GENERAL MOTORS is thinking about building cars in Japan. No big deal, you might think, given how comfortable Honda, Toyota and the rest have made themselves here in the United States. But as the Wall Street Journal notes, GM production would represent the first time since before World War II that a foreign company has built automobiles inside the country that brought Detroit to its knees.
Japanese officials have been claiming for so long that they are reforming their economy, with so little to back up the claims, that the temptation is to dismiss all such representations. But the news from General Motors, and the assumption that such investment today would be welcomed by Japan, is symptomatic of a significant shift. A decade ago, an effort by a U.S. investor to purchase a Japanese auto-parts company was met with ferocious hostility. Japanese industry was happy with globalization as long as it meant access to other countries' markets, but traffic in the other direction -- of both imports and investments -- had much tougher going.
That hasn't entirely changed, of course. Japan maintains vast trade and investment surpluses with the rest of the world. But U.S. foreign direct investment in Japan grew more than fivefold from 1997 to 1998. U.S. companies made big purchases in insurance and the financial sector that would have been unthinkable a few years ago. And portfolio investment grew too; foreign stockholders owned 45 percent of Sony stock and 27 percent of Hitachi as of March 1998. Business executives report that many smart Japanese college graduates now want to work for U.S. firms in Japan, also unthinkable not long ago.
These changes have been brought on by necessity. Japan, with an economy that couldn't go wrong in the 1980s, has spent most of the 1990s in a slump. Many Japanese now recognize that they need not only foreign capital but the infusion of ideas and competitive pressures that outside investment can bring. It's a slow evolution and painful in Japan as in every country, but many Japanese seem to understand that globalization can't be a one-way street.