The Nixon Shocks were not as damaging as the Oil Shock, but ih» ^ were disturbing to the Japanese. They clearly signalled a cooling in jg American attitudes and goodwill towardsJapan. Nevertheless,Japan rode ■>1 them all out, and by the end of the 1970s many Japanese were starting to * wonder if they needed American goodwill anyway. After all, Japan wasO now the master, and ifAmerica turned its back on Japan then it would be il America's loss, not Japan's. Hadn't a Harvard professor told them so? i
■*■> 6.4 A Superpower under Siege - and a Bubble
Japan's economy continued to grow at around 4 per cent during the early 1980s. Its trade surplus with America, which had started to develop since the late 1970s, became massive, typically in the order of US$40-50billion. Japanese products were everywhere.
There had been some criticism of Japan's seemingly narrow focus on economic growth during the 1970s, but in general the praise had predominated. The balance was now tipping the other way. Backlashes were starting to become serious, not just in America. The Japanese were increasingly criticised as 'economic animals' who lacked any values other than makingmono}'. There were anti:Japanese protests in which Japanese products were destroyed by sledgehammers. Books were appearing that openly denounced the ethics of certain Japanese trade practices.102
Some of the criticism was justified. The Japanese were at times undoubtedly guilty of 'dumping' (selling below cost in a targeted market) or erecting non-tariff barriers (disadvantaging imports bynon-economic practices such as time-consuming testing). However, the criticism was expressed in increasingly emotional language. It was almost like war brewing - an economic war that was threatening to get out of hand.
To try to remedv the situation a meeting was convened in 1985 in New York's Plaza Hotel, attended by the financial leaders of the United Slates, Britain, France, Germany, and Japan. Inthe so-called Plaza Accord they agreed effectively to devalue the dollar relative to the yen. The yen duly rose, in what is known as 'endaka' ('high yen'). One result was an increased transfer of Japanese business operations overseas so as to make use of cheaper labour. However, contrary to .American expectations, American goods did not make significantly greater inroads into Japan. Japanese goods- now often produced abroad - continued to loom large in the American market.
A Phoenix from the Ashes
klThe Japanese now tried, with some 'success', to stimulate domestic Remand by releasing cheap capital. Loans were made available at remark-illy low interest. Prices of land in particular, which was used as collateral against loans, were allowed to escalate to absurd levels. The land infjjte: immediate vicinity of the Imperial Palace theoretically had the same price tag in 1988 as all of California. Japan's total land assets at the lime 'vfere equivalent to no less than 60 per cent of the entire land value of tjxe planet - 200 times the 0.3 per cent of the planet it occupies in geographical terms.103 Stock market prices also became grossly inflated, with some companies worth more onpaper, than the entire GNP of many countries. This was the infamous Bubble Economy.
| Japan had become the second largest economy in the Free World in the late 1960s. However, it was during the Bubble Economy of the late 1980s that, in terms of per capita income, the Japanese became officially the wealthiest people in the world - at least on paper.
The money inevitably flowed overseas. Japanseemed to be buying up the world. By this stage it was the largest net overseas investor nation in the world. It controlled 4 per cent of the American economy, and Japanese companies even bought up bastions of America such as the Rockefeller Center and Columbia Film Studios.
Equally inevitably, this stirred up anti-Japanese feelings even more. The Japanese called this 'Japan bashing', and felt...