Tackling the Traders

Open clashes between government and industry are about as unusual in "Japan, Inc." as low-priced beefsteak. But spurred by public anger against roaring inflation, the Japanese government is now publicly criticizing one of the nation's unique business institutions: the trading houses. To the extent that they have a comparison outside of Japan, these houses might be called a combination of import-export houses and U.S.-style conglomerates. Their main business is to procure raw materials and sell finished products, at home and abroad, for thousands of other companies that are thus freed to concentrate on production. The trading houses also serve as market researchers, financiers and worldwide economic intelligence agents for their clients. In addition, like U.S. conglomerates, they carry on extensive operations of their own, ranging from distributing canned vegetables to building supermarkets and apartment houses.

As long ago as last April, the government accused the six biggest trading houses* of spending more than $2.5 billion to buy up and hoard land and supplies of such important commodities as rice, wool, silk and soybeans. It implied that the hoarding had fueled Japan's disastrous inflation (retail prices rose 20.1% last year, the highest leap of any major industrial country). Now a just published report by Japan's Fair Trade Commission asserts that the big six have used their vast resources to crush competition and fasten an oligopolistic stranglehold on the economy.

Stifling Competition. Between 1968 and 1972, the report says, the big six boosted their total turnover from $28 billion to $68 billion--19.6% of all the wholesale business done by all companies in Japan. In 1972 they accounted for 40% of Japan's exports and 50% of its imports (an especially vital point, since Japan must import nearly all its raw materials). From 1968 to 1972 they lent $24.7 billion to other firms and were the biggest shareholder in a total of 1,057 companies with combined sales of no less than $20.8 billion in 1972.

The traders made the loans, says the Japanese F.T.C., not for the sake of the interest they could collect, but to gain enough influence over the borrowing companies so that they could stifle potential competition.

Except for a temporary price freeze by Mitsubishi, officials of the trading houses greeted the report with pained silence, retiring to their plush offices to await the government's next move. Although the report was written in an elegantly indirect Japanese way, it carried the message that something must be done to loosen the grip of the trading houses on the economy. Perhaps as the first step in a government campaign against them, Tokyo customs last week summoned officials of 23 trading houses, including the top six, to explain why they were keeping large quantities of imported goods in bonded warehouses after the merchandise had cleared customs.

The traders were warned that the government might confiscate 120,000 tons of frozen beef, fish and other foodstuffs unless the goods were released for immediate sale.

*Mitsubishi Corp., Mitsui & Co., Marubeni Corp., C. Itoh & Co., Sumitomo Shoji Kaisha, Ltd. and Nissho-Iawai Co.

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