The Japan That Can Say No

In late January 1989, a paperback the size of a Tokyo subway novel went on sale at Kinokuniya bookstores under a yellow-and-red cover that promised, in the breathless typography Japanese mass-market publishers used for political broadsides, that the country was finally about to learn how to say no. It was an essay collection, 160 pages, 820 yen, less than a bowl of ramen. The publisher was Kobunsha, the most commercial of Tokyo’s mass-trade houses, which had paired its two authors the way American publishers paired senators with celebrities, on the theory that the contrast itself would sell. One author was a sixty-eight-year-old industrialist who, the previous summer, had stepped down as Sony’s chief executive after building, almost single-handedly, the most recognizable Japanese consumer brand in the world. The other was a fifty-six-year-old novelist, former environment minister, and freshly retired transport minister whose Akutagawa Prize, won at twenty-three, had once made him Japan’s enfant terrible and whose subsequent thirty years of right-wing journalism had made him one of the country’s most reliable sources of incendiary copy.

The book was called 「NO」と言える日本, transliterated as “Nō to Ieru Nihon,” with the subtitle “Shin Nichi-Bei kankei no kādo,” meaning roughly “the new card in U.S.–Japan relations.” Akio Morita and Shintaro Ishihara had done it as a series of short alternating essays, dictated separately, edited together. The publisher was happy. By the spring it would clear half a million copies; by the time the trouble started, it would pass a million. In a country that bought books by the truckload in commuter stations, “Nō to Ieru Nihon” outsold every nonfiction title on the market.

It was, at first, a domestic phenomenon. The two men had agreed it would not be translated. Morita, who had spent thirty years cultivating an American audience, was clear with the publisher and with Ishihara that what he was saying inside the covers was meant for Japanese readers and would not work without the cultural assumptions a Japanese reader carried into it. Ishihara felt the same way for different reasons. Kobunsha registered no English rights. The book was a Japanese object, sold for Japanese consumption, in the manner of every other million-copy political tract of the era. It would have stayed that way if the Pentagon had not gotten interested.

In July 1989 DARPA, which under Reagan and Bush had been quietly absorbing more responsibility for monitoring foreign technology trends, commissioned an English translation of the book. The stated reason, conveyed afterward by Pentagon spokesman Pete Williams, was that the contents were “relevant to national security.” The translation, seventy-four pages of single-spaced typescript, was prepared “for internal purposes only.” DARPA stamped it accordingly and circulated it inside the building. Then copies started moving. By the end of the summer, a photocopy was in the office of Representative Mel Levine, a Democrat from California. Another was in the office of Representative Don Ritter, the Pennsylvania Republican who had two summers earlier swung the first sledgehammer at the Toshiba radio on the Capitol lawn. Ritter’s staff Xeroxed it. Levine’s staff Xeroxed it. Within weeks, every congressional aide who handled trade or defense was reading a manuscript Sony’s chairman had ordered translators not to produce.

What they read, in Ishihara’s chapters, was a frontal argument for Japanese leverage. The single passage that traveled the fastest concerned the chips. “Whether it be midrange nuclear weapons or intercontinental ballistic missiles,” Ishihara wrote, “what ensures the accuracy of weapons is none other than compact, high-precision computers,” and the silicon inside those computers, he said, was Japanese. The corollary followed: “If Japan stopped selling chips to the United States, there would be nothing more the United States could do.” Ishihara then proposed, half rhetorically and half not, that Japan might at some point also choose to sell those chips to the Soviet Union, which would alter the global balance of power in an afternoon. The sentence was Ishihara at his most provocative, but not throwaway. It sat inside a longer argument that Japan had a strategic asset the postwar order had taught it to be embarrassed about, and that the time had come to use it.

In Washington in the autumn of 1989, that paragraph was an electrical short. Ritter quoted it on the floor of the House. Levine talked to reporters about it. The Buffalo News ran the headline “Japan Could Bring U.S. To Its Knees.” Bentley, the Maryland Republican who had told the cameras two summers earlier that treachery by another name was Toshiba, told a Detroit radio station that the book proved every concern she had ever raised about Japanese reliability. On November 14, Sander Levin, Mel Levine’s congressional cousin and a Michigan Democrat with the Detroit Big Three’s anxieties stitched into his coat lining, formally entered the unauthorized translation into the Congressional Record. The Pentagon’s pirated typescript was now part of the official documents of the United States government.

Ishihara’s reaction, when American reporters reached him, mixed delight and indignation in roughly equal proportions. He told one interviewer that the circulation of the unauthorized translation was “an insult to freedom of speech,” and that what had happened to him was a kind of lynching. He said he was considering suing the Pentagon. He gave more interviews and repeated the chip argument. He told the journalist David Sheff, in a long conversation reprinted in Playboy, that the United States had used the atomic bomb on Japan but not on Germany because Americans were racially uncomfortable with white casualties. He told Sheff that Lee Iacocca, who had spent a year publicly demanding tariffs on Japanese cars and had then raised Chrysler prices in lockstep with the Japanese instead of competing on them, was the kind of executive Japanese high school students could outthink. He suggested, without quite proposing, that Japan revisit its three non-nuclear principles. He did all of this while remaining in the Diet, and one of the most-voted-for politicians in Japanese history, and a strong contender, in some forecasts, for the prime ministership.

Inside Sony’s executive suite in Tokyo, Morita watched the firestorm with the expression of a man whose professional life of careful American outreach was being burned in a public square he had inadvertently helped build. His own essays in the book had been notably milder than Ishihara’s. Morita had argued that American business had hollowed itself out by drifting from manufacturing into finance, that American executives had stopped studying their own factories, that managers paid themselves too much and laid off workers too easily, and that the result would be the gradual loss of American industrial capability. There was nothing in his chapters about selling chips to Moscow, nothing about the atomic bomb, nothing about race. What Morita had written, he had written for thirty years in different forms in different American venues; a version of it had appeared the year before, slightly polished, in his autobiography Made in Japan. The trouble was that his name now sat next to Ishihara’s on a book Americans were reading as a single document. Morita would spend the next eighteen months trying to disentangle himself.

He failed publicly in September. On September 27, 1989, Sony Corporation announced that it had agreed to acquire Columbia Pictures Entertainment, including the TriStar studio, for $3.4 billion in cash plus the assumption of $1.6 billion in debt. The total was $4.9 billion. Norio Ohga, who had succeeded Morita as Sony’s chief executive that summer, made the announcement in a Tokyo press conference. The price worked out to $27 a share, against a Columbia stock price that had been hovering near $12 at the beginning of the year. The deal financing was syndicated across five Japanese banks: Mitsui, Tokyo, Fuji, Mitsubishi, and the Industrial Bank of Japan. Morita had been the architect. He had spent two years convincing Ohga, his board, and his banks that an electronics company that owned the playback hardware in millions of American living rooms also needed to own the studios that produced the content the hardware played. The strategy was sound. The timing was a public-relations catastrophe.

Newsweek’s October 9, 1989 cover, on the stands a week after the announcement, showed the Statue of Columbia recoated as a kimono-wearing Japanese figure under the headline “Japan Invades Hollywood.” Inside, the Sony deal was framed as the largest-yet step in what the magazine called an invasion of American culture. Columnists at the major dailies competed to phrase the loss in the most evocative terms. One called Columbia “a part of America’s soul.” Another quoted an unnamed studio executive describing the takeover as the cultural equivalent of giving away Disney. Morita’s American spokesperson, in interviews, pointed out that British and Dutch firms had bought larger pieces of American industry that same year with no comparable outcry; the line was correct and made no difference. The Sony deal was Japanese, the studio was iconic, and the timing, three months after the Pentagon translation began circulating, placed the acquisition inside the same narrative.

Five weeks later, on October 30, 1989, Mitsubishi Estate Co. announced that it had agreed to acquire fifty-one percent of the Rockefeller Group, the holding company that owned New York’s Rockefeller Center, for $846 million. The structure was less dramatic than the headline. The Rockefeller Group had floated 71.5 percent of the Center itself in a 1985 public offering, so Mitsubishi’s effective interest in the buildings was on the order of 14.5 percent. None of the nuance survived translation into the New York tabloid front pages. The Daily News led with “JAPS BUY ROCKEFELLER CENTER.” The Dallas Times Herald: “JAPANESE BUY HEART OF N.Y.” The Wall Street Journal published a more measured piece that nonetheless quoted Mitsubishi Estate executives expressing surprise at the volume of public reaction. Privately, according to subsequent reporting, the Japanese government was furious with Mitsubishi for proceeding with a deal whose symbolism it had warned would damage the broader trade relationship. Mitsubishi went ahead anyway.

By December, the cumulative arithmetic was vivid enough that columnists who had spent their careers writing temperately about trade started reaching for the language of conquest. Iacocca, who had revived Chrysler in the early 1980s with a federal loan guarantee and was now selling cars against Toyota and Honda, used a “Buying America” speaking tour to argue that the Japanese had progressed from selling cheap radios to acquiring cultural patrimony, and that Washington was watching it happen. The Cato Institute’s David Boaz, in a Wall Street Journal op-ed near year-end, would describe what was unfolding as “yellow peril reinfecting America” and would name names, citing the Newsweek cover and the Iacocca tour and the Buffalo News headline as evidence that the response had outrun any economic analysis.

Tokyo, meanwhile, was finishing the most extraordinary year in Japanese financial history. On December 29, 1989, the Nikkei 225 index, which had opened the year near 30,000, touched an intraday high of 38,957.44 and closed at 38,915.87. Land prices in central Tokyo had reached a level at which the 1.15 square kilometers of the Imperial Palace grounds, by the most-cited calculation, were estimated to be worth more than the entire real estate value of California. Top-tier Tokyo commercial parcels were selling for the equivalent of $139,000 per square foot, roughly 350 times Manhattan prices. Japanese banks held nine of the ten largest market capitalizations in the world. The Industrial Bank of Japan, which had helped finance the Columbia deal, was the largest bank on earth. Japanese pension funds were buying American Treasury debt in volumes that funded a meaningful share of Reagan’s deficits. NEC, Toshiba, and Hitachi were producing more than half of the world’s DRAM. And Morita, in the Japanese press, was being asked by interviewers who had read the unauthorized translation whether he believed Japan should now be entitled to a permanent Security Council seat.

It looked, from inside, like an arrival. A generation of Japanese executives who had grown up on the rationing of the late 1940s, who remembered being told by American occupation officers that Japan should focus on textiles and toys, were running the most efficient industrial economy in the world. They had taken the transistor, miniaturized it past anything its inventors had imagined, made the consumer-electronics aesthetic global, and then taken the chip itself and pushed American memory makers off the leading-edge map. They had bought studios. They were buying skyscrapers. The Nikkei was at thirty-nine thousand. In the December issue of Bungei Shunjū, Ishihara argued, with the air of a man stating something self-evident, that Japan had become the world’s most consequential economy and would in due course become its most consequential nation.

The American response was visible in two places at once. In the trade press and on Capitol Hill, the careful technical analyses that had characterized the 1985 SIA petitions had given way to apocalyptic rhetoric the sledgehammer ceremony had unlocked, framing Japan not as a difficult ally but as a strategic adversary. In the foreign-policy intellectual journals, a small library of books published in 1989 and 1990 made the case from different angles. Karel van Wolferen’s “The Enigma of Japanese Power,” published in late 1989 by Knopf, argued at over four hundred pages that what Westerners called the Japanese state was in fact a network of unaccountable elite cliques whose collective behavior was not constrained by anything Western political theory recognized as politics. Prestowitz, who had negotiated the 1986 semiconductor agreement, had already published “Trading Places” in 1988 and was now testifying before congressional committees. Fallows, the Atlantic journalist who had spent three years in Japan, was working on what would become “Looking at the Sun.” Chalmers Johnson, who had defined the developmental-state model in his 1982 book on MITI, was being quoted in newsweeklies with increasing frequency. The four would soon be tagged, sometimes derisively, as the Revisionists. Their shared contention was that the standard American assumption — that Japan was a laggard democracy on its way to becoming more like the United States — had been wrong for thirty years.

Morita, by then, was trying to repair the damage to himself rather than to the broader argument. In the spring of 1990 he gave a speech at the Wharton School in Philadelphia, telling eight hundred and forty MBA graduates that the difference between America and Japan was that America had stopped making things and was now “making profits from moving money around,” and that he would prefer to see half of them go into manufacturing rather than the fifty hands he had counted in the room. The speech was vintage Morita, restatement of the argument he had been making for decades. American press coverage ran in the same news cycle as a Toyota plant announcement and a fresh round of chip-trade tension, and the resulting stories folded his Wharton remarks back into the “Japan That Can Say No” narrative he had been trying to escape. He told Japanese journalists later that he regretted having lent his name to Ishihara’s project. He refused to allow his essays to be included in the authorized English translation Simon & Schuster would publish in 1991 with a foreword by Ezra Vogel. The American edition would carry only Ishihara’s name on the cover, only Ishihara’s essays inside, and a translator’s note explaining the omission. Frank Baldwin, the translator, did the work professionally; Morita had vanished from the book.

Ishihara, characteristically, was undeterred. By 1991 he had published a sequel, “Danko Nō to Ieru Nihon,” and a third volume with the Malaysian prime minister Mahathir Mohamad attacking Western dominance from a pan-Asian platform. He continued to argue that Japanese semiconductors were the indispensable substrate of American military power and that Japan was foolish not to use them. He continued to be among the highest vote-getters in Japanese politics. In 1999 he would be elected governor of Tokyo and would govern from that office for thirteen years.

The macroeconomic story was already turning. The Bank of Japan, alarmed by the asset bubble, raised its discount rate from 2.5 percent to 3.25 percent on May 31, 1989, and to 3.75 percent that October, and would push it to six percent by August 1990. The Nikkei, which had peaked on the last trading day of 1989, opened 1990 at 38,921 and would close the year near 21,902, a forty-three percent decline in twelve months. Land prices, lagging by a quarter or two, would begin their own collapse in 1991 and would continue declining, with brief plateaus, for the next two decades. The Mitsubishi Estate stake in Rockefeller Group, the trophy of October 1989, would by 1995 be in bankruptcy court, with Mitsubishi having walked away after losing roughly $2 billion. Sony’s $4.9 billion for Columbia Pictures would, three years later, force a $2.7 billion write-down, the largest in Japanese corporate history at the time. The pebbles of the bubble were hitting the windshield in slow motion.

What the Pentagon had pirated, and what Sander Levin had entered into the Congressional Record, was therefore, in a way none of its participants could see at the time, the high-water mark and not the cresting wave. The book’s argument — that Japan held the strategic high ground because it held the chips, and that the United States would have no choice but to defer to that fact — assumed a continuation of the trajectory of the previous decade, in which Japanese DRAM share had risen from nothing to ninety percent and Japanese stepper share had gone from nothing to leadership. By the time the unauthorized translation was being passed around in congressional cloakrooms, that trajectory was already bending. Micron, whose 1985 antidumping petition had helped trigger the 1986 trade agreement, was crawling back into profitability under the floor prices the agreement had imposed. Grove had walked Intel out of memory in late 1985, and Intel’s microprocessor business was going to make the company rich enough to dwarf any DRAM maker. Morris Chang had founded a peculiar Taiwanese contract manufacturer called TSMC in 1987, and Samsung had pushed past the early-generation DRAM threshold and was beginning to ramp 4-megabit production with American government encouragement.

None of this was visible in Ishihara’s book. None of it was visible from the trading floor of the Tokyo Stock Exchange on December 29, 1989. The Japanese system, on the day the Nikkei peaked, had every reason to believe that the structural advantages it had built — patient capital, vertically integrated keiretsu, MITI coordination, national-champion firms playing for share rather than margin — were going to keep producing the outcomes they had produced through the 1980s. The question Ishihara was asking, and that the Pentagon was uneasily reading, was a question of how a country with an asset that decisive should behave. It was not a question about whether the asset was permanent.

That was the question the next decade would force.

On the morning of January 1, 1990, the Pentagon’s typescript sat in an unlocked file drawer somewhere in Mel Levine’s office. Morita, in Tokyo, was preparing letters disowning chapters of a book that bore his name. Ishihara, in his Diet office, was drafting his sequel. Sony’s auditors were beginning the first quarter of integration with Columbia. Mitsubishi Estate’s bankers were finalizing the Rockefeller Group paperwork. The Nikkei, after closing at 38,915.87, had not yet opened on the new year. Outside the Imperial Palace, the cherry trees were bare. Inside the Bank of Japan, the next interest-rate increase was already on the agenda. The peak, when it was identified later, would be located precisely on the day the book’s authors were proudest. Everything after was the slope.