n ) , Tokyo, 1970, p.5. " [ ] " 36 Raymond Vernon, Manager i n the I n t e r n a t i o n a l Economy. P r e n t i c e H a l l , Englewood C l i f f s , N.J., 19bti, pp.142-165.  28  1)  c a p i t a l assistance, such as grants,  loans,  investments and export credit over one year, to provide c a p i t a l and  exchange needs,  2) technological assistance to narrow technological gaps, and 3 ) trade expansion assistance, f o r example, by means of p r e f e r e n t i a l treatment of imports from LD0 s to help earn needy f o r e i g n exchange and 1  to  promote i n d u s t r i a l i z a t i o n ^ . The United Nations Conference on Trade and Development was  established i n 1964 to improve economic relations between  developed and less developed countries. meetings held i n 1964,  Through the past  1968 and 1972, LDO's increasingly  i n t e n s i f i e d t h e i r demands f o r p r e f e r e n t i a l treatment of t h e i r exports, and f o r increased c a p i t a l and aid.  technological  These are devices to promote i n d u s t r i a l i z a t i o n to  earn f o r e i g n exchanges, and to o f f s e t the worsening of LDC's terms of  37  trade . 3 8  MITI, op c i t , p.5.  3 Appendix B shows the terms of trade of advanced countries and LDC's. Deterioration i n terms of trade Is brought about by price,increases of manufactured goods imported from advanced countries that r i s e faster than do the prices of t h e i r primary products. The competition of primary products i n the market tends t o . r e f l e c t the competition among LDC's. Futhermore, the formulation of synthetic products.,and technological innovations f o r raw material saving slows down the Increase i n demand f o r t h e i r resources. 8  29  Economic a s s i s t a n c e to LDC's i s explained r e s p o n s i b i l i t y of the developed n a t i o n s welfare  o f the world39.  t o o l of p o l i t i c a l act.  as  the  f o r the peace  However, a i d has  and  been used as a  s t r a t e g y r a t h e r than being a p h i l a n t h r o p i c  f o r example, U.S.  a i d was  used to achieve  the  country's p o l i t i c a l s t r a t e g i e s , such as an important measure o f the  compartmentalization o f China, and  to reduce domestic  s u r p l u s goods, w h i l e a i d from the communist bloc was  used  as a v e h i c l e o f p o l i t i c a l propaganda * . 2  0  Japan t r i p l e d I t s net amount o f a i d s i n c e 1966, increased seeking  the r a t e a g a i n s t the GNP,  LDGs' w e l l - b e i n g ,  and  as shown i n Appendix  and a l s o three m e r i t s .  Japan's  s o - c a l l e d white paper on economic a s s i s t a n c e , i s s u e d by M i n i s t r y of I n t e r n a t i o n a l Trade and three merits LDC's.  and  Industry,  P,  pointed  n e c e s s i t i e s of economic a s s i s t a n c e  the  out  for  They a r e : 1. to secure the i n f l o w of Japan's necessary resources, 2. to promote Japan's exports and  to s t r e n g t h e n  the  bases o f the Japanese economy I n the i n t e r n a t i o n a l  39  MITI, op c i t .  4° Shizuo Maruyama, Tonan A s i a to Nippon (Southeast A s i a and Japan), A s i a Economic Research Center, Tokyo, 1968, pp.12-13.  30  sphere,  and  3. to e s t a b l i s h Japan's p o l i t i c a l ground i n A s i a by c o n t r i b u t i n g to A s i a n p e a c e ^ l . Since the second and  t h i r d i s s u e s are not r e l a t e d to a  r e s o u r c e investment,  o n l y the f i r s t one w i l l be examined.  Japan r e q u i r e s a huge volume o f imported to  support i t s enlarged economic a c t i v i t i e s .  resources  However, i t  i s becoming i n c r e a s i n g l y d i f f i c u l t to o b t a i n r e s o u r c e s i n advanced c o u n t r i e s and  from e x i s t i n g supply sources^" .  Investments i n t o resources h o l d i n g LDC's d i v e r s i f y not only the supply sources but a l s o the methods o f o b t a i n i n g resources by changing  the c o n v e n t i o n a l heavy purchases  Japan's investments exchange and  i n the market.  not only supplement LDCs'  c a p i t a l needs, but a l s o h e l p t h e i r economic  development through increase i n exports.  the i n t r o d u c t i o n of technology  and  Japan's g i v i n g economic a s s i s t a n c e i n  the form o f Investments, thus, i s not a l t r u i s t i c  to the  r e c i p i e n t , nor does i t c o n s t i t u t e p l u n d e r i n g of r e s o u r c e s by the Japanese.  I t seems to be mutually  Japanese investments  w i l l become extremely  by combining w i t h government a i d , such as  ^'  KCTI, op c i t  42  Ibid.  beneficial.  grants.  effective  31  Government a i d can be used f o r improvement o f i n f r a s t r u c t u r e s , such as roads, r a i l r o a d s , and p o r t and h a r b o r f a c i l i t i e s where r e s o u r c e Investments  are to be undertaken.  This  e l i m i n a t e s some o f the investments t h a t must be done by resource d e v e l o p i n g i n d u s t r i e s .  I n t h i s case, government  a i d to LDC's works s i m u l t a n e o u s l y as a subsidy to the Japanese  investors.  F o r these reasons, Japan's  economic  a s s i s t a n c e paves an avenue to r e s o u r c e investments. I n r e c a p i t u l a t i o n , t h i s h y p o t h e s i s proposed  that  investments a r e being undertaken as a p a r t of economic a s s i s t a n c e to LDC's.  Investments,  as such, a r e f a r from  b e i n g p h i l a n t h r o p i c , but b r i n g b e n e f i t s to Japan and LDC's a l i k e , because  Japan can o b t a i n r e s o u r c e s w h i l e LDC's can  undergo economic development.  32  CHAPTER THREE JAPAN'S INVESTMENT BEHAVIOR  Overview The periods first  postwar p e r i o d i s d i v i d e d i n t o t h r e e major  to examine Japanese investment behavior.  covers from immediately a f t e r the War  o f the Korean War 1960's, and The  i n 1950,  the second, 1951  the t h i r d , from around 1970  d i s t i n c t i o n between the second and  The  to the  beginning  throughout  to September, t h i r d periods  d e f i n i t e , but i t i s g e n e r a l l y agreed t h a t Japan's  the 1972.  i s not  new  b e h a v i o r toward independent investments began from the c o n f r o n t a t i o n between the O r g a n i z a t i o n Exporting  Countries  of Petroleum  and major o i l c o m p a n i e s ^ ,  p e r i o d i s , of course, i n t r a n s i t i o n , and p o l i c i e s i n resource established.  the  ihe  third  nation's  i n d u s t r i e s have not y e t been d e f i n i t e l y  Thus, Japan i s s t i l l  i n search o f f u t u r e  direction.  (I)  F i r s t Period  (1945  to  1950)  This p e r i o d i s c h a r a c t e r i z e d by the d e s t r u c t i o n o f  43 p o example, the then F o r e i g n M i n i s t e r Takeo Fukuda commented t h a t Japan's new.measures f o r secured resources flow a t a reasonable p r i c e were being s t u d i e d , t a k i n g the l e s s o n o f the l a s t o i l war i n t o c o n s i d e r a t i o n . Cf. Takeo Fukuda, "Shigen Mondai Tokushyu n i Yosete ( C o n t r i b u t i n g to S p e c i a l Issue on.Resource Problems)," K e i z a i to Gaiko, No.590, J u l y , 1971, pp.2-3. r  the  33  war economy and the f o l l o w i n g  c o n f u s i o n , as new  a c t i v i t i e s had not been e s t a b l i s h e d .  economic  The beginning o f  i n d u s t r i a l a c t i v i t i e s and the c e s s a t i o n o f postwar I n f l a t i o n were the i n i t i a l problems to be d e a l t The government's r e c o n s t r u c t i o n  with. p o l i c i e s , emphasizing  the p r o d u c t i o n o f i r o n and c o a l by f u l l y u t i l i z i n g domestic r e s o u r c e s , were s t a r t e d i n the l a t t e r p a r t  of  \9h6^*  These p o l i c i e s were augmented from 1948 by the U.S. Economic R e h a b i l i t a t i o n i n O c c u p a t i o n Area Fund, which supplied  Japan w i t h i r o n , c o a l and o t h e r key  materials ^,  r e s u l t s o f these  4  reconstruction  reconstruction  a c t i v i t i e s were c l e a r i n the r e c o v e r y o f the mining and manufacturing index, which h i t a low o f 12 i n the 1934-1936 average, reached 50 i n 1948, and r e t u r n e d to the prewar average i n 1950^6. The slowlng-down o f i n f l a t i o n and r a p i d economic r e c o v e r y enabled the replacement o f m u l t i p l e  exchange  rates,  which were used i n t r a d e s s t a r t e d i n 1947 under government control. was  A s i n g l e exchange r a t e o f 360 yen to the d o l l a r  s e t I n 1949.  The s c a r c i t y o f f o r e i g n exchange  Tasuzo H o r i e , Nihon K e i z a i s h i Dokuhon (Reading i n Japanese Economic H i s t o r y ) , O r i e n t a l Economist P r e s s . Tokyo. 1068, p p . 2 5 6 - 2 5 8 . : 4  4  4  5  ibid.  6 Economic P l a n n i n g Agency, Economic White Paper. 1952, Tokyo, p.12. 4  34  necessitated Exporting  s t r i c t government c o n t r o l t o m a i n t a i n t h i s r a t e .  c a p a b i l i t i e s were low  import demands were h i g h .  because o f war  During t h i s p e r i o d ,  damage, and Imports were  under t i g h t c o n t r o l and  f o r e i g n exchange f o r i m p o r t i n g  necessary raw  was  materials  a l l o c a t e d p r i m a r i l y to  the  manufacturers; t r a d i n g companies represented manufacturers as p u r c h a s i n g agents, u s i n g exchange^?. by  foreign  D i r e c t government import c o n t r o l was  the newly e s t a b l i s h e d  i s the  the a l l o c a t e d  exchange and Foreign  Foreign  trade c o n t r o l  Exchange Law  i n 1949,  Japanese i n d u s t r i e s  t h i s period.  The  reasons  have been i n s u f f i c i e n t i n d u s t r i a l c a p a b i l i t i e s and extremely low  l e v e l of f o r e i g n currencies  a d d i t i o n to r e s o u r c e s s u p p l i e d  which  law.  c a p i t a l investments by  were not p e r m i t t e d d u r i n g  replaced  by the U.S.  could an  reserves.  In  Economic  R e h a b i l i t a t i o n i n Occupation Area Fund, r e a d i l y a v a i l a b l e n a t u r a l r e s o u r c e s i n the world market d i d not Japan to i n v e s t i n f o r e i g n c o u n t r i e s  require  for natural  resources.  A s i g n i f i c a n t p o l i t i c a l event which occured t h i s p e r i o d was i n i t i a t e d by the  the c r e a t i o n o f the East-West  during  confrontation,  " i r o n c u r t a i n " address made by S i r  Winston C h u r c h i l l i n M i s s o u r i  i n March, 1946;  this lead  to  47 K a t s u t o s h i Uchida, Shosha Hakusho (White Paper on Trading Companies), Kodansha, Tokyo, 1967,-'pp.68-69.  35  s w i f t European economic r e c o n s t r u c t i o n with M a r s h a l l under the f e a r of communism . 48  The  c o l d war  d e c i s i o n s i n Japanese economic p o l i c i e s and i n the f o l l o w i n g  affected later activities  periods.  In s h o r t , the  Japanese economy s t a r t e d i t s a c t i v i t i e s  f o r r e c o n s t r u c t i o n from war ment was  Aid  not permitted;  destruction.  Foreign  even i f i t should  allowed, the i n d u s t r i e s had f o r investment i n resource  not  the  have been  c a p a b i l i t i e s nor  industries.  Mining  supplied domestically,  damage.  n a t u r a l resources  by the U.S.,  and  need  and  manufacturing a c t i v i t i e s scraped through the war During the r e h a b i l i t a t i o n stage,  invest-  were  by purchases i n the  market.  (II)  Second P e r i o d  (1959  throughout the 1Q60's)  Overview T h i s p e r i o d i s c h a r a c t e r i z e d by various •Domestically, U.S.  the Korean War  occupation  as d i s c u s s e d  policies,  aspects.  brought about changes i n the  e s p e c i a l l y i n economic p o l i c i e s ,  i n the next s e c t i o n .  Japan's  reconstruction  ^° C h u r c h i l l formulated h i s s t r a t e g y to use the U.S., s e t t i n g the stage f o r the c o l d war, and used a l o g i c of a b s o l u t e s : f r i e n d and enemy, good and e v i l . He must have used t h i s p o l i c y f o r h i s o b j e c t i v e s , but he h i m s e l f a c t u a l l y d i d not b e l i e v e i t a t a l l . Cf. Masaharu I t o , "Kokusai Tsuka K i k i no Ura Omote (Inside and Out of the I n t e r n a t i o n a l Monetary C r i s e s ) , " Asahi J o u r n a l , Vol.14, No.1, January 7, 1972, pp.138-144.  36  was  a c c e l e r a t e d by an economic boom brought about by s p e c i a l  procurements  from the Korean War.  d o l l a r s i n t o the Japanese  These poured b i l l i o n s o f  economy^, which e s t a b l i s h e d a  b a s i s f o r the g r e a t economic growth o f the f o l l o w i n g decades.  The annual economic growth between 1958 and  averaged 9.4$;  the pace was  when annual growth averaged  1965  i n c r e a s e d d u r i n g the 1960's, 11.4$5°.  The i n d u s t r i a l s t r u c t u r e s h i f t e d r a p i d l y from l i g h t i n d u s t r i e s to heavy and chemical i n d u s t r i e s i n the 1960's; the  r a t e o f the l a t t e r i n the manufacturing and mining  i n d u s t r i e s reached 67.9$ i n 1965 and 70.2$ i n 1 9 7 0 . 51  The export s t r u c t u r e changed a c c o r d i n g l y .  The export r a t e  of heavy and chemical i n d u s t r i a l products reached 62.0$ and 74.6$ i n the t o t a l v a l u e of exports o f #8.5 #25 b i l l i o n ,  b i l l i o n and  r e s p e c t i v e l y , f o r the same y e a r ? . 2  F o r e i g n investments by the Japanese were p e r m i t t e d i n 1951 the  under t i g h t c o n t r o l f o r exchange reasons.  Before  e f f e c t s o f automatic investment a p p r o v a l o f up to  #200,000 appeared i n 1969,  the t o t a l Japanese  investments  Four b i l l i o n d o l l a r s was r e c e i v e d as . s p e c i a l procurements, which helped Japan's balance o f payments and the b u i l d i n g up o f f o r e i g n exchange r e s e r v e s . Of. J . Cohen, Japan's Postwar Economy. Indiana U n i v e r s i t y P r e s s , Bloomington, 1958, p.1b. 50 The Bank o f Japan, Economic S t a t i s t i c s No.302, May, 1972, p.8. 5 1  5  2  M a i n i c h i Shimbun, June 19, Ibid.  1972.  Monthly,  37  i n resource i n d u s t r i e s by March, 1969, o f which 36.2$ was  i n v e s t e d i n 1967  was  and  #599.7 m i l l i o n ,  1968 3. 5  Large s c a l e import l i b e r a l i z a t i o n , Japan's move to become an I n t e r n a t i o n a l Monetary Fund, A r t i c l e VIII and the Kennedy Round was  agreed  upon d u r i n g t h i s p e r i o d ,  and a step-up i n a c a p i t a l d e c o n t r o l was I n t e r n a t i o n a l l y , the U.S.  balance  also carried  i t s economy.  especially  the  i n Indo-Ohina s i n c e 1965  aggravated  F r e q u e n t l y monetary c r i s e s were  experienced  among IMF member c o u n t r i e s ^ . 4  the upsurging  out.  o f payment d e f i c i t  continued almost throughout the p e r i o d , and e s c a l a t i o n of the war  country,  Another s i g n i f i c a n t  n a t i o n a l i s m i n l e s s developed  event  countries.  i n t e n s i f i e d t h e i r demands f o r economic a s s i s t a n c e and  was They  trade  53 The investment was #58.6 m i l l i o n i n 1967 and #158.7 m i l l i o n i n 1968. Of. MITI, K e i z a l Kyoryoku no Genjo to Mondaiten (The Current C o n d i t i o n and Problems o f Economic Cooperation), Tokyo. 1969. pp.128-130 and pp. 480-401-. R4  As a r e s u l t , major c u r r e n c i e s were r e v a l u e d . The French f r a n c was devalued t h r e e times, 16.7$, 17.55$ and 11.1$, r e s p e c t i v e l y , i n 1957, 1958 and 1969. The German mark was r e v a l u e d upward twice, 5$ and 9.29$ i n 1961 and 1969. The B r i t i s h pound was devalued 14.3$ i n 1967. Of. M a i n l c h i Shimbun. June 24, 1972. The c o n v e r t i b i l i t y o f the d o l l a r i n t o g o l d was a l s o i n q u e s t i o n throughout the 196o's, and s p e c u l a t i o n over d o l l a r d e v a l u a t i o n pushed the p r i c e o f g o l d up to more than #40 per ounce as e a r l y as the f a l l o f 1960. As a r e s u l t o f f r e q u e n t g o l d rushes, a d u a l gold p r i c e system was adopted i n 1968. Cf. Buntaro Tomizuka, " S h i h a i r y o k u U s h i n a t s u t a K i j i k u : Doru ( D o l l a r : the Loss o f C o n t r o l as the Key C u r r e n c y ) , " A s a h i J o u r n a l , Vol.13, No.28, J u l y 30, 1971, pp.83-90. J  38  concessions from developed c o u n t r i e s i n the U n i t e d Nations Conference on Trade and Development,  which was e s t a b l i s h e d  i n 1964 and met i n 1964, 1968 and 1972. The r e s u l t s from these UNCTAD meetings were i n c r e a s e d economic a i d from developed c o u n t r i e s t o LDC's o f up to \% o f the doner's GNP by 1975, and p r o v i s i o n o f p r e f e r e n t i a l treatment o f imports from LDO's^^.  some LDC's went f u r t h e r than t h a t  by e x p r o p r i a t i n g and n a t i o n a l i z i n g f o r e i g n owned r e s o u r c e industries operating i n t h e i r countries.  Some  examples  are the e x p r o p r i a t i o n o f Union E m i l i n the Congo i n 1966, and the n a t i o n a l i z a t i o n o f copper mines i n C h i l e i n 1969^6. This tendency strengthened i n the 1970's. The supply c o n d i t i o n s o f r e s o u r c e s i n the postwar markets were g e n e r a l l y f a v o r a b l e t o Japan, s i n c e i t could obtain resources comparatively e a s i l y a t r e l a t i v e l y  stable  p r i c e s because o f t h e i n c r e a s i n g l y s u c c e s s f u l r e s o u r c e developments  throughout the w o r l d ^ .  These domestic, i n t e r n a t i o n a l and r e s o u r c e supply c o n d i t i o n s a f f e c t e d each s e c t o r — t r a d i n g  55  companies,  A s a h i J o u r n a l , Vol.14, No.18, May 5, 1972, pp.103-  104. Ikuro Suga, "Kinzoku Shigen o Meguru Shomondai (Problems i n M e t a l l i c R e s o u r c e s ) , " K e i z a i to Gaiko, No.590, J u l y , 1971, p.60. 57 Yasuhiro Masamura, "Rinen n i Kakeru Nihon no Shigen S e i s a k u (Japanese Resource P o l i c i e s Without D o c t o r i n e ) , " Economist. Vol.48, No.42, October 6, 1970, pp.21-23.  39  manufacturers and the g o v e r n m e n t — f o r t h e i r a t t i t u d e and behavior f o r resource investments.  (A)  Economic P o l i c y  Changes  The o b j e c t i v e s o f the U.S.'s o c c u p a t i o n p o l i c i e s underwent a complete change a f t e r the beginning o f the East-West c o n f r o n t a t i o n , which was f o l l o w e d by the Korean War.  The o r i g i n a l p o l i c y o f r e t a l i a t i o n and punishment  a g a i n s t Japan's war crime a t P e a r l Harbor was r e p l a c e d by the country's f a s t r e c o n s t r u c t i o n t o improve i t s p o s i t i o n as a s t r o n g anti-communist f r o n t i e r i n A s i a n s .  As a r e s u l t ,  recommendations f o r payments o f war r e p a r a t i o n s and m o d e r n i z a t i o n o f Japan's economic system by d e c o n c e n t r a t l n g i n d u s t r i e s were r e t r o c e d e d from the o r i g i n a l  reformation  plan. I n r e p a r a t i o n payments, the i n i t i a l Pauley M i s s i o n a r r i v e d a t the amount o f £2,466 m i l l i o n i n 1939 y e n ^ , hut 9  i n the f i n a l Johnston Committee recommendation, the amount was reduced to £662 m i l l i o n , l e a v i n g s u f f i c i e n t  capabilities  f o r Japan to implement i t s economic r e h a b i l i t a t i o n ^ . 0  58 Kazuto Nagasu, Mihon K e i z a i Nyumon ( I n t r o d u c t i o n to Japanese Economy), Kobunsha, Tokyo, 1965, p. 11b"; 59 The exchange r a t e was £4.112 to the d o l l a r . 6° J . Cohen, Japan's Economy i n War and Reconstruct i o n s , U n i v e r s i t y o f Minnesota Press, M i n n e a p o l i s , 1949, pp.419-425. The d i f f e r e n c e between the two d e c i s i o n s was about $450 m i l l i o n .  40  The  o r i g i n a l economic m o d e r n i z a t i o n p l a n  z a i b a t s u d i s s o l u t i o n s and tions of i n d u s t r i e s .  included  e l i m i n a t i o n of excessive  A f t e r the  z a i b a t s u were d i s s o l v e d ,  3 2 5 companies were named to be d i v i d e d i n t o s m a l l But only  the U.S.  r e t r e a t e d from  concentra-  companies.  i t s original objectives,  1 1 companies were ordered to be  and  deconcentrated^ . 1  Thus, a great p a r t o f the prewar i n d u s t r i a l s t r u c t u r e  was  not only preserved,  U.S.  but a l s o strengthened to meet the  p o l i t i c a l strategies. The h i s t o r i c a l p a t t e r n o f i n d u s t r i a l a c t i v i t i e s I n Japanese economy was  the  t h a t the f i n a n c i a l c a p a b i l i t y o f  i n d u s t r i a l c a p i t a l was  weak and  tended to be c o n t r o l l e d by  commercial c a p i t a l throughout the development of c a p i t a l i s m 62  since 1 9 6 8  .  The  representative  c a p i t a l i s t r a d i n g companies, and the supply  o f resources  affiliated  enterprises^.  Trading supply  and  example of commercial they were omnipotent i n  d i s t r i b u t i o n of goods o f  companies were s t i l l i n d i s p e n s a b l e  o f resources  and  channeling  i n the  of goods i n postwar  They were: M i t s u b i s h i Heavy I n d u s t r i e s , Japan I r o n and S t e e l , O j i Paper Manufacturing, M i t s u b i s h i Metal Mining, M i t s u i Mining and Smelting, Ika Mining I n d u s t r i e s , Dalnippon Brewery, Toyo Cannery, Teikoku T e x t i l e s , Hokkaido Dairy and T a i k e n I n d u s t r i e s . Of. Hideo Akimoto, Keidanren, Sekkasha, Tokyo, 1 9 6 8 , pp.96-97. D l  6 I n d u s t r i a l c a p i t a l i s c a p i t a l employed f o r manuf a c t u r i n g goods, w h i l e commercial c a p i t a l i s t h a t used f o r d i s t r i b u t i o n of goods. T r a d i n g companies are t y p i c a l examples p f the l a t t e r . Cf. Uchida, o p - c i t , pp. 1 9 - 2 1 . 2  63  Ibid.,  pp.31-38.  41  years,  because they were ready-made s a l e s f o r c e s ,  d i s t r i b u t o r s and  supply agents i n remote f o r e i g n markets i n  which manufacturers c o u l d not a f f o r d to e s t a b l i s h t h e i r channels. materials  For i n s t a n c e , almost a l l imports o f f o r the i r o n and  out by g e n e r a l  own  raw  s t e e l i n d u s t r i e s were c a r r i e d  traders^.  Thus, an a n a l y s i s o f t r a d i n g companies and  their  b e h a v i o r i n resources supply w i l l show the major trends b e h a v i o r i n the second  (B)  and  period.  Trading; Companies and  T h e i r Behavior  A t r a d i n g company i s d e f i n e d as a channel o f d i s t r i b u t i o n operating  extensively i n foreign  transactions^;  Although t h i s i s t r u e i n major l a r g e t r a d i n g companies, t h e i r domestic operations a c t i v i t i e s , so they are  are about h a l f o f t h e i r  c a l l e d general  merchants^.  study, the t r a d i n g companies under c o n s i d e r a t i o n generally  the top  organizations,  64 6  5  ten, out o f 8,100  which p l a y a key  i  n  this  are  existing trading  r o l e i n the  Japanese economy,  i b i d . , pp.68-78. Ibid.  66 p example, the c l a s s i f i c a t i o n of t h e i r a c t i v i t i e s i s : domestic, 57.1$^and f o r e i g n t r a d e , 42.9$ o f the t o t a l s a l e s o f the top 12 companies i n 1964. Of. I b i d . The f i g u r e s are almost s i m i l a r : 55.9$ and 44.1$ r e s p e c t i v e l y i n 1968, by the O r i e n t a l Economist, Vol.38, No.711, p.37. The former top 12 became 10 because o f mergers. o r  42  and have dealt with 46.7$ of exports and 60.4$ of imports of the t o t a l value i n in  1968  6 7  1960,  and 48.2$ and  63.1$,  respectively,  .  In Japan's postwar economy, the set-back of the U.S. i n d u s t r i a l deconcentration plan may have preserved the group allegiance that prevailed within an i n d u s t r i a l group i n the prewar period.  This may have f a c i l i t a t e d postwar  moves toward a new type of i n d u s t r i a l a l l i a n c e based on f i n a n c i a l and business r e l a t i o n s , centering on the bank and the trading company. . . . the bank because c a p i t a l has been i n desperately short supply, and the trading company because manufacturing firms hungry to expand export had to rely on i t f o r experience and knowledge i n f a r flung markets and could not a f f o r d to build up their own marketing organizations68. Trading companies and banks were strong devices to weld industries into p a r t i c u l a r groups.  For instance, the  Mitsui group i s headed by Mitsui Bank and Mitsui & Co., and other industries c l o s e l y connected range from mining  67 The low percentage i n exports i s due to such products as home electronics equipment and automobiles being exported by manufacturers f o r maintenance and servicing reasons. The top ten companies are: Mitsubishi Shoji, Mitsui & Oo., Marubeni-Iida, C. Itoh & Co., Nissho-Iwai, Sumitomo Shoji, Toyo Merika, Nichlmen, Kanematsu-Gosho, and Ataka & Oo. Of. "Trading House i n Japan," Oriental Economist, V o l . 3 8 , No.7H, January, 1970, pp.37^30^ 68 Robert Luber, "The Japanese Giant That Wouldn't Stay Dead," Fortune. Vol.LXX, No.5, November,1964, p.272.  43  and manufacturing t o warehouses and Sumitomo and one  r e a l estate.  Mitsubishi,  others have s i m i l a r connections w i t h a t l e a s t  o f the top t e n t r a d i n g companies i n t h e i r group69 In domestic a c t i v i t i e s , one  o f two  important r o l e s  o f t r a d i n g companies i s to c r e a t e c r e d i t and t r a n s a c t i o n s between i n d u s t r i e s . notes up  #  insure  Payments u s i n g  promissory  to 10-months' s i g h t are q u i t e a common and  neccesary business p r a c t i c e i n Japan, where the c a p a b i l i t i e s o f i n d u s t r i e s are l i m i t e d , and  most i n d u s t r i e s  f a l l w i t h i n the s m a l l t o medium c a t e g o r y ? . 0  companies c r e a t e c r e d i t by a c c e p t i n g i n d u s t r i e s and  notes o f  Trading other  making payments w i t h t h e i r h i g h q u a l i t y notes.  Thus, t r a d i n g companies smooth and transactions.  financial  ensure business  D e f a u l t r i s k s o f these accepted promissory  notes by t r a d i n g companies are d i l u t e d i n t h e i r g i g a n t i c amount o f s a l e s , but once these notes should l o s s e s must be Incurred  69  default, a l l  by the t r a d i n g companies? .  O r i e n t a l Economist S t a t i s t i c s , August,  1  This  1966.  f o r example, s m a l l to medium f i r m s w i t h employees o f l e s s than 300 accounted f o r 99.8$ o f a l l e n t e r p r i s e s , and 82.4$ o f the t o t a l work f o r c e s i n 1963. Of. K a z u j i Nagasu, Nihon K e i z a i My/umon ( I n t r o d u c t i o n to Japanese Economy), Kobunsha, Tokyo, 1965, p.137. ^ The t o t a l gross income o f Japan's top 500 mining and manufacturing i n d u s t r i e s i n 1965 was #39.6 b i l l i o n , w h i l e the top 12 t r a d i n g companies' revenue amounted to #24.6 b i l l i o n . M i t s u i & Oo. alone, f o r example, i n c u r r e d d e f a u l t l o s s e s o f #20 m i l l i o n between September, 1964, and March, 1965, when many I n d u s t r i e s went bankrupt due to the recession. Of. Uchlda, op c i t . , pp.101-105 and pp.120-123.  44  mechanism gives t r a d i n g companies important r o l e s i n c r e d i t c r e a t i o n , and  guarantees of t r a n s a c t i o n s  among i n d u s t r i e s  through them. The  o t h e r c a p a b i l i t y provided  i s f i n a n c i n g by  trading  companies, u s i n g the d i f f e r e n c e i n s i g h t s between promissory notes .  Trading  7 2  purchases and  companies i s s u e short s i g h t notes f o r t h e i r  accept l o n g e r  s i g h t notes f o r t h e i r s a l e s ;  the time d i f f e r e n c e i s f i n a n c e d Trading  by a t r a d i n g company.  companies can p r o v i d e the above f u n c t i o n s  by  t h e i r good c r e d i t i n banks supported by a tremendous amount o f s a l e s , and  t h e i r c a p a b i l i t i e s to r a i s e working c a p i t a l  from banks, as they are a t the core o f an i n d u s t r i a l group. The  r a t e of loans o f the top  banks i n 1964 o f the  was  8.2^3.  10 t r a d i n g companies i n c i t y  This  i n d i c a t e s the  importance  t r a d i n g companies i n Japan's economy, because banks  can a l s o extend t h e i r l o a n s to s m a l l - and  medium-sized  companies, u s i n g t r a d i n g companies as b u f f e r s to absorb insolvancy  risks.  I n f o r e i g n t r a n s a c t i o n s , t r a d i n g companies are made s a l e s f o r c e s , d i s t r i b u t o r s and experience i n f o r e i g n markets.  7  2  I b i d . , pp.123-124.  7  3  I b i d . , pp.103-105.  supply agents w i t h t h e i r  Their a c t i v i t i e s  p r e c i s e l y expressed i n the f o l l o w i n g  ready-  statement.  are  45  The major r o l e o f t r a d i n g companies Is channels o f t r a n s a c t i o n s o f Dig b u s i n e s s e s . Very few o f Japan's top 500 mining and manufacturing i n d u s t r i e s operate without u s i n g them? . 4  I n the supply o f r e s o u r c e s , the q u a n t i t y and terms and  price  c o n d i t i o n s of Japan's needy resources f l o w  f a v o r a b l e , as p r e v i o u s l y mentioned. were no p a r t i c u l a r reasons  was  Therefore, t h e r e  f o r making investments  in  r e s o u r c e i n d u s t r i e s to implement the goals o f s t a b i l i t y low resource p r i c e s as i n d i s p e n s a b l e f a c t o r s .  and  However,  t r a d i n g companies r a p i d l y i n c r e a s e d t h e i r f o r e i g n i n v e s t ments i n resources as an a l t e r n a t i v e to i n c r e a s e t h e i r profitability  for survival.  S e v e r a l reasons are c o n s i d e r e d causes o f t h e i r urgent s e a r c h f o r s u r v i v a l . c o n d i t i o n s o f the post-Korean  F i r s t , the d e v a s t a t i n g War  many t r a d i n g companies which had booming Korean War  economy.  and  1965  recessions h i t  expanded r a p i d l y i n the  T r a d i n g companies which  s p e c i a l i z e d i n t e x t i l e s and many medium- to s m a l l companies went bankrupt on both o c c a s i o n s ? ^ . . These l e s s o n s  urged  t r a d i n g companies, e s p e c i a l l y s p e c i a l i z e d i n p a r t i c u l a r commodities such as t e x t i l e s and s t e e l , to s t r e n g t h e n  their  business and f i n a n c i a l c a p a b i l i t i e s by becoming g e n e r a l  74  i b i d . , p.124.  75  T h i s prompted the r e o r g a n i z a t i o n o f t r a d i n g companies to i n c r e a s e t h e i r s t r e n g t h by merger, group a l l i a n c e and a f f i l i a t i o n . I b i d . , pp.68-78.  46  merchants by merger, take-over  or  affiliation.  Second, the changing Japanese export s t r u c t u r e , c e n t e r i n g on heavy and  chemical  i n d u s t r i e s , requires strong  f i n a n c i a l c a p a b i l i t i e s to p r o v i d e export payments to win i n export  now  c r e d i t by  deferred  c o m p e t i t i o n w i t h others i n  e x p o r t i n g v e s s e l s , p l a n t s and  o t h e r machinery.  In  raw m a t e r i a l s , the s t r e n g t h o f t r a d i n g companies  importing  was  r e q u i r e d to p r o v i d e manufacturers w i t h working c a p i t a l i n the form o f postponing  payments on imported  resources ^. 7  T h i r d , manufacturers are g r a d u a l l y t a k i n g over some o f the f u n c t i o n s p r e v i o u s l y g i v e n only to t r a d i n g companies, by e x p o r t i n g d i r e c t l y to f o r e i g n buyers. e x p o r t i n g c o n s i s t e d o f 14.0$  This d i r e c t  o f the t o t a l export v a l u e i n  1955.  I t i n c r e a s e d r a p i d l y t o 25$  export  value expanded from #2.0  o f the 1965  value;  b i l l i o n to #8.5  the  billion  respectively ?. 7  Fourth,  i n domestic t r a n s a c t i o n s , the s o - c a l l e d  d i s t r i b u t i o n r e v o l u t i o n changed the p a t t e r n o f commodity d i s t r i b u t i o n , e s p e c i a l l y f o r consumer goods.  The  of t r a d i n g companies as d i s t r i b u t i o n channels had  function been  g r a d u a l l y reduced by the r a p i d i n c r e a s e of s e l f - s e r v i c e and  d i s c o u n t s t o r e s which e l i m i n a t e d or reduced the  7  6  77  ibid. ibid.,  p.177  value  47  o f middle men.  One  such s t o r e appeared  staggeringly increased  i n Japan i n 1953.  and  i n number to 5,327 by October,  T h e i r s a l e s growth was o f these s t o r e s i n c r e a s e d  s p e c t a c u l a r : the top  two  t h e i r s a l e s by 1,260-fold and  1,200-fold between 1957 and  1967 . 7 9  L a s t and most important, the p r o f i t o f t r a d i n g companies was  d i m i n i s h e d f o r the above reasons.  t r a d i n g companies, w i t h a s s e t s  o f more than 510  I n the b i g billion  (#28 m i l l i o n ) , which i n c l u d e s the top f o u r , the net p r o f i t margin decreased from 2.9$  i n 1960  r e s t of the top t e n from 1.4$  to 0.4$  to 1.1$,  i n 1964;  the  respectively^.  Under these a d v e r s i t i e s , t r a d i n g companies expanded t h e i r domestic a c t i v i t i e s i n the f i e l d s of housing development and many o t h e r a r e a s .  supermarkets, In f o r e i g n  a c t i v i t i e s , a resource investment was an a l t e r n a t i v e to v a r i o u s investments such as manufacturing, commerce and others. Investments  I n resources i n v o l v e r i s k s and  s u b s t a n t i a l amount o f funds. s i n g l e t r a d i n g company may because  require  A r e s o u r c e investment by a  jeopardize  i t s existence  o f f i n a n c i a l burdens and the r i s k of f a i l u r e  •° T o s h l i c h l Atsumi, Kourigyo Seicho no H l m i t s u ( S e c r e t s of Growth i n R e t a i l I n d u s t r y ) , Kawade Shobo, Tokyo. 1967, p.41. 79  Ibid.,  8  Uchida, op c i t . p.195.  0  p.17.  48  i n discovery of resources.  I n t h e establishment o f j o i n t  ventures w i t h l o c a l e n t e r p r i s e s , host governments, Japanese i n d u s t r i e s o r ones from t h i r d c o u n t r i e s , t r a d i n g reduce f i n a n c i a l burdens and spread r i s k s .  In addition, a  j o i n t venture w i t h a h o s t government and l o c a l p r o v i d e s p r o t e c t i o n from d i r e c t exposure may a r i s e when n a t i o n a l i s m should  companies  industries  to h o s t i l i t y which  upsurge.  T r a d i n g companies had e n t h u s i a s t i c a l l y sought  joint  o p e r a t i o n s w i t h f o r e i g n and domestic p a r t n e r s i n the l a t t e r p a r t o f t h e 1960's.  I n r e s o u r c e investments, M i t s u i & Oo.,  f o r example, e s t a b l i s h e d  j o i n t ventures w i t h American and  A u s t r a l i a n i n d u s t r i e s to develop i r o n and coking c o a l mines i n A u s t r a l i a , and a copper mine w i t h a U.S. i n d u s t r y i n Zambia^.  T r a d i n g companies have a l s o a c t i v e l y  expanded  t h e i r r o l e as o r g a n i z e r s and c o o r d i n a t o r s o f l a r g e domestic  investment  groups.  scale  In t h i s case, a few t r a d i n g  companies a r e o f t e n i n the same investment group.  The  major reason i s t h a t Japanese major i n d u s t r i e s a r e gathered i n t o s e v e r a l groups by f i n a n c i a l and i n d u s t r i a l alliance.  When i n d u s t r i e s from d i f f e r e n t groups s h o u l d  form an investment  group,  i t i s p r a c t i c a l l y impossible to go prevent t h e a c t i v i t i e s o f t h e i r t r a d i n g companies .  "Trading Firms i n Japan," O r i e n t a l V o l . 3 8 , No.687, January, 1 9 6 8 , p p . 6 2 - c i n 0 1  ®  "Sogo Shosha (General Merchant)," Vol.46, No.39, p . 3 7 . 2  Economist, Economist,  49  Thus, i t i s more p r a c t i c a l to cooperate w i t h o t h e r t r a d i n g companies i n forming an investment group.  Mitsui &  Oo.  cooperates w i t h Marubeni-Iida i n Canada f o r coking c o a l development, f o r e x a m p l e ^ . To sum up, the f u n c t i o n o f t r a d i n g companies i n both domestic and i n t e r n a t i o n a l a c t i v i t i e s i s very important i n the Japanese  economy.  Some o f the f u n c t i o n s undertaken  by  them have been r e p l a c e d by manufacturers and r e t a i l e r s . a r e s u l t , t h e i r p r o f i t a b i l i t y was Investments  decreased  As  substantially.  i n r e s o u r c e s were sought as an a l t e r n a t i v e to  curb t h e i r d e t e r i o r a t i n g f i n a n c i a l p o s i t i o n .  They had  i n c r e a s i n g l y i n v e s t e d i n r e s o u r c e s by e s t a b l i s h i n g ventures and o r g a n i z i n g investment groups.  joint  Although  their  investments were i n c r e a s e d t o Improve t h e i r p r o f i t a b i l i t y , the m o t i v a t i o n was  not s o l e l y a s e a r c h f o r h i g h e r r e t u r n s ,  but r a t h e r f o r s u r v i v a l and s t r e n g t h e n i n g t h e i r  financial  capabilities.  (C)  Manufacturers and T h e i r Behavior Japanese manufacturers were s t i l l a t a heavy  disadvantage i n machinery  8  3  Ibid  and technology i n comparison  with  50  f o r e i g n competitors, although p r o d u c t i o n c a p a b i l i t i e s were r a p i d l y regained as a r e s u l t o f U.S. a i d and s p e c i a l procurements from the o f f - s h o r e war i n Korea.  Technological  gaps e x i s t e d i n many i n d u s t r i e s , such as heavy, chemical, e l e c t r o n i c s , and o t h e r s .  Imports o f machinery and  t e c h n o l o g i e s were the s h o r t cuts taken t o f i l l the Japanese e a r n e s t l y sought The  the gaps, and  them i n f o r e i g n c o u n t r i e s .  t o t a l number o f t e c h n o l o g i e s purchased  between 1950 and ftii  1965  amounted t o  3,534;  2,511  between  1960  and  1965  alone  The a u a l i t y o f Japanese i n d u s t r i e s and t h e i r s t r u c t u r e had been changed completely by the end o f the 1960's  under a g g r e s s i v e government p o l i c i e s . The M i n i s t r y o f I n t e r n a t i o n a l Trade and Industry p a t i e n t l y delayed the Import l i b e r a l i z a t i o n o f p r o m i s i n g i n d u s t r i e s , n o t w i t h s t a n d i n g severe f o r e i g n c r i t i c i s m s , u n t i l they gained the i n t e r n a t i o n a l competitive power. Simultaneously, t h e MITI demanded i n d u s t r i e s to s t r e n g t h e n t h e i r i n d u s t r i a l c a p a b i l i t i e s under the t h r e a t o f import l i b e r a l i z a t i o n and p e r m i s s i o n o f f o r e i g n investments i n t o Japan"5. I n d u s t r i e s needed l a r g e c a p i t a l investments f o r  a g g r e s s i v e purchases  o f f o r e i g n machinery and technology t o  e l i m i n a t e gaps with t h e i r c o u n t e r p a r t s .  As p r e v i o u s l y  ^ K. Miyagawa and M. H i r a o , Shlhon Koryu t o Kokusai Kinyu ( C a p i t a l Flow and I n t e r n a t i o n a l F i n a n c e ) , Ginko Kenshusha, Tokyo, 1965, p p . 1 3 0 - 1 3 1 . 8  8  5  Mihon K e i z a i Shimbun, June 1 8 , 1 9 7 2 .  .  51  mentioned, the most common way purchases was  of f i n a n c i n g f o r these  debt f i n a n c i n g , and t h i s has been i n c r e a s i n g  throughout the 1960's.  The average r a t e of e q u i t y i n t o t a l  c a p i t a l of a l l i n d u s t r i e s dropped h a l f of 1955,  to 19.8$  Investments  from 39.2$ i n the  f o r the same p e r i o d i n 1 9 6 9 . 86  i n resource i n d u s t r i e s r e q u i r e not o n l y  l a r g e sums o f funds, but a l s o o f p e r s o n n e l .  Manufacturers  were eager to meet the c r i t e r i a o f c a t c h i n g up with counterparts.  first  their  E s p e c i a l l y i n view o f the f a v o r a b l e terms  under which resources were obtained i n the open market, t h e r e was  l i t t l e urge to e n t e r upstream  resource  i n d u s t r i e s , r e c r u i t i n g p e r s o n n e l w i t h i n i n d u s t r i e s ; the s t a b l e flow h y p o t h e s i s has l i t t l e motivated investments. Although l a b o r c o s t s jumped i n the l a t t e r p a r t of the 1960's, manufacturers absorbed a p a r t o f l a b o r c o s t h i k e s by a c h i e v i n g s c a l e economy as a r e s u l t o f c a p i t a l investments i n p l a n t e x p a n s i o n ? ; the low cost argument does not appear to have 8  carried  weight.  < Morio Okazaki, "Tsuyomaru K a j o s e i s a n Pukyo no K i k i (The I n c r e a s i n g C r i s i s o f D e p r e s s i o n by O v e r p r o d u c t i o n ) , " Economist, Vol.48, No.42, October 6, 1970, pp.112-118. 87 j»or example, the MITI requirement f o r making an ethylene p l a n t was the p r o d u c t i o n c a p a c i t y of 100,000 tons per y e a r . But i t r a i s e d the minimum up to 300,000 tons p e r y e a r i n 1966. Cf. K a n - i c h i Kondo, "Kyodalka ga Maneita H i t s u z e n Aku (Necessary E v i l Caused by M a g n i f i c a t i o n ) , " Asahi J o u r n a l , Vol.14, No.22, June 2, 1971, p.22.  52  A significant investment i n 1958.  example o f an independent  resource  was t h e establishment o f the A r a b i a n O i l Oo. T h i s investment,  of an investment  however, was a mere  acceptance  i n v i t a t i o n from the Saudi A r a b i a n  govern-  ment, which wanted to c r e a t e a c o m p e t i t i v e power a g a i n s t major Western o i l c o m p a n i e s . 88  T h i s investment,  which was  made i n an e x c e s s i v e o i l market, d i d not n e c e s s a r i l y g a i n popularity. In s h o r t , the manufacturers'  major concern was t o  become c o m p e t i t i v e w i t h t h e i r Western c o u n t e r p a r t s by p u r c h a s i n g machinery and technology. enough f i n a n c i a l c a p a b i l i t i e s take investments  i n resources.  They d i d not have  and human resources t o underThese were a v a i l a b l e I n the  open market, and n e i t h e r the s t a b i l i t y nor low c o s t hypotheses  motivated  Investments.  C a p i t a l investments i n  p r o d u c t i o n f a c i l i t i e s were used t o o f f s e t a p a r t o f r i s i n g labor costs. investments  T h e r e f o r e , m o t i v a t i o n toward a c t u a l  was very  limited.  The c a p i t a l i z a t i o n was #28 m i l l i o n , w i t h a p a i d up c a p i t a l o f #10 m i l l i o n , although many l a r g e c o r p o r a t i o n s j o i n e d the venture. The f i n a n c i a l c a p a b i l i t i e s o f the company were t o o weak t o compete w i t h Western o i l companies. Cf. K a t s u j i Sugimura, "Wagakuni no K e i z a i Kyoryoku no Genjo to Tembo (Japan's Current Economic Cooperation and Outlook),'" K e i z a i Hyoron, September, 1961, pp.95^-96. 8  8  53  (J)  Government and i t s Behavior Japan regained i t s n a t i o n a l s o v e r e i g n t y , t e r m i n a t i n g  postwar o c c u p a t i o n , w i t h the f o r m a t i o n of a separate peace t r e a t y w i t h the f r e e world, c e n t e r i n g on the U.S., i n 1952. Because o f t h i s t r e a t y , Japan i s s t i l l t e c h n i c a l l y a t a s t a t e o f war w i t h such c o u n t r i e s as R u s s i a , China and many o t h e r communist c o u n t r i e s . of  However, by l a b o r i o u s methods  economy and p o l i t i c s s e p a r a t i o n , i t found a way to e s t a b l i s h  trade r e l a t i o n s w i t h these c o u n t r i e s .  The growth of t h i s  trade i s amazing^9. Japan r e t a i n e d c l o s e r e l a t i o n s w i t h the U.S.— politically  and e c o n o m i c a l l y — t h r o u g h o u t  the postwar p e r i o d .  Japan i t s e l f b e n e f i t e d most by t h i s c l o s e t i e , o b t a i n i n g s p e c i a l procurements from the Korean war I n the e a r l y p a r t of  t h i s p e r i o d , and from the war i n Indo-China  i n the l a t t e r  p a r t , and o b t a i n i n g a most promising export market i n the U.S., which c o n s t a n t l y absorbed approximately one t h i r d of Japan's t o t a l export v a l u e .  Trade between the U.S. and  Japan i n c r e a s e d from #993.6 m i l l i o n i n 1953 to #11.5 b i l l i o n 90  i n 1970^ .  I n these courses of development, Japan's s i n g l e  ^ The trade between Japan and China i n both d i r e c t i o n s was #34.2 m i l l i o n i n 1953, i n c r e a s i n g t o #822.7 m i l l i o n i n 1970. Japan's exports to R u s s i a i n 1953 were only #7,000 w i t h imports o f #2.1 m i l l i o n ; the trade i n both d i r e c t i o n s i n c r e a s e d t o #821.9 m i l l i o n i n 1970. C f . Business JAPAN. November, 1971. 8  90  ibid.  54  important  o b j e c t i v e was  the enlargement o f i t s Gross N a t i o n a l  Product91. For t h e i r own  purposes, the Japanese were not  willing  to i n v o l v e themselves i n other than economic i n t e r e s t s , p o i n t e d out by a c a r e e r  as  diplomat:  The p r e v a i l i n g a t t i t u d e s i n c e the war has been "Let's concentrate on r e b u i l d i n g our own economy, and not become i n v o l v e d too much i n o t h e r s affairs,"92 1  The GNP and  by 11.4$  ranked t h i r d ,  grew by 9.4$  a n n u a l l y between 1953  d u r i n g the 1960's.  f o l l o w i n g only the U.S.  t h a t time, the mass-media and c l a i m i n g t h a t Japan had Heated d i s c u s s i o n had  1965,  race, Japan  and R u s s i a .  Around  the government s t a r t e d  become an economic s u p e r s t a t e .  been appearing  but investment i n resources not  In the GNP  and  i n the mass-media,  to promote n a t i o n a l p r e s t i g e  was  noticed. The  constant  belance  of payments s t r a i n improved i n  the middle of the 1960's, as shown i n Appendix 0. government regarded  a s u r p l u s i n balance  The  o f payments  s t e a d i l y i n c r e a s i n g f o r e i g n r e s e r v e s as temporary,  and  and  Kazuto Nagasu, "Nanshin Sum Nihon Shihon Shugl (Japanese C a p i t a l i s m Marching South)," Economist, Vol.49, No.8, March 2, 1971, p.12. . 9 1  92 I c h i r o Kawasaki, Japan Unmasked, Charles T u t t l e Co., Tokyo,. 1968, p.20"4\  E.  55  d i d not make any  serious considerations  Thus n e i t h e r h y p o t h e s e s — n a t i o n a l  u n t i l the  p r e s t i g e nor  1970's93.  increased  r e s e r v e s — h a d s i g n i f i c a n t reasons to induce Japan's investment a c t i v i t i e s . resources  Japan's method of o b t a i n i n g  throughout the p e r i o d had  I n the market, of m a t e r i a l s and  natural  been through purchases  i n as raw  a s t a t e as p o s s i b l e ,  b r i n g them back to Japan so t h a t a l l processes could  be  done i n Japan. Japan's economic a s s i s t a n c e to LDC's has changes.  In the  e a r l y p e r i o d , Japan had  economic c a p a b i l i t i e s , from which i t had reparations to China and  to neighboring  9 4  very l i m i t e d to pay  of s p l i t countries  The  reparations  helped these r e c i p i e n t s , but they were war o f very  war  Southeast A s i a n c o u n t r i e s ,  to those others  to the communist b l o c k .  experienced  except  belonging  must s u r e l y have damage  settlements,  d i f f e r e n t nature to a i d .  There were heated d i s c u s s i o n s f o r r e l a x a t i o n of c o n t r o l o f Japan's f o r e i g n investments i n the middle of the 1960's, i n view of i t s s t a b l e f o r e i g n reserves l e v e l a t around #2 b i l l i o n f o r the p r e v i o u s s e v e r a l y e a r s . The MITI was r e l a t i v e l y i n t e r e s t e d i n doing so, but the M i n i s t r y of Finance was r e l u c t a n t because o f a p o s s i b l e balance o f payments d e f i c i t . I t was a l s o e x p l a i n e d t h a t reserves were approximately 20% o f Japan's t o t a l annual import a t t h a t time, and were s t i l l at a low l e v e l i n comparison w i t h the 40$ to 50$ l e v e l i n Western c o u n t r i e s . Of. Nihon S e i s a n s e i Honbu, Kokusai Shihon to Nihon Kigyo ( I n t e r n a t i o n a l C a p i t a l and Japanese E n t e r p r i s e s ) . Tokyo, 19o7, pp.10-25. y  D  Major war r e p a r a t i o n payments were #550 m i l l i o n to the P h i l i p p i n e s , #220 m i l l i o n to Indonesia,.#200 m i l l i o n to Burma and #39 m i l l i o n to South V i e t Nam. Cf. Economist, Vol.45, No.44, October 24, 1967, p.52. 9  4  56  Japan's major government a i d s were yen l o a n s and f i n a n c i n g o f exports to l e s s developed  ^he  countries ^, 9  former s t a r t e d i n 1958,  and the l a t t e r i n 1965  f i n a n c i n g of p l a n t s and  equipment exports u s i n g government  f o r the  funds. Thus, the main purpose o f government economic a s s i s t a n c e to LDC's was  to p r o t e c t Japan's export market i n  LDC's by means o f loans and d e f e r r e d payments o f Japan's exports.  Investments i n resource i n d u s t r i e s , which r e q u i r e  l a r g e sums o f funds, were not promoted u n t i l toward the of  the 1960's.  end  In the i n t e n s i f i e d demand from LDC's f o r  more economic a i d i n the l a t t e r p a r t of the 1960's, i n v e s t ment i n t o LDC's were, among o t h e r s , an a l t e r n a t i v e form o f economic a i d .  P r i v a t e funds, i n c l u d i n g investments  and  export c r e d i t over one year, i n c r e a s e d r a p i d l y , as shown i n Appendix P.  Since the c l a s s i f i c a t i o n "other o f f i c i a l  i n c l u d e s investment  f i n a n c i n g by the government, the  i n c r e a s e s i n c e 1967  i s significant.  Especially i n invest-  ment i n r e s o u r c e s , as mentioned i n the overview, the t o t a l investments (1968  fiscal  year) was  of #599.7 m i l l i o n by March, i n v e s t e d i n 1967  before the i n s t i t u t i o n o f automatic  funds"  and  1968  investment  36.2$ o f 1969, alone,  approval of  95 Y o s h i y u k i Hagiwara, " K i r o n i T a t s u T a i A s i a Kankei (Japan-Asia R e l a t i o n s a t . a Turning P o i n t ) , " A s a h i J o u r n a l , Vol.13, Ho.39, October 15, 1971, pp.10-13.  57 up to #200,000 i n 1969. i n v e s t e d i n 1967,  I n t h i s , #58.6 m i l l i o n , 7.8$,  and #158.7 m i l l i o n , 28.4$, i n 1968.  was It  i s not c l e a r which i s the reason f o r i n c r e a s e d resource i n v e s t m e n t s — t h e government's LDC's a s s i s t a n c e , or the t r a d i n g companies' s,earch f o r h i g h e r p r o f i t a b i l i t y f o r s u r v i v a l , and a l s o whether or not both of these are w e l l harmonized.  But c o n s i d e r i n g t h a t a t l e a s t two  investments are made i n LDC's, i t might  thirds^-bf  be c o n s i d e r e d t h a t  the LDC's a s s i s t a n c e h y p o t h e s i s has some value f o r inducing  investments.  In r e c a p i t u l a t i o n , the government h e l d economic expansion as i t s major g o a l .  Japan's  The i n c r e a s e d GNP  c r e a t e d d i s c u s s i o n f o r the investments, but the a c t u a l investments were not y e t motivated only f o r n a t i o n a l p r e s t i g e reasons.  F o r e i g n r e s e r v e s were being  throughout the 1960's, but the government was  accumulated c a u t i o u s to  use them as a r e s u l t o f s u f f e r i n g a long-term balance of payments s t r a i n i n postwar y e a r s . LDC's was  the device to expand Japan's  middle o f the 1960*s. Japan's  Economic a s s i s t a n c e to exports by the  But toward the end o f the 1960*s,  economic a s s i s t a n c e to LDC's, i n the form o f  resource investments, was  increased r a p i d l y .  The  reason  ^° MITI, K e i z a i Kyoryoku no Genjo to Mondaiten (Current P o s i t i o n , and Problems o f Economic C o o p e r a t i o n ) , Tokyo, 1970, p.135. [ \  58  might have been t h a t the government's p o l i c y to  increase  economic a s s i s t a n c e to LDC's, under severe pressure  from  them, c o i n c i d e d with the urge f o r investments by t r a d i n g companies, as an a l t e r n a t i v e f o r h i g h e r  (Ill)  Third Period  (1970  to September,  profitability.  1972)  Overview This p e r i o d covers s i n c e the beginning  the past two  o f 1970.  and a h a l f years  Although very s h o r t , i t had  s e v e r a l important i n t e r n a l and  e x t e r n a l changes which  d i r e c t l y a f f e c t e d Japan's economic, p o l i t i c a l diplomatic p o l i c i e s . resource  and  Japan's investment p o l i c i e s  i n d u s t r i e s experienced  In  changes d u r i n g t h i s  p e r i o d i n the l i q u i d i n t e r n a t i o n a l p o l i t i c a l and  short  economic  sphere.  I t i s too e a r l y to say whether the e x i s t i n g  resource  p o l i c i e s are s t a b l e , but they w i l l g i v e c e r t a i n  bases f o r a f u t u r e  outlook.  In e x t e r n a l i n f l u e n c e s , f i r s t , conversion  the U.S.  suspension of  of i t s d o l l a r i n t o gold i n monetary c r i s e s ,  the i m p o s i t i o n o f the  10$  s u r t a x f o r a l l U.S.  imports,  and were  undertaken i n August, 1971,  under i t s c h r o n i c balance of  payments s t r a i n .  f o r c e d to r e v a l u e the yen  Japan was  upward i n the course o f i n t e r n a t i o n a l monetary agreed upon i n December, 1971.  16.88$  realignment,  In trade, Japan was  forced  59  i n t o concessions, e s p e c i a l l y i n t e x t i l e exports, i n which the U.S. gave an ultimatum to use the Trade w i t h the Enemy A c t to r e s t r i c t U.S. t e x t i l e imports, and h i n t e d a p o s s i b l e delay o f Okinawa r e v e r s i o n . Only h a l f a y e a r a f t e r the world monetary agreement, the B r i t i s h pound f a c e d another c r i s i s f o r p o s s i b l e devaluation.  Although i t has not y e t been devalued, t h e  f u t u r e o f the pound and the i n t e r n a t i o n a l monetary  system  i t s e l f i s s t i l l uncertain. Second, Chinese premier Chou E n - l a i announced f o u r p r i n c i p l e s w i t h which to do business w i t h Japanese companies in April,  1970^7.  I n d u s t r i e s committed too much i n Taiwan  and South Korea, Japanese defense c o n t r a c t o r s and e n t e r p r i s e s supply/ing the U.S. procurements f o r the war i n Indoc h i n a , were completely excluded from China-Japan t r a d e . Thus Japan's major i n d u s t r i e s t h a t a r e c l o s e l y  following  government p o l i c i e s t o support Taiwan, were excluded  from  China t r a d e s unless they were sworn t o the " f o u r p r i n c i p l e s . " T h i s caused i n c r e a s i n g uneasiness i n Japanese i n d u s t r i e s : they f e a r e d t h a t they might be l e f t alone i n business when 97 Japanese companies cannot undergo any business t r a n s a c t i o n s i f they p a r t i c i p a t e i n any o f the f o l l o w i n g c o n d i t i o n s : (a) manufacturers and t r a d i n g companies t h a t a s s i s t Taiwan's a g g r e s s i o n to Mainland China, and t h a t a s s i s t i n the i n v a s i o n of North Korea, (b) i n d u s t r i e s that have i n v e s t e d h e a v i l y i n Taiwan and South Korea, (c) companies t h a t cooperate i n U.S. a g g r e s s i o n i n Indo-China, and (d) j o i n t ventures w i t h U.S. companies and U.S. s u b s i d u a r i e s i n Japan. Of. J i y u Kokumin Sha, Gendai Yogo no K i s o O h i s h i k l (Fundamental Knowledge of Current Words), Tokyo, 1971, 0.1550.  60  China and Japan began moving toward rapproachment a t a l a t e r date. T h i r d , the U.S.  changed i t s p o l i c y a g a i n s t China,  from p a s t Chinese c o m p a r t m e n t a l i z a t i o n to rapproachment i n July,  1971,  by announcing the U.S.  visit  to China by May,  1972.  p r e s i d e n t ' s expected  The U.S.  p r e s i d e n t had  summit  t a l k s w i t h Chinese and R u s s i a n l e a d e r s i n February and 1972.  Meanwhile China r e g a i n e d i t s seat i n the U.N.,  Taiwan i n the f a l l ments appeared  o f 1971.  i n U.S.  F a i r , f o r the f i r s t  The  r e s u l t s of these  p a r t i c i p a t i o n i n the Canton  time, i n May,  1972 ®, and, 9  as  May, ousting  rapproachTrade proposed,  the o i l , n a t u r a l gas and o t h e r m i n e r a l resource developments in  S i b e r i a between the Russian government and U.S.  industries^!?,  Fouth, the power of n a t i o n a l i s m i n LDC's, which i n c r e a s e d s u b s t a n t i a l l y i n the l a s t decade, i s s t i l l i n c r e a s i n g and i t had a s e r i o u s impact c o u n t r i e s and  on r e s o u r c e consuming  t h e i r resource i n d u s t r i e s .  O i l , one  major r e s o u r c e s , i s a t y p i c a l example t h a t was  o f the  seriously  a f f e c t e d by the growing n a t i o n a l i s m o f the OPEC.  The  o r g a n i z a t i o n won  1971,  a s i g n i f i c a n t o i l tax h i k e  Newsweek, May  15,  1972,  1 0 0  in  p.75.  99 The l a t e s t p r o p o s a l s f o r two gas p r o j e c t s a l o n e may r e q u i r e . # 1 0 to #14 b i l l i o n . There a r e a l s o many o t h e r opportunities. Of.,Time, August 2 1 , 1 9 7 2 , p.57. 100 ike t a x rose 3 5 ^ per b a r r e l (a 2 0 $ i n c r e a s e ) , and 2 . 5 $ f o r . i n f l a t i o n e s c a l a t i o n w i l l be added a n n u a l l y f o r the next f i v e y e a r s . Of. Chuo Koron,Vol.10,No.2, 1971,pp203-  61  backed up and  by the  ever-Increasing  o i l demand i n the world,  the squeezed market c o n d i t i o n s  by the i n c r e a s e d  U.S.  import quota, t o g e t h e r w i t h the decreased Russian s a l e s i n the f r e e w o r l d  1 0 1  .  A f t e r the monetary realignment,  OPEC demanded another p r i c e hike to make up d o l l a r devaluation dollars.  f o r the  the  8.6$  s i n c e the o i l p r i c e i s quoted i n  In a d d i t i o n , t h e i r demand f o r more p a r t i c i p a t i o n  i n ownership was  increasing.  In June, 1972,  Iraq  took  ownership by n a t i o n a l i z i n g the Western-owned I r a q Petroleum Co.  1 0 2  This  I r a q i a c t i o n may  more p a r t i c i p a t i o n and  n a t i o n a l i z a t i o n o f foreign-owned  o i l p r o p e r t i e s to the OPEC. s i m i l a r and  cause f u r t h e r a s p i r a t i o n s f o r  A l s o , t h i s trend may  immeasurable a c t i o n s i n o t h e r  Domestically,  cause  resources.  many important a c t i v i t i e s were under-  taken, many of them c l o s e l y r e l a t e d w i t h the above international a f f a i r s .  F i r s t , the r e q u i r e d  Japan's growth are i n c r e a s i n g i n q u a n t i t y , dependency had  resources f o r and  i t s foreign  a l s o been i n c r e a s i n g , as shown i n Appendix  Second, the s t a g g e r i n g  increase  H.  of i t s f o r e i g n  The demand i n c r e a s e f o r crude o i l i n the market, as a r e s u l t o f these a c t i o n s , i s estimated to be at l e a s t 420 m i l l i o n tons. Ibid. 102 The IPC i s owned p r i m a r i l y by B r i t i s h Petroleum Co., Royal D u t c h - S h e l l , Compagnie F r a n c a i s e des P e t r o l e s , M o b i l O i l Corp. and Standard O i l Oo. of New Jersey.  62  r e s e r v e s r e s u l t e d i n the unexpected h i g h 16.88$ upward r e v a l u a t i o n i n December, 1971.  I t was  yen  hoped t h a t i t would  curb the i n c r e a s e of r e s e r v e s and  ease f o r e i g n p r e s s u r e s  Japan, but the r e s e r v e s continued  to i n c r e a s e throughout  the p e r i o d .  Although  April,  Japan s t i l l has more than $16  1972,  shown i n Appendix D. crisis,  another  the r e s e r v e s decreased  on  slightly in  billion,  as  In connection w i t h the B r i t i s h pound  upward yen r e v a l u a t i o n has  i n the mass-media s i n c e June, 1972.  been d i s c u s s e d  Under the  circumstances,  the government must f a c e the r e - e v a l u a t i o n o f i t s p o l i c i e s , i n c l u d i n g Japan's investment with t h i s  p o l i c i e s , among o t h e r s , to cope  situation.  T h i r d , the u n u s u a l l y h i g h nationwide p o l l u t i o n has  concern  been at stake s i n c e 1970 °3, and 1  of p o l l u t i o n became a s e r i o u s industry-wide  technology,  and  the r e d u c t i o n  problem.  problem not o n l y a f f e c t s c o s t s , because of the use o f new  about  This  necessary  of d i f f e r e n t q u a l i t i e s  of  resources f o r p o l l u t i o n c o n t r o l , but a l s o the demandsupply c o n d i t i o n s of world  resources s u i t a b l e f o r p o l l u t i o n  control. Fourth, the new 1972.  He  relations.  prime m i n i s t e r was  e l e c t e d I n June,  showed great i n t e r e s t i n n o r m a l i z i n g Ohina-Japan A f t e r the e l e c t i o n , the Chinese premier  Ninon, K e i z a i Shimbun, June 15,  1972.  sent  63  an i n v i t a t i o n t o t h e new prime m i n i s t e r f o r n o r m a l i z a t i o n talks.  T h i s has not y e t been a c t u a l i z e d , but w i l l have  s i g n i f i c a n t impact And  fifth,  i n various aspects. a f t e r the h u m i l i a t i o n s the U.S. made  Japan s u f f e r p o l i t i c a l l y and economically i n 1971, Japan i n i t i a t e d more independent a c t i o n by sending  economic  missions t o seek c l o s e r r e l a t i o n s w i t h Mongolia, Korea, North V i e t Nam and so o n i s s u e , many i n d u s t r i e s expressed Chinese  1 0 4  .  North  E s p e c i a l l y on t h e China  t h e i r f e a r of missing the  band wagon, and i n c r e a s i n g l y sought business  w i t h China.  By the middle  ties  o f August, 1972, many major  i n d u s t r i e s committed themselves i n t o China,  expecting  r e s u l t s from i t s p o t e n t i a l .  (A)  Trading Companies and T h e i r Behavior The  r e s p o n s i b i l i t i e s o f t r a d i n g companies as c e n t r a l  o r g a n i z a t i o n s o f i n d u s t r i a l groups have been i n c r e a s e d i n the c u r r e n t l i q u i d i n t e r n a l and e x t e r n a l c o n d i t i o n s T r a d i n g companies continued t h e i r zealous a c t i v i t i e s i n resource investments  to o b t a i n secured i n f l o w s o f resources  f o r Japanese i n d u s t r i e s .  In June, 1972, the Japanese government decided to grant economic a i d , p r i n c i p a l l y i n the form o f a l o a n , to Mongolia f o r the development o f m i n e r a l resources i n t h a t country. Of. Asahi Shimbun. June 20, 1972. 1  0  5  Ninon K e i z a i Shimbun, June 15, 1972.  64  I t would be q u i t e p o s s i b l e t h a t l a r g e themselves  manufacturers  would i n v e s t i n resource i n d u s t r i e s , but i n  r e a l i t y they depended on t r a d i n g companies of t h e i r i n d u s t r i a l groups f o r t h e i r supply o f r e s o u r c e s . i m p l i c a t i o n s would be t h a t resource investments  The in a  f o r e i g n country i n v o l v e s p e c i f i c business, economic, and p o l i t i c a l i n f o r m a t i o n , i n a d d i t i o n to complete and comprehensive mine i n f o r m a t i o n .  The investment  environment  w i l l d i f f e r from country to country, and the search f o r f e a s i b l e mines r e q u i r e s comprehensive i n f o r m a t i o n - g a t h e r i n g through dependable s o u r c e s . g a t h e r i n g channels throughout  The establishment o f i n f o r m a t i o n the world by an i n d u s t r y  r e q u i r e s huge sums o f money and human r e s o u r c e s .  Trading  companies have a l r e a d y e s t a b l i s h e d world-wide channels, i t would be more a t t r a c t i v e , a t l e a s t f o r the time  and  being,  f o r i n d u s t r y to use the t r a d i n g companies' o r g a n i z a t i o n and s c a r c e c a p i t a l s f o r a l t e r n a t i v e investments,  such as  p l a n t s and equipment, to s t r e n g t h e n t h e i r competitive position. T r a d i n g companies' behavior took s e v e r a l d i f f e r e n t forms.  F i r s t , a t r a d i n g company s t a r t e d resource  ments, such as timber, o b t a i n i n g acreage. investments  develop-  However,  i n m i n e r a l and o i l r e s o u r c e s by a s i n g l e  firm  were not s u i t a b l e because they r e q u i r e d tremendous amounts  65  of c a p i t a l w i t h h i g h r i s k s . sought p a r t n e r s h i p s  Second, t r a d i n g  companies  i n the i n v e s t i n g country, i n t h e i r own  country and i n a t h i r d  country.  T h i r d , the t r a d i n g  company o f an i n d u s t r i a l group decided t o make a l a r g e s c a l e j o i n t investment w i t h i t s members °6. 1  Fourth, many  t r a d i n g companies, manufacturers and others from d i f f e r e n t i n d u s t r i a l groups formed a l a r g e - s c a l e investment f o r a l a r g e n a t u r a l resource development  syndicate  project ?. 1 0  During t h i s p e r i o d , a l l major t r a d i n g companies made a c r u c i a l d e c i s i o n that w i l l a f f e c t t h e i r f u t u r e a c t i v i t i e s i n resources:  investment  the acceptance o f the Chinese  " f o u r p r i n c i p l e s " f o r business r e l a t i o n s . f o r the d e c i s i o n was t h a t i n a p p r o p r i a t e  The main reason  behavior o f a  t r a d i n g company as a p a r t o f the core o f an i n d u s t r i a l group aggravates the o v e r a l l competitive group.  power o f t h e  Thus, a t r a d i n g company must behave f o r the b e n e f i t  o f i t s group.  M i t s u i & Co. and M i t s u b i s h i S h o j i remained i n  IUO q>Yxe 30 companies o f the M i t s u b i s h i group agreed i n August, 1972, to e s t a b l i s h the M i t s u b i s h i O i l Development. The new p r o j e c t w i l l be e f f i c i e n t i n fund r a i s i n g , technology and I n f o r m a t i o n g a t h e r i n g . Of. Nihon K e i z a i Shimbun, August 19, 1972.  ? One s i g n i f i c a n t example o f a l a r g e - s c a l e j o i n t investment i s the f o u n d a t i o n of North Slope O i l i n February, 1970, a f t e r only three months p r e p a r a t i o n , u s i n g the f u l l power o f t h e business and f i n a n c i a l worlds; i t i n c l u d e s 26 major companies from e l e c t r i c power, i r o n and s t e e l , o i l i n d u s t r i e s , and t r a d i n g companies. C f . Economist, Vol.48, No.42, October 10, 1970,pp.21-23. 1 0  66  i n v u l n e r a b l e p o s i t i o n s i n the l a n d - s l i d i n g movement o f major i n d u s t r i e s toward  China t r a d e , but they  finally  decided to j o i n the Chinese band wagon i n June,  1972  u  .  The main i n t e r e s t s o f these t r a d i n g companies, as the c e n t e r s of i n d u s t r i a l groups, were i n r e s o u r c e s , such as o i l , n a t u r a l gas, i r o n ore and non-ferrous m e t a l s ^ . 1 0  The  e f f e c t s o f t h i s p o l i c y change w i l l take some time t o develop. In b r i e f , t r a d i n g companies s t i l l s u p p l i e d r e s o u r c e s t o manufacturers.  The investments were a c t i v e l y made by  t r a d i n g companies, forming  j o i n t v e n t u r e s , and o r g a n i z i n g  investment groups i n the same o r d i f f e r e n t i n d u s t r i a l  groups.  A h i g h l i g h t o f t h i s p e r i o d was that even the g r e a t e s t t r a d i n g companies c o u l d not r e s i s t the p o t e n t i a l i t y i n v o l v e d i n China t r a d e , which made them accept the Chinese c o n d i t i o n s , thereby pushing ahead o f the Japanese government's China p o l i c i e s .  (B)  Manufacturers and T h e i r Behavior Japanese  i n d u s t r i a l s t r u c t u r e had been changed to  being centered on heavy and chemical i n d u s t r i e s by the end of the l a s t p e r i o d , as mentioned  1  1  0  8  °9  previously.  At the same  Nihon K e i z a i Shimbun, June 15, 1972. ibid.  67  time, i n d u s t r i e s made c a p i t a l investments i n t h e i r p l a n t expansion, based on the p r e m i s i s t h a t they would export a s i g n i f i c a n t portion of t h e i r o u t p u t b u i l t i n t o the Japanese  industrial  1 1 0  ;  e x p o r t i n g has been  structure.  Under t h i s i n d u s t r i a l s t r u c t u r e , three major f a c t o r s acted against i n d u s t r i e s . remained  F i r s t , t h e l a b o r shortage  such throughout the p e r i o d .  F o r example, t h e r e a l  wage index f o r a l l manufacturing i n d u s t r i e s up to 109.3 i n 1970, and 117.2 i n 1 9 7 1  1 1 1  (1969=100) went  .  Second, i n d u s t r i e s a r e r e q u i r e d to make investments to c o n t r o l p o l l u t i o n , which a l s o a f f e c t s the s e l e c t i o n o f i n d u s t r i a l s i t e s , l e a d i n g to a s c a r c i t y and h i g h p r i c e of good s i t e s i n such a densely populated country.  Japan's  f i r s t o f f i c i a l Environmental White Paper estimates t h a t l a s t y e a r #2.7 b i l l i o n was spent by major c o r p o r a t i o n s f o r r e s e a r c h and p o l l u t i o n c o n t r o l  1 1 2  .  But deaths caused by  such p o l l u t i o n as methyl mercury, cadmium, sulphurous a c i d gas and others a r e u n o f f i c i a l l y estimated to be a t about 1,000 3.  i n many recent court b a t t l e s , i n d u s t r i e s have  11  been sentenced as l i a b l e t o pay m i l l i o n s of d o l l a r s o f compensation  1 I U  to v i c t i m s .  P o l l u t i o n control requires  M a i n i c h i Shimbun, June 29, 1972.  S t a t i s t i c s Dept., The Bank of Japan, S t a t i s t i c s o f Japan, No.302, May, 1972, p.8. 1 1 1  112 1  1  3  Time, J u l y 24, 1972, p.57. Ibid.  Economic  68  investments  i n v a r i o u s areas such as r e s e a r c h , equipment  and f a c i l i t i e s ,  new k i n d s o f r e s o u r c e s , and b e t t e r  q u a l i t i e s of resources. of  industries.  These e x t r a costs i n c r e a s e d c o s t s  Toho Z i n c , one o f t e n l e a d , z i n c and n i c k e l  i n d u s t r i e s , which had not been making d i v i d e n d payouts because o f r e q u i r e d investment  i n pollution  control,  decided i n J u l y , 1972, t o r e t r e a t completely overseas  copper resource investments  from a l l  as one measure t o  r e c o n s t r u c t and f r e e i t s e l f from the business  slump  1 1 4  .  T h i r d , the upward currency r e v a l u a t i o n had adverse e f f e c t s on i n d u s t r i e s .  Products  of heavy and chemical  i n d u s t r i e s u s u a l l y c o n t a i n h i g h added v a l u e .  Thus, the  b e n e f i t s o f resource p r i c e s , d e c r e a s i n g r e l a t i v e to Japanese currency, a r e l i m i t e d , but the r e v a l u a t i o n d e t e r i o r a t e s the terms and c o n d i t i o n s o f the f i n i s h e d exported  product.  Export d e c l i n e i s a hard blow t o Japan's h e a v i l y exportoriented industries.  Furthermore, import  and i n c r e a s e d c a p i t a l investments Japan w i l l  liberalizations  by f o r e i g n i n v e s t o r s i n t o  i n c r e a s e c o m p e t i t i o n among i n d u s t r i e s .  Japan's resource i n d u s t r i a l s t r u c t u r e s t i l l  remained  centered on downstream, which Is s m e l t i n g and c o n c e n t r a t i o n , although some resources investments  1  1  4  were  undertaken.  Nihon K e i z a i Shimbun, J u l y 5, 1972.  69  T h i s s t r u c t u r e b r i n g s very l i m i t e d p r o f i t margins to Japanese resource i n d u s t r i e s because the added v a l u e s , and hence the o p p o r t u n i t y f o r p r o f i t , are l o w 5 , 1 1  Low  p r o f i t a b i l i t y not o n l y i n h i b i t s the o p p o r t u n i t i e s f o r expansion o f the i n d u s t r i e s , but a l s o may monetary  be e r a d i c a t e d by  revaluation.  Investments i n resource developments were undertaken d u r i n g t h i s p e r i o d f o r a secure s t a b l e resources f l o w and low p r i c e s .  But i t became q u i t e c l e a r t h a t the w a l l  p r e v e n t i n g Japan's e n t r y i n t o resource i n d u s t r i e s was too t h i c k because o f Japan's f a t e f u l i n f e r i o r competitive power, both f i n a n c i a l l y and t e c h n o l o g i c a l l y , to that of the e x i s t i n g i n t e r n a t i o n a l resource c o m p a n i e s 6 . 11  Indonesian O i l Development,  i n actual  example,  founded j o i n t l y by 16  companies,  i n c l u d i n g the M i t s u i , M i t s u b i s h i , Sumitomo groups and o t h e r s , f i n a l l y succeeded i n b o r i n g f o r o i l a t the end of  1970,  5 High p r o f i t i s u s u a l l y r e a l i z e d i n upstream, except f o r b a u x i t e and i r o n o r e . For example, added values o f copper and l e a d i n upstream were 71.4$ and 66.5$ i n 1969, w h i l e added v a l u e s i n downstream were only 5.6$ and 15*1$, r e s p e c t i v e l y , f o r the same y e a r . Of. MITI, Shigen Mondal no Tembo,1971 (The Outlook i n Resource I n d u s t r i e s , 1,971), Tokyo, 1971, p.44. 1 1  6 F i n a n c i a l l y , one major o i l company spent an annual average of #100 m i l l i o n f o r mine e x p l o r a t i o n s , while the t o t a l o f Japanese investments reaches t h i s amount, which f r e q u e n t l y f o r c e s the Japanese to abandon p r o j e c t s because o f f i n a n c i a l t r o u b l e s . T e c h n o l o g i c a l l y , the c a p a b i l i t y o f a Japanese barge i s from 100 to 200 meters, while a major company can excavate from 3,000 to 4,000 meters. T h e r e f o r e , the c o m p e t i t i o n i n the resource i n d u s t r i e s i s i n money and t e c h n o l o g y . Of. Economist, Vol.49, No.25, June 22, 1971, pp.86-87. 1 1  70  but t h a t success came j u s t before from the p r o j e c t .  i t retreated  I t s o l d out a h a l f of the  completely  original  acreage f o r development t h a t summer to o f f s e t expenses accumulated by t h a t t i m e ? . 1 1  There are a l s o other r e t r e a t s  from investments i n v a r i o u s p a r t s of the world because of I n s u f f i c i e n t f i n a n c i a l and  technological  In r e c a p i t u l a t i o n , i n t e r n a l and surrounding manufacturers had  and  external  conditions  many adverse e f f e c t s on them.  Labor shortages, l a b o r cost Increases, c o n t r o l s and  capabilities.  required p o l l u t i o n  compensation payments, requirements of  q u a l i t y resources  and  new  the yen r e v a l u a t i o n a f f e c t s  were f a c t o r s Japanese i n d u s t r i e s had  to face i n t h i s  period.  Resource investments were undertaken to e n t e r i n t o upstream, but  i t became d e c i s i v e that Japanese resource  industries  cannot compete w i t h the e x i s t i n g i n t e r n a t i o n a l resource industries.  (0)  Government and  I t s Behavior  Japan's a s p i r a t i o n s have had  to face s e v e r a l econo-  p o l i t i c a l t e s t s i n the p e r i o d s i n c e 1970. the s o - c a l l e d o i l war, companies and Countries  the  The  first  was  c o n f r o n t a t i o n between major o i l  the O r g a n i z a t i o n  of Petroleum  f o r a crude o i l tax h i k e .  Exporting  Under the  disadvanta-  geous p o s i t i o n i n the o i l c o n f r o n t a t i o n , the government  1 1  7  Ibid.  71  campaigned to make i n d u s t r i e s , f i n a n c i e r s , and  the  general  p u b l i c r e a l i z e t h a t heavy f o r e i g n dependency makes Japan's economy very v u l n e r a b l e , the  and  t h a t i t may  e x i s t i n g resource supply s t r u c t u r e .  e f f i c i e n t l y c a r r i e d out o i l war  i n e a r l y 1971,  the c a m p a i g n  Japan's mass-media .  By the  extensive discussions  to i n d u s t r i e s , f i n a n c i e r s and various  1 1 8  enslave Japan to  end  of  the  were presented  the g e n e r a l p u b l i c  through  mass-media. In a d d i t i o n to the  International  Trade and  white paper on 1  pointed  Industry i s s u e d  "Prospect of N a t u r a l  Japan" i n 1971 19. i n t e r n a l and  campaign, the M i n i s t r y  I t analyzed the  of  its first  official  Resources Problems i n current  and  expected  e x t e r n a l problems i n resource i n d u s t r i e s ,  and  out t h a t a s t a b l e i n f l o w o f resources a t a reasonable  p r i c e w i l l become a more important i s s u e than ever i n Japan's economic s t r u c t u r e . resource problems, the  report  As a proposed s o l u t i o n to emphasized the need f o r Japan's  ^ Major newspapers and TV s t a t i o n s can e f f i c i e n t l y cover the Japanese. There are f i v e major n a t i o n a l d a i l y papers: A s a h i ( c i r c u l a t i o n 6 m i l l i o n ) , Y o m i u r i ( c i r . 5.8 m i l l i o n ) , M a l n i c h i ( c i r . 4.7 m i l l i o n ) , Sankei ( c i r . 1.9 m i l l i o n ) , and Niho'n K e i z a i ( c i r . 1 . 4 m i l l i o n ) : the l a t e s t c i r c u l a t i o n f i g u r e s from Time, J u l y 17, 1972, pp.20-31 • NHK-TV(Japan B r o a d c a s t i n g Corp.) reaches 96$ of the p o p u l a t i o n through i t s 2,000 o u t l e t s . TV Guide, May 1, 1971, pp.6-11. A major p a r t of programming o f o t h e r p r i v a t e s t a t i o n s i s sent from key s t a t i o n s i n Tokyo. 1 1  119 For example, Trade and Industry o f Japan, Vol.XXI, No.1, January, 1972, c a r r i e s the f u l l r e p o r t .  72  independent resource d e v e l o p m e n t s — J a p a n i n v e s t s c a p i t a l and c a r r i e s development—so t h a t resources may i n d e p e n d e n t l y a t a reasonable However, i t was  be  obtained  price.  not c l e a r i n the MITI's paper whether  Japan's independent resource developments should be undert a k e n w i t h a l o n g - r u n outlook t o help resource h o l d i n g n a t i o n s to reduce the e x i s t i n g o l i g o p o l i s t i c c o n t r o l s , o r i f Japan i s to be b u i l t i n t o the  resource existing  resources supply system as a new-comer, and i n c r e a s e i t s strength.  Soon i t became c l e a r t h a t Japan should choose the  l a t t e r , when some Japanese i n v e s t o r s r e t r e a t e d from resource developments i n Indonesia, the r i c h e s t resources d e p o s i t i n A s i a , f o r such reasons as i n s u f f i c i e n t technology, heavy a f i n a n c i a l burden f o r c o n t i n u a t i o n of an and  too  investment,  others 20. 1  Thus, the MITI r e c e n t l y r e p a i n t e d the wagon from the once b r a v e l y encouraged "independent development" to " i n t e r n a t i o n a l c o o p e r a t i v e development "(namely c o o p e r a t i o n w i t h world oligopolists). The independent development and c o o p e r a t i v e development w i t h resource h o l d i n g nations should be undertaken I f there should be an o p p o r t u n i t y 2 1 . 1  120 Jyun Nishikawa, " A s i a Bundan e Susumu H i c h i b e i Shihon (Japanese and U.S. C a p i t a l s Moving Toward a S p l i t i n A s i a ) , " A s a h i J o u r n a l , Vol.14, No.2, January 14, 1972, p.24. . 1  21  Ibid.  73  The  new p o l i c y w i l l give some s a t i s f a c t i o n t o Japan  i n I d e n t i f y i n g i t s e l f as a p a r t i c i p a n t i n resource developments, j o i n i n g the i n t e r n a t i o n a l resource but i t may have some f l a w s . could  enterprises,  I t i s u n c e r t a i n whether Japan  be accepted i n t o a f e a s i b l e investment p r o j e c t c a r r i e d  out by e x i s t i n g world resource i n d u s t r i e s . could p a r t i c i p a t e , a s m a l l - s c a l e produce s u f f i c i e n t m e r i t s ,  Even i f Japan  p a r t i c i p a t i o n may not  i n terms o f p r i c e and q u a n t i t y  s t a b i l i t y , as could be necessary to compensate f o r the business and f i n a n c i a l r i s k s t h a t Japan might have t o t a k e . And  Japan may be i n h i b i t e d from buying resources elsewhere,  at b e t t e r terms and c o n d i t i o n s ,  than those agreed upon  by the i n t e r n a t i o n a l resource e n t e r p r i s e s , without jeopardizing The  business r e l a t i o n s w i t h t h e m  speed o f f o r e i g n reserves  accelerated  i n 1971, and i n c r e a s e d  1 2 2  .  accumulation  the reserves  from  #4.4 b i l l i o n a t the b e g i n n i n g of the y e a r t o $15.2 b i l l i o n at the end.  This was i n s p i t e o f the U.S. i m p o s i t i o n  1 2 3  of an  " Iraq o f f e r e d crude o i l to Japan a t a lower p r i c e than t h a t s u p p l i e d by major o i l companies a f t e r the I r a q i government n a t i o n a l i z e d the Western-owned Iraq Petroleum Corp. i n June, 1972. But i t may be unwise f o r Japan to buy i t because o f heavy dependence on major o i l companies t h a t are t h r e a t e n i n g t o take any p o s s i b l e l e g a l a c t i o n a g a i n s t Iraq o i l buyers. C f . Nihon K e i z a i Shimbun, June 14, 1972. 1  As a r e s u l t of i n c r e a s i n g r e s e r v e s , the M i n i s t r y o f Finance i n c r e a s e d the amount o f automatic f o r e i g n i n v e s t ment a p p r o v a l t o #1 m i l l i o n p e r investment i n September ^970. T h i s c o n t r o l was l i f t e d i n 1971. C f . JETRO, 1972 K a i g a i Shi jo Hakusho (White Paper on the F o r e i g n Market), Tokyo, 1972, p.2. 1 2 3  ,  74  import surcharge and monetary c r i s e s throughout The r e s e r v e s are s t i l l in  the f i r s t  being maintained around  few months o f 1972,  upward yen r e v a l u a t i o n . o c c u r r e d i n June, 1972,  the y e a r . #16  billion  even a f t e r the l a r g e - s c a l e  Another B r i t i s h pound  crisis  only a h a l f y e a r a f t e r the l a s t  monetary realignment. Japan produced  a 7-point yen measure to reduce i t s  f o r e i g n r e s e r v e s , but i t s v a l i d i t y i s expected to be  minimal.  The primary reason i s that almost a l l Japanese i n d u s t r i e s have been converted i n t o export i n d u s t r i e s p e r s u i n g i n t e r n a t i o n a l c o m p e t i t i o n as t h e i r u l t i m a t e o b j e c t i v e s . In  Japan's i n d u s t r i a l s t r u c t u r e , i n t o which exports are  built,  domestic  economic r e c e s s i o n s reduce imports,  and  both r e c e s s i o n s and the upward yen r e v a l u a t i o n c r e a t e a harder export d r i v e , as an a l t e r n a t i v e countermeasure t o the r e v a l u a t i o n and r e c e s s i o n s .  The e f f e c t i v e n e s s of  Japan's c u r r e n t monetary p o l i c i e s f o r r e d u c i n g export p r e s s u r e i s l i m i t e d , u n l e s s Japan can make l o n g - r u n adjustments  i n i t s industrial structure  1 2 4  .  Although  r e s o u r c e developments are an a l t e r n a t i v e to r e d u c i n g r e s e r v e s , among o t h e r s , they s t i l l are not the best p o l i c y for  unloading reserves. The amount o f economic a s s i s t a n c e to LDO's has  increased.  1  2  4  The r a t i o a g a i n s t the GNP  M a l n i c h i Shimbun, June 29,  has a l s o been  1972.  been  75  i n c r e a s e d i n Japan's high, economic nominal of 15.5$  a year, from 1965  to 1 9 7 1  1 2 5  .  growth  average  Although t h i s i s  so, the r a t e s o f government grants and other a i d a g a i n s t the GN? are c o n s t a n t l y d e c r e a s i n g s i n c e 1961, 1967.  except f o r  Since Japan decided to i n c r e a s e i t s economic a i d  up to 1$ of i t s GNP  by 1975,  o t h e r elements i n economic  a s s i s t a n c e must be i n c r e a s e d to meet t h i s g o a l .  Export  f i n a n c i n g over one y e a r by Japan and yen loans are u n f a v o r a b l e to r e c i p i e n t s under the c u r r e n t u n s t a b l e i n t e r n a t i o n a l monetary system.  A country t h a t has  obtained  yen l o a n s , f o r example, must i n c u r the l o s s c r e a t e d by the upward yen r e v a l u a t i o n i n r e l a t i o n t o t h e i r c u r r e n c y . Under the circumstances, investments  i n t o LDO's  are a l t e r n a t i v e s t o i n c r e a s e the amount of Japan's economic cooperation.  Investments i n resource i n d u s t r i e s were an  a l t e r n a t i v e i n investments.  They are s u i t a b l e  especially  when the resource flow i s becoming more unstable i n the changing world r e s o u r c e demand-supply c o n d i t i o n s . To sum  up,  the s t a b i l i t y  of resource f l o w a t a  reasonable p r i c e became an important economy.  i s s u e i n the Japanese  Japan decided to s o l v e i t s resource problems by  c o o p e r a t i n g w i t h e x i s t i n g l a r g e i n t e r n a t i o n a l resource industries.  1  p.10.  2  5  Foreign reserves increased staggeringly during  Economic S t a t i s t i c s Monthly, No.302, May,  1972,  76  t h i s period, and continued upward yen revaluation.  to do so a f t e r a large-scale  Large-scale investments i n  resources were a method to unload some reserves, a l l e v i a t i n g pressure on the yen f o r another upward revaluation. Resource investments were also an alternative i n the proposed increase i n Japan's economic assistance to LDC's of up to \% of the GNP, especially when other elements of assistance are uncertain under the current unstable monetary system.  CHAPTER  POUR  JAPAN'S EXPECTED FUTURE BEHAVIOR  Overview Japan's postwar resource i n d u s t r i e s i n the t o t a l economic s t r u c t u r e seemed t o have reduced t h e i r importance  relative  i n the course o f economic development, by the  advancement o f r e s o u r c e s - s a v i n g technology and by an i n c r e a s e i n added v a l u e s .  However, resource problems may  become r e s t r i c t i v e f a c t o r s i n the Japanese economy i n t h e changing world resource market c o n d i t i o n s . The to  o v e r a l l world demand f o r resources i s expected  increase staggeringly. I t has been estimated t h a t more of t h e earth's minerals were consumed d u r i n g t h e past 50 years than d u r i n g the preceeding h i s t o r y o f men. I t i s a l s o estimated t h a t twice the q u a n t i t y w i l l be consumed during the next 50 years as i n the past 50 years126. Japan's demand f o r major r e s o u r c e s f o r the 1970's,  and the r a t e o f f o r e i g n dependency i s expected t o i n c r e a s e , as w i l l be examined i n the next s e c t i o n . announced i t s long-range 2000.  The U.S.  resources demand f o r the y e a r  I t s c u r r e n t f a i r l y h i g h - s e l f - s u f f i c i e n c y r a t e s are  Maurice Mawby, "Minerals E x t r a c t i o n a t 2000 AD and Management s Requirements," Mining Magazine, V o l . 1 1 6 , No.6, June, 1 9 6 7 , p.405. 1  78  expected to decrease  substantially  1 2 7  .  As i s well-known, resources are unequally  distributed  i n the world and many resources h o l d i n g c o u n t r i e s are s u b j e c t to i n c r e a s i n g economic n a t i o n a l i s m and instability. and  political  They i n t e n s i f i e d t h e i r demand both  independently  j o i n t l y , forming t r a n s n a t i o n a l o r g a n i z a t i o n s , such as the  OPEC, f o r more money f o r t h e i r i r r e p l a c e a b l e t r e a s u r e s . They a l s o demanded more p a r t i c i p a t i o n i n the e x i s t i n g f o r e i g n owned resource i n d u s t r i e s i n t h e i r c o u n t r i e s .  For example,  60$  Middle  of the t o t a l world o i l d e p o s i t s are i n the  East  1 2 8  , which i s s u b j e c t to p o l i t i c a l i n s t a b i l i t y and Arab  nationalism. Under the circumstances, resource supply c o n d i t i o n s are becoming i n c r e a s i n g l y t i g h t .  To cope w i t h t h i s ,  U.S.  i n d u s t r i e s are a g g r e s s i v e l y seeking p a r t i c i p a t i o n i n o i l , n a t u r a l gas and o t h e r m e t a l l i c resource: developments i n R u s s i a , e s p e c i a l l y a f t e r the summit t a l k s i n May, T h i s w i l l p r o v i d e U.S. resources and  i n d u s t r i e s w i t h a q u a n t i t y of  d i v e r s i f i c a t i o n of supply s o u r c e s .  does not supply resources e x t e n s i v e l y f o r the time but i t s t i l l  1972.  has p o t e n t i a l i t y .  Resources from  China being,  communist  7 The s e l f - s u f f i c i e n c y r a t e s are estimated to d e c l i n e from 72$ i n 1969 to 51$ i n 2000 i n copper, 69$ to 26$ i n i r o n , and 53$ to zero i n l e a d . Of. MITI, Shigen Mondai no Tembo, 1971 (Outlook o f Resource Problems: 1971), Tokyo, 1971, p.165. 1 2  1  28  i b i d . , p.146.  79  countries, however, may be vulnerable to p o l i t i c a l elements i n the l i q u i d i n t e r n a t i o n a l p o l i t i c a l structure.  Thus,  resources problems w i l l increasingly be solved more e f f i c i e n t l y i n the context of p o l i t i c a l economy.  (A)  Japan's Expected Resource Demand Japan's Shigen Hakusho (White Paper on Resources),  revealed i n October, 1971^ , says that the demand i n major 29  resources  has increased 10$ to 20$ annually f o r the past  f i v e years, which well exceeds the annual average growth rate of the GNP, 12.4$, f o r the same period.  The paper  pointed out that price and quantity i n s t a b i l i t y has already become a r e a l i t y i n constraining Japan's economy.  The  preliminary c a l c u l a t i o n , assuming an annual economic growth of 10$ plus, and i n d u s t r i a l structure and technological development remains at the same rate as i n past  years,  indicates that Japan w i l l require to import 31$ of the world's trade of available major resources  by the end of  t h i s decade: 39$ of raw materials and 24$ of f o s s i l f u e l s . It i s quite u n r e a l i s t i c to assume that Japan alone can obtain and use f o r i t s own economic purposes one t h i r d  The major part of t h i s white paper i s carried i n the Hokkaido Shimbun, October 4, 1971. For the f u l l report, see Trade and Industry of Japan, Vol.XXI, No.1, 1972, pp.34-59": 1 2 9  80  of the resources a v a i l a b l e i n the world market, without any c o u n t e r - a c t i o n s from o t h e r c o u n t r i e s . world's  I t s impact  on the  resource i n d u s t r i e s w i l l be s i g n i f i c a n t . Facing i n c r e a s i n g l y t i g h t resource supply c o n d i t i o n s ,  it  i s e s s e n t i a l f o r Japan t o e s t a b l i s h long-range  resource  p o l i c i e s , i n c o r p o r a t i n g i t s economic and i n d u s t r i a l s t r u c t u r e s i n t o the estimated world's  resources demand-  supply c o n d i t i o n s .  (B)  Japan's Expected  Behavior  Japan's r e s o u r c e p o l i c i e s changed from  independent  resource developments t o c o o p e r a t i v e development w i t h e x i s t i n g i n t e r n a t i o n a l resource e n t e r p r i s e s , as e x p l a i n e d i n the l a s t c h a p t e r .  T h i s means t h a t Japan i s b u i l t - i n  i n the e x i s t i n g resources supply s t r u c t u r e , perhaps strengthening i t ,  and t h a t c o n f r o n t a t i o n w i t h economic  n a t i o n a l i s m o f resources producing c o u n t r i e s may be i n t e n s i f i e d by a c l a s h of i n t e r e s t s . Judging from the c u r r e n t tendency  of r i s i n g n a t i o n -  a l i s m among r e s o u r c e s h o l d i n g c o u n t r i e s , i m p o s i t i o n of mandatory r e s o u r c e s p r o c e s s i n g i n the o r i g i n a l before export, stepplng-up and  of p a r t i c i p a t i o n ,  country  nationalization  e x p r o p r i a t i o n w i l l spur the expected f u t u r e t i g h t  resource supply c o n d i t i o n s .  T h i s s i t u a t i o n may e s c a l a t e  81  the  current  c o n f r o n t a t i o n between host government  I n v e s t i n g i n d u s t r i e s to one c o u n t r i e s and it  nations  between resources  and  holding  of i n v e s t i n g i n d u s t r i e s .  In o i l ,  i s p r e d i c t e d t h a t l a r g e o i l consuming c o u n t r i e s  step up  struggles f o r  oil  1  3  0  will  .  Under the expected extreme resource  shortage, i t  i s q u i t e p o s s i b l e t h a t many c o u n t r i e s w i l l be tempted to use  t h e i r n a t i o n a l power t o secure r e q u i r e d  E x i s t i n g i n t e r n a t i o n a l resource  enterprises  resources. could tempt  t h e i r country i n t o u s i n g t h e i r n a t i o n a l s t r e n g t h , t h e i r m i l i t a r y power.  There i s no guarantee that Japan  w i l l not be caught i n a t r a p to step up  rearmament,  i n c l u d i n g n u c l e a r power, however s m a l l the should  be.  including  A secured i n f l o w of resources  possibility was  the most  important f a c t o r t h a t c a r r i e d Japan i n t o the l a s t  Pacific  War: . , . the d i f f e r e n c e i n n a t u r a l resources was l i n k e d to the d i f f e r e n c e i n n a t i o n a l power, and the r i g h t to a q u i r e n a t u r a l resources would be r e a l i z e d only a f t e r obtaining t e r r i t o r i a l r i g h t s . . . 131 Under the extremely t i g h t resources  market c o n d i t i o n s , i t  cannot be completely denied t h a t the s p e c t e r of m i l i t a r i s m  1  Nihon K e i z a i Shimbun, June 9,  31 Trade and p.40. 1  1971,  30  Industry  1972.  of Japan, Vol.XX,  No.4,  82  w i l l not a t t r a c t Japan, desperate f o r resources p l u n d e r s . Japan's m i l i t a r y power, o r i g i n a l l y organized as p o l i c e r e s e r v e s immediately a f t e r the breakout of the Korean War i n 1950, has g r a d u a l l y i n c r e a s e d , and f u r t h e r expansion i s expected.  T h i s expected l a t e s t expansion i s  based on a s e t of U.S. p o l i c y changes shown i n the Guan D o c t r i n e of J u l y , 1969, i n which the U.S. d e c l a r e d i t . would reduce i t s m i l i t a r y involvement i n A s i a , and emphasized  the s e l f - d e f e n s e e f f o r t s by A s i a n c o u n t r i e s 3 2 . 1  T h i s was f o l l o w e d by the U.S.-Japan j o i n t communique i n November, 1969, d e c l a r i n g t h a t the s e c u r i t y of Korea and Taiwan i s e s s e n t i a l f o r the s a f e t y o f Japan.  Furthermore,  the Nixon D o c t r i n e was r e v e a l e d i n February, 1970, r e q u i r i n g the U.S. t o share the defense burden w i t h i t s p a r t n e r s , making i t necessary f o r Japan to stop i t s f r e e r i d e on U.S. n u c l e a r d e f e n s i v e power. explicit,  The U.S. requirement became  e s p e c i a l l y when the U.S. S e c r e t a r y of Defense  v i s i t e d Japan i n J u l y , 1971, f o r week-long  discussions  w i t h Japanese government and m i l i t a r y o f f i c i a l s , concerning Japan's takeover o f a g r e a t e r share o f the U.S.'s defense burden i n the P a c i f i c .  3 2 T h i s paragraph Is based on a r t i c l e s i n the Documentary News of the Month, 1967 through 1972. 1  83  Japan's responses a g a i n s t these American p r e s s u r e s became c l e a r i n two phases: the d i s c l o s u r e of the BoejL Hakusho (White Paper on Defense), and the f o r m u l a t i o n of a budget f o r the f o u r t h 5-year defense program to be s t a r t e d i n the f i s c a l year of 1972. The white paper, a f i r s t  i n Japan's h i s t o r y ,  issued  i n October, 1970,  c a r e f u l l y formulates the treatment o f  n u c l e a r weapons.  I t argues that even though the government  takes a n e g a t i v e p o l i c y toward p o s e s s i o n , p r o d u c t i o n and use o f n u c l e a r weapons, i t i s p o s s i b l e t o have n u c l e a r weapons under the present C o n s t i t u t i o n , i f t h e i r c a p a b i l i t i e s a r e w i t h i n the l i m i t  of minimum requirements  f o r Japan's s e c u r i t y and i f they should not g i v e anya g g r e s s i v e t h r e a t t o other countries'! 3 3 . T h i s statement c o n t a i n s s e r i o u s shortcomings to r e s t r i c t i n g Japan's n u c l e a r armament.  First,  "the minimum  requirement" changes w i t h the i n t e r p r e t a t i o n of the situation.  Second, the a g g r e s s i v e t h r e a t s f e l t  by others  are not n e c e s s a r i l y the same as those Japan f e e l s , and i t can be i g n o r e d as a groundless a c c u s a t i o n a g a i n s t Japan. L a s t and most important, Japan's n u c l e a r armament can be promoted without d i f f i c u l t y , simply by changing the c u r r e n t government p o l i c y .  33 Defense Department, Boei Hakusho (White Paper on Defense), M i n i s t r y of Finance P r i n t i n g O f f i c e , Tokyo, 1970, p.36. 1  84  Neighboring  c o u n t r i e s r e a c t e d q u i c k l y a g a i n s t the  white paper, e x p r e s s i n g t h e i r u n r e s t a g a i n s t Japan's p o s s i b l e n u c l e a r armament and a g g r e s s i o n as, f o r example, i l l u s t r a t e d i n a Korean newspaper, while Japan r u l e d them out as groundless  a c c u s a t i o n s a g a i n s t Japan 34 1  #  A more p r e c i s e f a c t i s c l e a r i n the proposed budget f o r Japan's f o u r t h 5-year defense program to be started i n f i s c a l  1972,  i n which #17-7  billion will  be  spent, n e a r l y three times as much as the t h i r d 5-year defense program ended i n f i s c a l spending  of $7-02 b i l l i o n .  1971,  w i t h an expected  T h i s m i l i t a r y spending  total  is a  s u b s t a n t i a l amount, i n comparison w i t h the magnitude o f the economy i n many n e i g h b o r i n g c o u n t r i e s .  The  facts  could be a r e a l t h r e a t to those n e i g h b o r i n g c o u n t r i e s • which s u f f e r e d Japan s a g g r e s s i o n before World War  II  1 "55 .  34 i t admits t h a t a m i l i t a r y b u i l d up, i n c l u d i n g n u c l e a r weapons, i s not w i d e l y accepted by the Japanese y e t , but i t says: "judging from i t s hidden c a p a b i l i t y , n e i g h b o r i n g c o u n t r i e s cannot help becoming nervous against the r e v i v a l o f Japanese m i l i t a r i s m , and so condemn i t . Whether i t i s t r u e or not, i t reminds us o f the Japanese m i l i t a r y i n v a s i o n before World War I I . " The Korea D a i l y , October 22, 1970. 1  35 japan's m i l i t a r y spending f o r f i s c a l 1970 was 7% of the t o t a l n a t i o n a l budget, 0.8$ a g a i n s t i t s GNP. The magnitude of the spending, however, was almost as l a r g e as the t o t a l n a t i o n a l budget of T h a i l a n d f o r the same year, and almost double t h a t of the P h i l i p p i n e s . Cf. Toshitada Nakae, "Gunji Taikoku Nihon no I m e i j i ( M i l i t a r y Superstate: Japan's Image)," Chuo Koron, Vol.9, No.4, Winter, 1970, p.153* 1  85  The neighboring  above-mentioned behavior does not  c o u n t r i e s , even though Japan i n s i s t s  t h e i r expressed unrest Japan, and  convince that  are groundless a c c u s a t i o n s  that Japan i s a p e a c e - l o v i n g  nation.  against Also, i t  i s not u n r e a l i s t i c to them to assume t h a t Japan may i t s s t r e n g t h to o b t a i n necessary resources  use  when i t becomes  desperate, as seen i n the course of h i s t o r y up to the  last  war. Economically s e a r c h f o r new  and  d i p l o m a t i c a l l y , Japan began to  p o l i c i e s , abandoning i t s vehement  pro-  Americanism a f t e r a s e r i e s of h u m i l i a t i o n s from the during  1971J  the U.S.  president's  U.S.  announcement of a China  v i s i t without c o n s u l t a t i o n , i n s t e a d of the b e l i e f of c l o s e U.S.-Japan r e l a t i o n s h i p s i n China p o l i c i e s , a  10%  import surcharge aimed p r i m a r i l y a t Japanese exports, demand f o r t e x t i l e export l i m i t a t i o n s , u s i n g the of applying upward yen The  the Trade w i t h Enemy Act, and  the  threat  the f o r c e d huge  revaluation. widening o f the U.S.-Japanese c r e d i b i l i t y  gap  f o r c e d Japan to formulate more independent p o l i c i e s , s t a r t i n g i n economic and  diplomatic areas.  As a step toward  promoting independent p o l i c i e s , Japan a g g r e s s i v e l y s t a r t e d negotiations with Russian leaders, c o i n c i d i n g with U.S.  president's  China v i s i t  peace t r e a t y between the two  i n 1972,  the  on the l o n g overdue  c o u n t r i e s , i n c l u d i n g the  86  t e r r i t o r i a l dispute  over the i s l a n d s n o r t h o f Japan, and  on the p o s s i b l e Japanese p a r t i c i p a t i o n i n the c o n s t r u c t i o n of a 4,163-mile t r a n s - S i b e r i a n P i p e l i n e from the Tryumen o i l f i e l d s to Nakhodka, a p o r t on the Sea o f Japan 36. 1  The f a s t - d w i n d l i n g c r e d i b i l i t y and may  dependability  urge Japan to re-examine p r e - e x i s t i n g p o s t u l a t e s , not  only i n economic and d i p l o m a t i c areas, military field,  but a l s o i n the  i n c l u d i n g the development  o f i t s own  n u c l e a r weapons, f o r the p r o t e c t i o n of Japan's n a t i o n a l i n t e r e s t s , e s p e c i a l l y i n A s i a where Japan's i n t e r e s t s are concentrated.  There i s no guarantee here t h a t t h e r e i s  no p r o b a b i l i t y of resurgent  n a t i o n a l i s m to promote the  p r o t e c t i o n of n a t i o n a l i n t e r e s t s w i t h power.  This  p r e c i p i t a t e s r e m i l i t a r i z a t i o n and c o n s t r u c t s the road to a nuclear nation.  Japan's d i r e c t i o n toward more independent  p o l i c i e s urges i t to take c e r t a i n measures, and they make t h a t country  which i s blaming Japan f o r not having  i t s r e s p o n s i b i l i t y i n A s i a as a s u p e r s t a t e ,  achieved  to be the very  f i r s t one t o r e g r e t the r e s u l t s . In r e c a p i t u l a t i o n , the supply world's resources  c o n d i t i o n s of the  w i l l become t i g h t e r , and may  limit  136 I t i s r e p o r t e d t h a t the Japanese f i n a n c e m i n i s t e r decided on a #1 b i l l i o n l o a n f o r a S o v i e t Japanese o i l development i n S i b e r i a . Cf. The Vancouver Sun, March 6, 1972.  37  Japan's f u t u r e economic a c t i v i t i e s .  Japan's  expected  demands a r e s i g n i f i c a n t i n t h e i r magnitude, and the country w i l l have to f a c e r e a l d i f f i c u l t i e s resources.  f o r o b t a i n i n g enough  T h i s t r e n d w i l l enforce the resource  problems  not as economic i s s u e s , but as g l o b a l - s c a l e e c o n o - p o l i t i c a l i s s u e s , mixing them w i t h economic, p o l i t i c a l and m i l i t a r y strengths. Japan's resource p o l i c i e s changed from vehement independent development t o c o o p e r a t i v e development l a r g e i n t e r n a t i o n a l resource e n t e r p r i s e s .  with  It i s quite  p o s s i b l e t h a t the s t r e n g t h e n i n g of the e x i s t i n g  supply  sources w i l l i n t e n s i f y t h e c o n f r o n t a t i o n between r e s o u r c e s producing and i n v e s t i n g c o u n t r i e s , which may  create  temptation f o r Japan t o use i t s n a t i o n a l s t r e n g t h , economically or  militarily.  Under vehement pro-American p o l i c i e s , Japan has been i n c r e a s i n g i t s m i l i t a r y power to share i n i t s r e s p o n s i b i l i ties,  but a s e r i e s of p o l i t i c a l and economic h u m i l i a t i o n s  f o r c e d Japan t o take more independent p o l i c i e s , may  which  cause the nightmare o f n e i g h b o r i n g c o u n t r i e s to come to  r e a l i t y i n the r e m i l i t a r i z a t i o n o f Japan.  88  CHAPTER  FIVE  SUMMARY  In t h i s study, v a r i o u s problems e x i s t i n g  In  Japanese resource i n d u s t r i e s have been i d e n t i f i e d . Japan's resource i n d u s t r i e s were h e a v i l y  concentrated i n  downstream a c t i v i t i e s which depend g r e a t l y resources.  Very few  on the  s i z a b l e investments i n upstream  a c t i v i t i e s were undertaken by Japanese i n d u s t r i e s , the  end  of the  imported  1960's.  The  until  major reasons f o r t h i s were  the government's investment c o n t r o l f o r exchange reasons, and  i n d u s t r i e s ' f i n a n c i a l and  to c a r r y  out  technological i n c a p a b i l i t i e s  investments.  Japan's major r e s o u r c e - o b t a i n i n g method p u r c h a s i n g i n the market, but  was  the a c q u i s i t i o n of  s u b s t a n t i a l amounts of resources by t h i s method i s becoming increasingly shortages and holding  d i f f i c u l t because of i n t e r n a t i o n a l r e s o u r c e i n t e n s i f i e d economic n a t i o n a l i s m  i n resource  countries. Resource investments have i n c r e a s e d  t o the Japanese economy.  Possible  i n importance  reasons f o r t h i s were  presented i n f i v e hypotheses on Japan's f o r e i g n ments i n r e s o u r c e i n d u s t r i e s .  invest-  These hypotheses do  not  i n c l u d e p r o f i t c r i t e r i a , because the  l a t t e r are of r e l a t i v e l y  low  objectives.  p r i o r i t y i n Japanese investment  89  Japan's Investments  experienced s i g n i f i c a n t changes  from t o t a l p r o h i b i t i o n u n t i l 1950, to conditional permission u n t i l I960, to automatic approval up to #200,000 l a t e r i n 1969, up to #1 m i l l i o n i n 1970, and to t o t a l l i b e r a l i z a t i o n in  1971.  Resource investments have been increasing over the past few years.  During t h i s period, the government's  investment promotion p o l i c i e s changed from i n i t i a l autonomous investment to cooperation with existing i n t e r national resource i n d u s t r i e s . Japan's f u l l - s c a l e resource investments are s t i l l at  the primary stage, and i t s resource investment p o l i c i e s  seem to be s t i l l i n t r a n s i t i o n .  However, the impact of  recent economic and p o l i t i c a l humiliations, due to U.S. actions, has made Japan seek more independent  activities  based on i t s own economic and p o l i t i c a l objectives. Japan's movement toward independent a c t i v i t i e s  may  reinforce increased m i l i t a r i s m and rearmament there, and may also result i n the r e a l i z a t i o n of neighboring countries' nightmares.  90  BIBLIOGRAPHY  Abegglen, James G., The Japanese F a c t o r y . The Free P r e s s , Gltfncoe, 111., 1958. Aharon!, Y a i r i , The F o r e i g n Investment D e c i s i o n P r o c e s s . D i v i s i o n o f Research, Graduate School o f Business, Harvard U n i v e r s i t y , Boston, 1966. Behrman, Jack N., Some P a t t e r n s i n the R i s e o f the M u l t i n a t i o n a l E n t e r p r i s e s , U n i v e r s i t y o f North C a r o l i n a a t Chapel H i l l , 1968. Benedict, Ruth, The Chrysanthemum and the Sword, Houghton M i f f l i n Co;, Boston, 1^46. ~ " Cohen, J . , Japan's Economy I n War and R e c o n s t r u c t i o n s , U n i v e r s i t y o f Minnesota P r e s s , MineapoHs, 1949. Japan's Postwar Economy, Indiana U n i v e r s i t y P r e s s , Bloomington, 1958. Harty, J.Q., Management D e c i s i o n i n the Japanese F a c t o r y ( t r a n s , e d . ) . Diamond P u b l i s h i n g Co.. Tokyo\ l 9 o i . Headberg, Haakan, The Japanese Challenge ( t r a n s ; e d . ) , K a i g a i Hyoron sna, Tokyo, 1970. " Hague, D. C., M a n a g e r i a l Economics; A n a l y s i s f o r Business Decisions,Longthamg Green and Co., L t d . , London, 1969. Jordan, David F. and H. E . D o u g a l l , Investments (7th e d . ) . P r e n t i c e - H a l l Inc., Englewood C l i f f s , N;J., I960. Kahn, Herman, The Emerging Japanese Superstate, P r e n t i c e H a l l , Englewood C l i f f s , N.J., 1970. K l n d l e b e r g e r , G. P., I n t e r n a t i o n a l Economics ( 4 t h e d . ) . R i c h a r d 1 Irwin, Hbmewoodv 111., 1965. Kawasaki, I c h i r o , Japan Unmasked, C h a r l e s E. T u t t l e Co., Tokyo, 1968. Maddison, Angus, Economic Growth i n Japan and the U.S.S.R., W. W. N o r t o n and Co., Inc., New Y o r k , 1 9 6 9 .  91 Mao,  James G., Q u a n t i t a t i v e A n a l y s i s o f F i n a n c i a l D e c i s i o n s . The MacMlllan Company. Toronto.  1969.  M a r r i o t t , Hugh F., Money and Mines. The M a c M l l l a n Co., New f o r k , 1925. TTT— Parkes, Ronald D., Examination and V a l u a t i o n o f M i n e r a l P r o p e r t y (4th ed.), Addison-Wesley Pub. Co., Reading, Mass., 1957. Penrose, E d i t h T., The Theory of the Growth o f the Firm. B a s i l B l a c k w e l l and Mott L t d . , London, 196B. Q u l r i n , G. David., The O a p l t a l _ E x p e n d l t u r e D e c i s i o n . R i c h a r d D. I r w i n Inc, , Homewood 111., 1967. s  Robinson, R i c h a r d D., I n t e r n a t i o n a l Business P o l i c y . H o l t . R l n e h a r t and Winston Inc., New York, 19o4. , I n t e r n a t i o n a l Management, H o l t R i n e h a r t and Winston Inc., New York,  1967.  S c o t t , Anthony, Natural-*Resources; The Economics o f C o n s e r v a t i o n . U n i v e r s i t y o f Toronto P r e s s . 1955. Servan-Schreiber, J . J . , The American Challenge, Atheneum, New York, 1968. ' "*"" ; TT- • Tatemoto, Masahiro, Japan's S t r e n g t h o f I n t e r n a t i o n a l Competitiveness. Kodansha, Tokyo,1966. Vernon, Raymond, Manager I n the I n t e r n a t i o n a l Economy. P r e n t i c e - H a l l , Englewood C l i f f , N.J.,1968. Wright, Robert, Investment D e c i s i o n I n I n d u s t r y . Chapman and H a l l , London, 1964"7  Articles H i r s h l e i f e r , Jack, " R i s k s , the Discount Rate, and Investment D e c i s i o n , " American Economic Review, V o l . L I , May 1961. "Japan, Inc.: Wining the Most Important B a t t l e , " Time, May 10, 1971. Luber, Robert, "The Japanese G i a n t That Wouldn't Stay Dead," Fortune, V o l . LXX, No.5, November 1964.  92  Mawby, Maurice, " M i n e r a l s E x t r a c t i o n a t 2000 AD and Management's Requirements," Mining Magazine, Vol. No.6,  116,  1967.  "Trading Firms i n Japan," O r i e n t a l Economist, V o l . No. 687, January 196B.  38,  " T r a d i n g House i n Japan," O r i e n t a l Economist, V o l . No. 711 January 19701  38,  t  Books i n Japanese Akimoto, Hideo, K e i d a n r e n . Sekkasha, Tokyo,  1968.  Atsumi, T o s h l i c h i , Kourjgyo Seicho no H l m i t s u (Secret o f Growth i n R e t a i l I n d u s t r y ) , Kawade Shobo, Tokyo, 1967. Bank o f Tokyo, The Overseas Investment Tokyo,  1970~I  Guidebook,  Ben Dasan, I s a i a h , N l h o n j i n to Y u d a y a j i n (The Japanese and the Jew), Kadokawa Shoten. Tokyo, 197*. Defense Department, Boel Hakusho (White Paper on Defense M i n i s t r y o f Finance P r i n t i n g O f f i c e , Tokyo, 1970. Diamond Press ed., Ninon K e i z a i o K e t t e i s u r u 50 no Polnto (50 P o i n t s t h a t T B e c i d e Japanese Economy), Diamond P r e s s , Tokyo, 1 9 0 9 . Economic P l a n n i n g Agency, K e i z a i Hakusho (Economic White Paper), 1952 and 1960 - 1970, Tokyo. H o r i e , Yasuzo, Nihon K e l z a i s h l Dokuhon (Reading i n Japanese Economic H i s t o r y ) , O r i e n t a l Economist P r e s s , Tokyo, 19bB. Japan Long-Term C r e d i t Bank, S h i n J i d a l n l Chosen Suru Nihon no Sangyo (Japanese I n d u s t r i e s That Ohallen, New E r a ) , M a l n l c h l Shimbun. Tokyo. 196b". Japan E x t e r n a l Trade O r g a n i z a t i o n , 1972 K a l g a l Shi jo Hakusho; Wagakunl no K a l g a l T o s h l no Gen.lo (white Paper on t h e F o r e i g n Market: The Current P o s i t i o n o f Japan's F o r e i g n Investments), Tokyo, 1972.  93  J i y u Kokumin Sha, Gendal Yqgo no K l s o  Chlshikl  jFundamental Knowledge o f Current Words). Kawada, Tadashi, A s i a no Chosen U n i v e r s i t y Press, Tokyo,  Tokyo,  (Asian Challenge). 1969.  Tokyo  Maruyama, Shizuo, Tonan-Asla to Nippon (Southeast A s i a and Japan), A s i a Economic Research Center, Tokyo, i960. M i n i s t r y o f I n t e r n a t i o n a l Trade and Industry, Shi gen Mondal no Tembo. 1971 (Outlook i n Resource Industries. 1971). Tokyo. 19?1. » Keizai Kyoryoku no Gen.jo to Mondalten (Current P o s i t i o n and Problems o f Economic Cooperation) , 1960 1970, Tokyo. M i t s u b i s h i Economic Research Center, Galka 30 Oku Doru K e i z a i to Klgyo K e l e l (#3 B i l l i o n F o r e i g n Reserves and Business A d m i n i s t r a t i o n ) , J i t s u g y o no Nippon Sha, Tokyo, 1969. Miyagawa, K. and M, H i r a o , Shihon Koryu to Kokusai K i n v u ( C a p i t a l Flow and I n t e r n a t i o n a l F i n a n c e ) , Glnko Kenshusha, Tokyo, 1965. Nagasu, K a z u j i , Nihon K e i z a i Nyumon ( I n t r o d u c t i o n to Japanese Economy^, Kobunsha, Tokyo, I960. Nakamura, Takafusa, Gendal no Nihon K e i z a i (Nowaday Japanese Economy). Tokyo U n i v e r s i t y P r e s s . Tokyo, 1960. Nakane, Ohie, Tate Shakai no Ningen Kankel (Human R e l a t i o n s i n V e r t i c a l S o c i e t y ) . Kodansha. Tokyo, 1966. Nihon S e i s a n s e i Honbu, Kokusai Shihon t o Nihon Klgyo ( I n t e r n a t i o n a l C a p i t a l and Japanese E n t e r p r i s e s ) . Tokyo, 1 9 6 7 . :  Okumura, H i r o s h i , Galkoku Shihon; Nihon n l Okeru Kodo to R i r o n ( F o r e i g n C a p i t a l ; Theory and Behavior l"n "Japan). O r i e n t a l Economist P r e s s . Tokyo. 1969.  94  Uchlda, K a t s u t o s h i , Shosha Hakusho (White Paper on Companies). Kodansha, Tokyo, 1967.  Trading  Yoshimura, Masaharu, J i y u k a to Nihon K e i z a i (Trade L i b e r a l i z a t i o n and Japanese Economy), Iwanami Shoten, Tokyo, 1961.  A r t i c l e s i n Japanese Fukuda, Takeo, "Shigen Mondal Tokushyu n i Yosete ( C o n t r i b u t i n g to S p e c i a l Issue on Resource Problems)," K e i z a i t o Gaiko, No.590, July, 1971. Hagiwara, Y o s h i y u k l , " K i r o n i T a t s u T a i A s i a Kankei (Japan-As$a R e l a t i o n s a t a T u r n i n g P o i n t ) , " A s a h l J o u r n a l , V o l . 13, No.39, October 15, 1971. H i r a h a r a , T a k e s h i , "Shigen Gaiko no Tembo (Scope o f Resource Diplomacy)," K e i z a i to Gaiko, No.590, July, 1970. Ikusawa, Kenzo, "Nihon K e i z a i no Kokusaika t o Shigen Mondai ( I n t e r n a t i o n a l i z a t i o n o f the Japanese Economy and Resource Problems)," K e i z a i Hyoron, Vol.20, No.5, May, 1971. I t o , Masaru, "Kokusai Tsuka K i k i no Ura Omote ( I n s i d e and Out o f the I n t e r n a t i o n a l Monetary C r i s e s ) , " Asahi J o u r n a l , Vol.14, No.1, January 7, 1972. ~ K i k u c h i , Takeo, "Nanshin Suru Nihon Shihon Shugi (Japanese C a p i t a l i s m Marching South)," Economist, Vol.49, No.25, June 22, 1971. Kondo, K a n - i c h i , "Kyodaika ga Maneita H i t s u z e n Aku (Necessary E v i l Caused by M a g n i f i c a t i o n , " A s a h l J o u r n a l , Vol.14, No.22, June 2, 1971. Masamura, Masahlro, "Rinen n i Kakeru Nihon no Shigen Seisaku (Japanese Resource P o l i c y Without D o c t r i n e ) , " Economist, Vol.48, No.42, October 10, 1970. Mlmura, M., " K e i z a i Taikoku no Genso (An I l l u s i o n of the Economic S u p e r s t a t e ) , " K e i z a i t o Gaiko, No.584, January, 1971.  95  Nagasu, K a z u j i , "Nanshin Suru Nihon Shihon Shugl(Japanese C a p i t a l i s m Marching South)," Economist, Vol.49, No.8, March 2, 1971. Nakae, T o s h i t a d a , "Gunji Taikoku Nihon no I m e i j i ( M i l i t a r y S u p e r s t a t e : Japan's Image)," Ohuo Koron (Management I s s u e ) , V o l . 9 , No.4, winter, 1970. Nlshikawa, Jyun, "Asia Bundan e Susumu N i c h i h e i Shihon (Japanese and U.S. C a p i t a l s Moving Toward a S p l i t i n A s i a ) , " A s a h l J o u r n a l , Vol.14, No.2, January 14, 1972. Noguchi, Y u i c h i r o , "Sekiyu Senso: Korega Nihon no H a i i n d a ( O i l War: These a r e the Causes o f Japan's D e f e a t ) , " Chuo Koron. Vol.10, No.2, June, 1971. Okazaki, Mario, "Tsuyomaru Kajo S e i s a n Fukyo no K i k i (The I n c r e a s i n g C r i s i s o f D e p r e s s i o n by O v e r p r o d u c t i o n ) , " Economist, Vol.48, No.42, October 6, 1970. "Sogo Shosha 1968.  (General Merchant)," Economist, Vol.46, No.39,  Suga, Ikuro, "Kinzoku Shigen o Meguru Shomondai (Problems i n M e t a l Resources)," K e i z a i to Gaiko. No.590, July, 1971. Sugimura, K a t s u j i , "Wagakuni no K e i z a i Ky/oryoku no Genjp to Tembo (Japan's Current Economic C o o p e r a t i o n and O u t l o o k ) , " K e i z a i Hyoron. September,1961. Tamikl, Masami, " H i t e t s u Kinzoku Shigen K a i h a t s u no S e i j i K e i z a i g a k u ( P o l i t i c a l Economy i n Non-Perrous Metal Resources Development)," K e i z a i Hyoron, Vol20, No.5, May, 1971. Tomizuka, Buntaro, " S h i h a i r y o k u U s h i n a t s u t a K i j i k u : Doru ( D o l l a r : The Loss o f C o n t r o l as the Key C u r r e n c y ) , " A s a h l J o u r n a l . Vol.13, No.28, J u l y 30, 1971. T s u c h l y a , K i y o s h i , " K l r i a g e Fukyo ga Y a t s u t e Kuru (The Upward R e v a l u a t i o n D e p r e s s i o n i s Coming," Bungei S h i n j y u . Vol.49, No.13, October^ 1971.  96  Newspapers and  Periodicals  A s a h i Shimbun Documentary  News o f the Month  The Japan Times The Korea D a l l y Main!chi Shimbun Nihon K e i z a i  Shimbun  Sankel Shimbun The Vancouver  Sun  Boekl t o S e l s a k u Business JAPAN Economic S t a t i s t i c s Monthly (The Bank o f Japan) Economist Hoseki K e i z a i to Gaiko M i n e r a l Yearbook Mining  Magazine  Monthly S t a t i s t i c s o f Japan (Bureau o f S t a t i s t i c s , of t h e Prime M i n i s t e r ) Newsweek O r i e n t a l Economist  Statistics  O r i e n t a l Economist Time Trade and Industry o f Japan World O i l  Office  97  APPENDIX  A  JAPAN'S IMPORT STRUCTURE FOR SELECTED YEARS  -  1935  1961  Foodstuffs  23  12  Textile  30  16  Materials  Metallic  Materials  Other Raw M a t e r i a l s Fossil  Fuels  1969 14 6  5  17  13  14  15  17  7  16  20  Chemical Products  4  6  5  Machinery  5  11  11  12  8  13  Others Total  100$  100$  100$  Source: K e i z a i ftyoron, Vol.20, No.5, May, 1971.  98  APPENDIX  B  FOREIGN DEPENDENCY OF MAJOR RESOURCES FOR SELECTED YEARS 1963  1968  1975*  Copper  59.6$  73.4$  82.9$  Lead  51.1  56.5  55.6  Zinc  32.6  53.8  61 .7  Aluminum  100  100  100  Nickel  100  100  100  Iron Ore Coking  Coal  Oil  76.7  84.7  90.0  46.9  71.9  85.9  98.8  99.5  99.7  Natural Gas  0  Uranium  -.•  0 100  73.6 100  * Estimated demand. Source: Bank of Tokyo, The Overseas Investment Guidebook, Tokyo, 1970, p.15^  99  APPENDIX  0  JAPAN'S BALANCE OP PAYMENTS (In M i l l i o n s of Dollars) 1961  1962  1963  1964  1965  Current Balance  -982  - 48  -780  -480  932  Trade Balance  -558  401  -166  377  1,901  Overall Balance  -952  237  -161  -129  405  Gold and Exchange 1,486 Reserves  1,841  1,878  1,999  2,107  1966  1967  1968  1969  1970  Current Balance  1,254  -190  1,048  2,119  2,014  Trade Balance  2,275  1,160  2,529  3,699  4,019  -571  1 ,102  2,283  1,374  2,005  2,891  3,496  4,399  Overall Balance  337  Gold and Exchangf i Reserves 2,074  Source: Monthly S t a t i s t i c s of Japan, i 9 6 0 - 1971, Bureau of S t a t i s t i c s , Office of the Prime Minister, Tokyo.  100  APPENDIX  D  MONTHLY FOREIGN RESERVES BALANCE (In M i l l i o n s o f D o l l a r s )  1970  1971  1972  Jan.  $3,617  #4,532  #15,957  Feb.  3,630  4,868  16,478  Mar.  3,868  5,458  16,663  April  3,923  5,777  16,535  May-  3,901  6,916  June  3,769  7,599  July  3,508  7,927  August  3,527  12,514  Sept.  3,556  13,384  Oct.  3,778  14,098  Nov.  3,987  14,836  Dec.  4,399  15,235  Month  Source: Documentary News o f the Month, 1970 - 1972,  101  APPENDIX  E  TERMS OP TRADE* BETWEEN DEVELOPED AND LESS DEVELOPED COUNTRIES  (1958 = 100)  Developed North  1959  I960  1961  1962  1963  1964  Countries  101  102  103  104  104  104  America  102  102  104  105  103  102  106  107  105  104  102  98  101  100  96  94  96  97  97  96  94  91  99  104  Japan Developing C o u n t r i e s Latin  America  Africa  100  98  94  90  91  93  Asia  104  101  97  96  94  92  1965  1966  1967  1968  1969  1970  Countries  104  104  105  105  105  106  America  104  105  106  107  107  106  95  95  98  99  104  106  95  97  96  98  99  98  101  104  101  101  107  107  Africa  91  95  95  95  99  94  Asia  93  93  93  94  94  93  Developed North Japan  Developing C o u n t r i e s Latin  America  * U n i t value i n d e x o f export d i v i d e d by u n i t value index o f imports (excludes o i l ) . Source: U n i t e d Nations Monthly B u l l e t i n o f S t a t i s t i c s , J u l y , 1960 - J u l y 1971.  102  APPENDIX  P  NET PLOW OP FINANCIAL RESOURCES FROM JAPAN TO LDC'S AND MULTILATERAL AGENCIES  1966 - 1970  (In M i l l i o n s of Dollars) 1966  1967  1968  1969  #285.3  #385.3  1356.2  #435.6  #458.0  Other O f f i c i a l Funds**  198.9  215.5  322.1  375.5  693.6  Private Funds  140.9  196.8  371 .0  451.7  672.3  Total  625.1  797.5 1,049.3 1,262.1 1,824.0  O f f i c i a l Development Assistance  Ratio Against GNP  0.62  0.67  0.74  0.76  1970*  0.93  * Estimate ** Include export credits over one year, d i r e c t investment finances and finances f o r international organizations. *** Include export credits over one year and direct investments. Source: Kuranosuke Saito, "Aid Expansion Continues to Gain," Business JAPAN. Vol.16, No.11, November,1971, p.81.  103  APPENDIX  G  RESOURCES DEMAND INDEX FOR SELECTED YEARS Average r i s e 1968-1975  1963  1968  1975*  Copper  100.0  186.9  353.5  Lead  100.0  131.9  250.3  10.2  Zinc  100.0  191.5  393.3  10.8  Aluminum  100.0  260.6  706.3  15.3  Nickel  100.0  240.0  524.0  11.8  I r o n Ore  100.0  224.8  476.9  11.3  Coking C o a l  100.0  196.1  389.2  10.3  Oil  100.0  225.8  441.8  10.1  N a t u r a l Gas  100.0  117.8  446.0  20.9  9.6$  * Estimated demand. Source: Bank o f Tokyo, The Overseas Investment Guidebook. Tokyo, 1970, p.15.  APPENDIX  H  ESTIMATED SUPPLY AND DEMAND IN MAJOR NATURAL RESOURCES  F i s c a l 1970 Dependence Demand on Imports a  Copper  F i s c a l 1975 Dependence Demand on Imports 82$  880  76$  b Lead  216  55  303  56  c Zinc  681  55  1,149  57  d Aluminum  885  100  2,000  100  91  100  150  100  111  88  200  91  79  106  83  99.7  3,230  100  35  9,500  74  e Nickel f I r o n Ore g Coking Co;i l h Oil i j  59.2 204.1  N a t u r a l >: 3,662 Gas Uranium  0.7  100  1,420  3.5  100  a - e = 1,000 tons, f and g = m i l l i o n tons, h = m i l l i o n k l l o l l t e r s , i = m i l l i o n c u b i c meters, and j = 1,000 s h o r t tons Source: M i n i s t r y o f I n t e r n a t i o n a l Trade and I n d u s t r y . Cf. Trade and Industry o f Japan. Vol.XXI, No.1 ,  

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Country Views Downloads
United States 18 3
China 5 26
Germany 1 3
India 1 0
City Views Downloads
Ashburn 7 0
Unknown 6 7
Shenzhen 4 26
Mountain View 3 3
Redwood City 2 0
Hilliard 1 0
Delhi 1 0
Beijing 1 0

{[{ mDataHeader[type] }]} {[{ month[type] }]} {[{ tData[type] }]}
Download Stats

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0101629/manifest

Comment

Related Items