Van Wolferen's writings were met with even less comprehension than had greeted the work of Johnson, at least in the United States. The notion of a "strong state" might seem alien and suspect, but Americans could at least conceive of tightly organized countries dedicated to global hegemony; they had fought a decades-long Cold War with just such a state. But the idea of a formidable economic power capable of laying waste to the American industrial base and wresting the crown of global economic and financial leadership from the American brow run by bureaucrats who didn't know what they were doing was a notion greeted with incredulity and disbelief. (Notwithstanding a determined and protracted smear campaign by powerful Japanese interests, Van Wolferen's analysis was received sympathetically by many Japanese; respected journals such as Toyo Keizai and the Nihon Keizai Shimbun have recently run essays explaining akauntabiritei (accountability) to their readers--but one indication of the extent to which van Wolferen's analysis has penetrated the Japanese consciousness.)

The clearest delineation of the differences between the central core/strong state thinkers and van Wolferen occurred in the pages of this magazine in a linked pair of articles that should top the list of required reading for any government official or business executive who deals with Japan. In the first of these, Leon Hollerman labels the country's central core a "collusive oligarchy" and discusses an array of tactics by which this oligarchy is implementing a strategy aimed at turning Japan into "The Headquarters Nation" for the global economy.¹³ Hollerman has devoted many years to analyzing the institutional arrangements by which linked networks of Japanese banks, trading companies, and manufacturers achieve dominance of industrial sectors and establish economic beachheads abroad. He reviews many of these arrangements in his article and concludes that they amount to a well thought out strategy to achieve, if not global economic hegemony, then "comprehensive economic security", which is tantamount to the same thing.

His conclusion seems not only convincing but inevitable--until van Wolferen asks rhetorically in the following article "Are Japan's strategists gamblers?"¹⁴ Anyone who has ever dealt with Japanese institutions knows that, to the contrary, they are extremely risk-averse. A strategy by which a crowded island nation, bereft of most natural resources, hemmed in by watchful, resentful neighbors, supporting within its borders fifty thousand foreign troops under foreign command, attempts to wrest leadership of the global economy from under the noses of those same foreigners--foreigners who within living memory of much of the nation's elite had stripped it of its empire and reduced its cities to rubble--is, however good the odds may seem and however stupid and gullible those foreigners might have become, a huge gamble. But what other than a well-thought out strategy could have secured for Japan its extraordinary economic achievements? Japan might not yet have become the world's "headquarters", but by 1991, when the articles appeared, it looked pretty damned close.

Van Wolferen posited the notion that all those jealous, conservative instincts of institutional self-preservation that, according to observers from Max Weber to James Q. Wilson, define the nature of the bureaucratic beast have acted in the Japanese case to perpetuate a system whose origins lay not in a consciously conceived strategy but in a confluence of historical factors. These included wartime controls that had never been dismantled, the occupation's unwitting emasculation of any power centers that could check the economic ministries, the long and historically unprecedented indulgence of the United States toward Japan, and the obvious need for postwar reconstruction that "required no political discussion." The result was a system whose essence lay in a drive to accumulate production capacity without regard to profitability, consumer welfare, or any kind of clearly articulated understanding of what the capacity was supposed ultimately to buy for Japan.

A Four Year Test

The Hollerman/van Wolferen diptych appeared in the fall of 1991; the intervening four years have given us about as good a test as we're likely to get of the underlying assumptions. It is still conceivable that Hollerman, Johnson, and Fingleton are right; that Japan's wise and far-seeing economic mandarins are, even as we speak, in the final stages of bringing about the most brilliantly conceived and implemented national strategy in history. Perhaps when Euromoney awarded Takemura Masayoshi the title "Worst Finance Minister of the Year", his nominal subordinates grinned at one more testimonial to their unparalleled ability to dupe the gaijin. Maybe when Japan's current prime minister, Hashimoto Ryutaro, led a successful lobbying effort before assuming office to gut the official apology the world had awaited on the fiftieth anniversary of the end of the Second World War, Japan's diplomats and business leaders congratulated themselves for their prescience in getting other Asians used to the subordinate role they will be playing when Japan's "ascendancy" is revealed to East Asia and the world. And it could be that the avalanche of recent books and articles in Japan portraying widespread bureaucratic incompetence point to the devious tactics by which Japan's top officials have hidden all evidence from their fellow Japanese of well thought out plans to bring about that ascendancy.

But I don't think so. Far more likely, the last four years bear out van Wolferen's thesis. Rather than any sort of transition, planned or otherwise, from the postwar setup, these years have witnessed the latest chapter in a quarter century of heroic efforts to preserve the existing system. Mikuni Akio put his finger on the heart of the matter when he wrote:

 There were two motives behind [Japan's economic] system. The first was to expand Japan's productive capacity as quickly as possible. The second was to keep control of Japan's productive assets out of the hands of foreigners. The strains in this system first started appearing in the late 1960s, when Japan began running chronic trade surpluses. The result has been constant upward pressure on exchange rates. The increasing value of the yen should have served as a signal to Japan's policy elite that it needed to shift the driving force of the economy from exports to domestic demand. But Japan, alas, has lacked the political infrastructure capable of carrying out such a wide-ranging shift.¹⁵

 The notion that Japan can easily engineer a "transition" to a "headquarters economy" ignores both the lack of this political infrastructure and the extraordinary interdependence of the United States and Japan, an interdependence now critical to maintaining domestic power balances in both countries. It is this interdependence that allows Japan to avoid dealing with the "wide-ranging shift" that economic developments would seem to dictate; it is this interdependence that permits the United States to maintain superpower pretensions and a level of consumption it could not afford on its own. Its essence lies in the role of the dollar in underpinning economic relations between the two countries; and the accumulating strains are, as Mikuni suggests, at their most visible in the history of dollar/yen crises.

These crises--there have been five since the yen was cut loose from the dollar in 1971--all bear a family resemblance, most particularly in the near-hysteria they seem to induce in Japan when the yen soars to previously unimaginable levels. Companies go into paroxysms of cost-cutting and automation financed by easy money as the authorities open the monetary spigots; MOF officials rush to Washington prophesying global collapse unless they get help in bringing down the yen; the Bank of Japan ("BOJ") buys billions of dollars in the foreign exchange market; Japanese insurers and banks are "guided" into joining the BOJ in its dollar buying.

The contention that this hysteria is all a put-up job aimed at forcing Japanese industry to pare costs overlooks the tremendous price that Japan has paid. Japanese institutions have sustained direct losses of a least a trillion dollars in propping up the American currency over the past two decades. The dead weight of bad loans on the books of Japan's banks (and thus the seemingly endless recession) stems directly from a "bubble economy", deliberately created by the mof to cope with the aftermath of the 1985 Plaza Accord that saw the dollar drop from 240 yen to 140 yen in less than two years.

A willingness to saddle Japan with such burdens can only come from horror at the thought of the alternative: insisting that foreign countries conduct their business with Japan in yen. Countries seeking to finance their government deficits with Japan's savings would have to borrow in a currency Japan could control. Foreigners buying Japanese products would be billed in the currency Japanese manufacturers must use, in turn, to pay their own workforce and suppliers. This is the way the world usually works: Stronger countries--a Victorian Britain, a postwar United States, a reunified Germany in today's Europe--demand that others take the risk that currencies will fall in value, rather than forcing their own businesses and household savers to shoulder such risks by accumulating and holding foreign currencies.

 Because the notion of a "headquarters nation" that does not control the currency of its trade and investment flows is ultimately inconceivable, many have assumed it only a matter of time until Japan too establishes such control, giving rise to much talk of the "internationalization of the yen" and the "emergence of a yen bloc." But to date, this has been only talk, for any genuine internationalization of the yen--any widespread move to require foreigners to pay for Japanese exports in yen or to borrow in yen--would make it instantly apparent that foreigners do not have sufficient opportunity to earn yen by selling into the Japanese market. Unless foreigners can sell freely into Japan, they cannot earn yen to pay for Japanese goods or service yen debts.