Suddenly there's concern as Japanese `buy America'

Like a Komatsu earthmover eating away at a vast hillside, Japanese investors each year are acquiring more and more of America. Loaded with cheap dollars, the Japanese are buying American factories, banks, office towers, stocks, bonds, and masterpiece paintings. Now some outspoken Americans are getting upset - although it is unclear why they are more upset today than in the past.

Publisher Malcolm Forbes, who has long been a staunch supporter of free trade, sounded the alarm in a lead editorial Jan. 25 in his magazine.

``Before Japan buys too much of the U.S.A.,'' Mr. Forbes wrote, ``we must instantly legislate a presidentially appointed Board of Knowledgeables whose approval would be required before any foreign purchase of significance would be allowed of any consequential US company - regardless of size.''

New York investment banker Felix Rohatyn made a similar point to the Economic Club of Washington last week, saying the United States might have to consider limits on foreign ownership of US companies.

``No major industrial power in the world,'' Mr. Rohatyn said, ``certainly not Japan, not even Great Britain, allows foreign control of major strategic companies to be acquired without government approval.''

Foreign (read: Japanese) ownership of American businesses is shaping up as a major issue this year. Sen. Ernest Hollings (D) of South Carolina is planning hearings of the Senate Commerce Committee on this subject for next month.

A key resource in this debate is sure to be a new book by Susan Tolchin, a professor at George Washington University, and her husband, Martin, a New York Times reporter. ``Buying Into America'' (Times Books, 1988) is the definitive work on the subject.

Among their points: Foreigners control $1.5 trillion of American resources and own more than 16 percent of total US bank assets, more than $100 billion in US real estate, and more than one-tenth of America's $2 trillion national debt. With this leverage, the Tolchins warn, foreign companies and governments are exerting political influence over US policy. It is a Faustian bargain, they say.

``We have to look at investment as part of our overall export and trade strategy,'' Susan Tolchin says.

As you might expect, Japan is the biggest worry.

And yet Japanese direct investment (hard assets as opposed to, say, US Treasury bonds) in the US ranked third at $23.4 billion last fiscal year, compared with $51.4 billion for Britain and $42.9 billion for the Netherlands. Value alone isn't the full story, however. Japan was No. 1 for the third year in a row in the number of acquisitions, registering 351 out of a total of 1,051 with the US Commerce Department.

But why all the fuss now? After all, foreign investors have been buying American for generations, just as Americans have been buying overseas properties and investments. On the face of it, the Japanese in the 1980s, like the Arabs in the 1970s, have simply joined the British, Canadians, and Dutch at the game.

There is something different this time, critics contend. The scale of ownership and the long-term aims of the Japanese are worrisome. Arabs were mostly passive investors, preferring real estate and farmland, not offering a serious threat to American manufacturers. Western Europeans are easy to understand, since their interests and culture look familiar to Americans.

But the Japanese are an unknown. Mr. Rohatyn and others worry that Japanese and American economic aims could diverge at some point. Seen as a kind of cartoon, the challenge of a highly efficient Japan Inc. is much more serious than any posed by good-times Arab sheikhs or jolly English lords. No less than the future wealth and power of the United States is at stake.

All this worry is cropping up in a year that could see the greatest acceleration yet in foreign investment in the US. If there was ever a time to buy American, it is now, says Earl Fry, a Brigham Young University professor who tracks foreign direct investment in the US. Here's why:

With the dollar at postwar lows against the yen, a Japanese investor has huge numbers of dollars at his disposal. Major central banks appear eager to stabilize the dollar. So the next move could be upward. That would create a big gain for the Japanese investor who buys with cheap dollars today.

There's value out there, too. Stock prices in the US are quite moderate following the Oct. 19 crash. Commercial real estate is in a slump in many cities.

Tough trade talk is increasing. The apparent appeal of Richard Gephardt's trade-protection campaign ads in Iowa, President Reagan's ending of trade preferences for East Asian nations, and the congressional debate over the omnibus trade bill - all indicate it would be better to buy into America before a trade or investment wall goes up. ``It looks,'' says Professor Fry, ``like we may be in for a spate of foreigner bashing.''

It is difficult to see how Congress could be united on this subject, however. Many states actively court Japanese investment, offering incentives to set up factories and employ local workers. Sellers of office towers and land certainly don't want to be protected from Japanese buyers. Even labor unions have mixed feelings, preferring to see jobs preserved under Japanese or other foreign owners than to see factories shuttered. And, of course, Japanese money helps finance the chronic deficits in the budgets that Congress passes.

Mitsu Takii, director of research in the New York office of the Japanese External Trade Organization, recalls a similar outcry 10 years ago when Arabs were buying American real estate and companies. ``Some members of Congress were very anxious and wanted to set up rules. But all failed. I think this is the same.''