A recent international survey found that the residents of Tokyo, the richest metropolis of what is theoretically the richest country in the world, stand only twenty-eighth highest in purchasing power per capita among fifty-two major cities, way ahead of people in Cairo and Lagos (two of the poorest) but way behind those in Los Angeles, Zurich, and Frankfurt (first through third, respectively). Some of Japan's underconsumption reflects an unavoidable lag in putting its recent wealth to work—it will take decades to improve Japan's roads and houses—but most is caused by the economy's continuing bias toward corporate profit and foreign investment rather than individual consumer welfare.
The Dutch journalist Karel van Wolferen asks in the opening pages of his forceful and important new book The Enigma of Japanese Power, "For what ultimate purpose do [the Japanese] deprive themselves of comfort and risk the enmity of the world?" His answer is that individual Japanese, rather than depriving themselves, are deprived by the country's major power centers—the big corporations, the government regulators—which are always struggling to keep from losing ground to one another or to foreign competitors. I'll refer several times to his book, which has just been published in the United States, because, like MITI and the Japanese Miracle, by Chalmers Johnson, of the University of California, it is a seminal study of the structural and institutional reasons for Japan's growth. ("MITI" stands for the legendary Ministry of International Trade and Industry, or Tsusansho.)
A second, equally obvious indication of imbalance involves trade statistics. Japan's trade is somewhat more balanced than it used to be. When the yen began to rise in value against the dollar, in 1985, the trade surplus began to shrink. As a proportion of Japan's gross national product, for instance, the surplus fell by almost half in three years, from about 4.5 percent in 1985 to about 2.4 percent last summer. Last year Japan's overall trade surplus fell by some 2.5 percent, from $80 billion in 1987 to $78 billion in 1988, and its surplus with the United States fell also, from about $52 billion to $48 billion. A big surge in foreign tourism recycled some of Japan's export earnings last year.
But these adjustments stopped happening about a year ago. By every available measure—dollars, yen, physical volume, or percentage of Japanese GNP—Japan's exports and its trade surplus increased from the middle of 1988 through the first few months of this year. Measured in dollars, Japan's worldwide trade surplus reached its highest-ever level last December. (The dollar measure is significant, because most international trade is conducted in dollars, and dollars, of course, are used for investment in the United States. Also, the yen-dollar rate has been fairly stable since early 1988. This removes the distortion caused by the plummeting dollar in 1986 and 1987, when Japan's trade surplus decreased in yen terms while rising in dollar terms.) In 1985, when the dollar was worth 250 yen, the American trade deficit with Japan was about a billion dollars a week. In 1989, with the dollar worth 125 to 135 yen, the trade deficit is a billion dollars a week. That is, for products worth half as much in yen, Japan receives the same flow of dollars, which it can use to obtain as much as a billion dollars' worth of U.S. assets each week.