US Firms Say Japan's Market Can Be Cracked

JAPAN has gained a couple of new and unlikely champions for trade and investment in its home market: the United States government and the US companies already here. Both have recently begun to tout a message to wary American firms that Japan's image as a hard market to crack is changing fast, with only a residue of official barriers.

Ease of access to the Japanese market ``is significantly better than it was five years ago,'' says William Best, managing director at the Tokyo office of A.T. Kearney International Inc., a consulting firm.

A new survey of 340 US companies by A.T. Kearney revealed that 52 percent found the climate for investment to be either favorable or somewhat favorable, compared to 18 percent citing it as unfavorable. Forty-one percent were meeting all their financial goals.

The upbeat survey, sponsored by the American Chamber of Commerce in Japan, will be used to deliver a message of ``Make It in Japan'' to companies in the US during a ``road show'' by Chamber officials next week. The presentation will be held in Los Angeles, Chicago, and New York.

``Japan is just not on the high priority list for most American companies,'' Mr. Best says. He sees a ``perception gap'' between what Americans think of the Japanese market and the actual opportunities for trade and investment.

Until recently, Japan's biggest booster for investment from the US has been the semi-governmental Japan External Trade Organization, which aimed to lessen the US-Japan trade imbalance by boosting American imports.

In trying to show that Japan has gradually opened its economy more than Americans perceive, the US officials and business leaders hope to fend off mounting pressure in Congress to close US markets to Japanese firms based on charges that Japan's market is closed. President Bush has said that he wants to ``level the playing field'' with Japan.

Officials also hope to prove that US companies are able to compete on Japan's turf and thus counteract Japanese claims that American business leaders are too short-sighted in profit-making.

``As a businessman, if you operate on the assumption that the [Japanese] market is closed today, I think you'll be at a disadvantage,'' Edmund Reilly, president of Digital Equipment Corporation Japan and of the US Chamber. ``For any American company that is serious about being a global player, participating in the Japanese market is nothing less than a strategic imperative.''

Despite its message, the Chamber still calls for ``reasoned pressure'' on Japan by the US government to ``create change'' in the Japanese market. As good examples, the Chamber cites recent agreements that aim to help US firms gain a higher share of the Japanese construction and semiconductor markets.

The US government's latest target are so-called keiretsu, or groupings of related companies, whose tight bonds tend to exclude new market entrants but have been a winning formula for Japanese competitiveness.

Japan's automobile keiretsu are special US targets since they help prevent penetration into Japan by US auto and auto-parts manufacturers and are the major reason for a high US trade deficit with Japan.

The survey, however, found that 32 percent of respondents find keiretsu are either positive or very positive for their business, and another 44 percent said keiretsu have no effect. In fact, many US firms have been able to join keiretsu, say Chamber officials.

``One of the answers to [the keiretsu problem] is time,'' says Mr. Reilly, who says that foreign firms need to make a long-term commitment in Japan to develop close ties with Japanese corporate groups.

The survey, which included in-depth interviews with US firms not yet in the Japanese market, found that two of the biggest barriers were high property prices and a tight labor market.

Recruiting good employees has become more and more difficult in Japan's expanding economy, and foreign firms must overcome a perception among the Japanese that they may not be in the market for long, Reilly says. But he says that most US companies that come to Japan ``do not pull up roots and leave.''

Japan has rolled back many of its regulations and trade barriers in recent years, but the ``lingering effects'' of 40 years of protectionism are still around, says Best. He cites as one problem the difficulty foreign firms have obtaining approval for their products by Japan's testing associations, which tend to favor Japanese products.

One sign of improved access to the Japanese market, he says, is an increasing number of US companies breaking with their Japanese partners and running the business themselves in Japan.