Nowhere in the United States is the Japanese economic presence more deeply felt than in Southern California, which has long provided a large market for Japanese products and, recently, has become the base for several large-scale-Japanese manufacturing enterprises.
"Our objective is to come to Southern California not for radical growth but to make a foundation, a base for supply and delivery for all over the United States," says Hayahiko Tokunaga, the Harvard-educated director of Kajima International, a Japanese architectural design and construction company. "We are trying to get Japanese to come here and establish American corporations here."
More than 500 Japanese-owned businesses are located in Southern California, double the number here ten years ago. Fully one-third of Japan's $25 billion trade with the United States takes place in California, the majority of it in the heavily urbanized southern section of the state, according to Takasho Sakai, president of the Japan Trades Club of Los Angeles.
Sakai believes that Japanese investment - particularly in the form of industrial plants - can take off in the near future. More than 20 Japanese firms, including a general knit plant in Cucamonga, already are turning out manufactured goods in the United States, largely for California and other Sun Belt markets.
The largest of these plants is Sony's $25 million color television tube factory in San Diego, 100 miles south of Los Angeles. MOre than 1,000 workers virtually all Americans, work at this facility. "We think it's a good location for us between Japan and the United States," said Mits Ohki, spokesman for the New York-based Sony Corp. of America.
"We can get good high-level employees in that area."
Location is one of the many factors spurring Japanese investment in Southern California. Another is that the state has access to both the Southwest and the Northwest, two of the nation's fastest growing regions. In industries like electronics and - now - clothing, California quickly is becoming a major manufacturing center as well as a large, growing consumer market.
Other factors also leading Japanese companies to invest in California. Plant space and raw materials are becoming increasingly hard to get at reasonable prices inside Japan, making this region increasingly attractive for investment. The recent soaring value of the yen against the shrinking dollar has accelerated the trend.
"Japan is literally saturated with plants and agricultural fields," said Hiroshi Matsuoka, executive director of the Japan Traders Club , representing 280 Japanese firms in Southern California. "No business wants to expand when land is hard to come by. Now at the present time things are worse with the high price of the yen. To get out of this devaluation problem and the saturation of property, the first thing we want is fall upon the United States, the largest market in the world."
Matsuoka estimates that more than 100,000 jobs already have been created by Japanese investment in Southern California. With state unemployment rate still above the national average, it has become the policy of Gov. Jerry Brown's administration to work to expand the Japanese-controlled segment of the state's economy.
But many Japanese businessmen have expresssed reluctance to expand or bring in new plant because of what as they see as an anti-business climate in Sacrameto, the state capital. Sakai of the Japan Traders Club said 40 of the 50 states already have established some kind of lobbying effort in Tokyo and many of them, particularly in the Southeast, have presented more appealing incentives to Japanese investors than has California.
"We want to give the people here a chance to work but the taxes here in California really hurt us," Sakai said. "If you start a factory, you have to pay these unitary and investory taxes; even if you lose money here, still have to pay taxes."
The unitary tax is a Californian system by which multinational corporations are forced to pay taxes on income earned by their international activities, not simply on income earned by their California subsidiaries. Along with high property and investment taxes, it amounts to what is seen as an unduly oppressive burden dampening the Japanese interest in California.
This summer, Gov. Brown and some of his top aides journeyed to Tokyo, seeking to lure more Japanese job-producing investments to California.Brown was told the tax problems would have to be worked out before most major companies would expand existing operations here or establish new plants.
"The long reachof the tax collector is putting California at a competitive disadvantage," said Gray Davis, the governor's chief of staff. Davis added that the Brown administration is supporting new legislation to reduce the tax burden on industries interested in creating employment in the state.
Brown's hopes for increased Japanese investment were dashed somewhat earlier this year when Honda decided to locate its new American plant in Ohio rather than California. But Davis remains confident that Japanese investment will continue to grow in California.
But even if the tax situation is not straightened out, chances are that Japan will continue to keep a major economic toehold in Southern California. According to Japanese business sources, one of the main reasons is that besides being a major and relatively close market, the Los Angeles area is the center of the Japanese-American community in the United States.
Nowhere is that fact more evident than in Little Tokyo, the traditionally Japanese-American district just outside downtown Los Angeles. There, high rises with the names bank of Tokyo and Bank of California - which was bought just recently by the Japanese owned Sumitomo Bank of California - rise above the formerly rundown area. The shining New Otani Hotel, built for $30 million by the Kajima Construction Co., opened for business this September in the heart of Little Tokyo.
Given the Japanese presence here and the economic possibilities offered by California, executives like Kajima Corp. director Tokunaga are confident that Japan's presence will remain strong here. "In California they accept everything and they have really big capacity," Kajima's director, Tokunga, said over lunch at a Little Tokyo restaurant. "This state's output in production can absord everything we can give them. California itself is a country."