The next Japanese export to hit these undefended shores will be money.
Japan stopped being a net importer of capital three years ago; its financiers are now hunting for hospitable havens in which to reinvest their burgeoning profits. Canada is on the short list. Barry Steers, the Canadian ambassador in Tokyo, estimates that the Japanese have already placed investments worth at least $5 billion into this country. Much more is on the way.
This is partly a side effect of the Tokyo Stock Exchange’s amazing growth. Second only to New York, it now accounts for well over 25 per cent of world equity turnover values. The size and clout of its leading players is remarkable, even when compared to Wall Street’s giants. Nomura Securities, for example, employs 8,000 salesmen and has assets in its custody of nearly $70 billion. Nomura recently became the first Japanese broker-dealer to be admitted to the New York Stock Exchange; its Canadian arm, operating out of Toronto, is AGF Management Ltd.
Japanese banking is rapidly becoming internationalized. The Fuji Bank recently paid $425 million for two commercial lending units of Walter E. Heller International in New York, and other takeovers of U.S. banks are in the works. Showing a special leaning to Canada is the Industrial Bank of Japan, which has done some Dome financing as well as investing in the $3-billion project to liquefy Alberta and B.C. natural gas for export to Japan and the coking coal project near Hinton, Alta.The largest of the long-term credit banks in Japan, the IBJ has assets of more than $64 billion and is currently financing projects as diverse as an Australian uranium mine, an aluminum smelter on the Amazon River, oilfields in Mexico and construction of a new commercial harbor at Long Beach, Calif. Yoh Kurosawa, the bank’s managing director, is particularly interested in Canada (“What news of Dome?” was his first question) and has handled provincial bond issues for Manitoba and New Brunswick. “The yen is now becoming an international currency,” he told Maclean's, “and further progress certainly can be expected in both Japan’s role in world finance and the yen’s position as a reserve currency.”
Kurosawa would like to develop Tokyo as an offshore banking centre.
“Foreign banks in Japan now feel that their quest for more business is running into a wall,” he said. “Offshore banking would open up a new field. Besides, the pan-Pacific region, which has the greatest potential for growth in the world, deserves to have a major offshore banking centre, comparable to London or New York.”
Japan’s most visible presence in North America at the moment is the growing investment of its carmakers in manufacturing facilities on this side of
the Pacific. Nissan and Hino trucks and Honda and Toyota cars are already rolling off U.S. assembly lines; Sony is making color TV sets in San Diego. Canadian investments to date have been largely concentrated in natural sources, including a paper mill at Dalhousie, N.B., and a chunk of oil sand property at Fort McMurray, Alta.
Canadian-Japanese trade in 1982 amounted to more than $8 billion. We had a $1.044-billion surplus, but it was Japan that imported all of the jobs because our exports consisted almost entirely of unprocessed raw materials. Statistics show that we managed to sell Japan $167 million worth of manufactured goods in 1982, but the top items in this category were minted gold Maple Leaf coins and fur coats. Nevertheless, a few Canadian manufacturers—Tridon
Ltd., which makes windshield wiper blades in Burlington, Ont., Duplate, Northern Telecom and Mitel—are winning a steadily growing share of the Japanese market. The most interesting breakthrough was the recent sale of a Telidon system to Mitsui & Co., which intends to market the videotex software across Asia. “It would be utterly foolish not to continue our export concentration on Japan,” says Canadian Ambassador Steers. “Instead of seeing Japan filtered through European myths as an island on the far side of the world, we must begin to recognize it as our Pacific neighbor. Sure the Japanese are efficient, but it’s uneven. They’re not 10 feet tall.”
Because their export drive has been so spectacularly successful (the Bank of Tokyo predicts a 1983 current account surplus of $19 billion), most of Japan’s trading partners have been threatening to impose import restrictions, such as Canada’s decision last summer to impede car imports until export restraints could be negotiated. The Japanese have responded by pleading innocent to erecting any tariff barriers of their own, claiming that their import duties average only 2.6 per cent. Japanese tariffs are low, but they’re finely tuned. The duty on bananas from the Philippines, for example, is higher if they’re shipped in Philippine-made crates than if they arrive in Japanese-made containers. Any degree of processing raises duties. Fresh shrimp from Thailand comes in at 3.4 per cent; if they’re dried, the tariff rises to four per cent.
As usual, the really effective barriers to free trade have little to do with published tariff rates. There are an estimated 100,000 Japanese pushing their products in North America, for instance, while the United States and Canada have only about 8,000 representatives resident in Japan. Another surprisingly powerful nontariff advantage: English is compulsory in Japanese schools, starting in the seventh grade, while very few foreigners speak Japanese.
The charges and countercharges in the trade war are escalating, but statistics reveal the real story. Japan prides itself on not having a tariff on automobile imports, in contrast with most of the car-purchasing countries. In 1981 Japan exported more than six million vehicles. The United States, former headquarters of the world car industry, managed to sell the Japanese precisely 3,562 cars.
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