BUSINESS ABROAD

Closed-Door Policy

In Tokyo last week the government's powerful Foreign Investment Council met in the Bank of Japan's oak-paneled conference room to screen foreign investment proposals. Before it were 70 applications, most of them from U.S. corporations who wished to invest an estimated $34 million in Japan. When the meeting adjourned two hours later, a spokesman declared: "In due time the companies involved will be informed of any progress."

None of the applicants expected any "progress." Since Jan. 1 the council has not approved a single major U.S. proposal to invest in Japan. Said one U.S. businessman, whose $200,000 offer has been hanging fire for a year: "They tell you it probably won't be approved and if you insist on applying they just drag their feet until you withdraw." Another businessman with $600,000 to invest sat in the Imperial Hotel last week sipping bourbon and complained: "I'll use up all the money I've come to invest paying whisky and hotel bills."

The council's commonest excuses for refusing U.S. proposals are that they would drain Japan's dollar reserves or that the industries concerned are "nonessential." In some cases the reasons make sense, e.g., a Coca-Cola bottling plant is hardly "essential." But in other cases the ban is unreasonable. Examples: P: When Studebaker-Packard Corp. wanted permission to erect an auto assembly plant, it argued that many of the cars would be exported, thus strengthening Japan's foreign exchange position. Though Studebaker even agreed not to convert its profits in Japan into dollars unless it also made money in both dollar and sterling areas, the offer was refused. P: Singer Manufacturing Co. wanted to buy 50% control of a small Japanese sewing machine firm and install new machines so the firm could compete better in world markets. Singer was turned down, although it promised not to take more than half its export profits off the island. P: Parke, Davis & Co. wanted to manufacture Chloromycetin, pointed out that it cost the Japanese a precious $300,000 annually for patent rights to make it themselves, but got nowhere.

The disappointed applicants were well aware that the real reason for the turndowns was a 1) resurgence of nationalism and 2) pressure from native manufacturers, who were reluctant to put in efficient production lines and retool to meet the fresh competition. In addition, there was pressure from banks protecting their 12% interest rates.

The closed-door policy was especially galling to U.S. manufacturers, who were asked recently by the Administration to support a program of stepped-up imports from Japan, lest the island be forced to trade with Red China (TIME, Nov. 29). Many a U.S. merchant in Tokyo thought that Japan wanted to discourage private U.S. capital to get more U.S. Government handouts. Said a U.S. official in Japan last week: "Give and take has come to mean something much different to the Japanese. To them it means 'you give and we will take.'"

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