Japan: Steeling for Competition

Although it exports its products with ever-increasing enthusiasm, Japan has maintained a closed-door policy toward imports and foreign investments. It has been under heavy pressure from its trading partners in recent years to ease its rigid protectionism. Still, the Japanese are cautious; if they must open their economy to big foreign investment, they want no corporate giants from abroad to take over too much.

To minimize the risk, Premier Sato's government has been urging Japanese businesses to grow stronger by merging. In notable response last week, Japan's two leading steel producers, Yawata and Fuji Iron & Steel, joined forces to become the Nippon Steel Corp. The new company is the world's second largest steel producer, behind U.S. Steel. It is also Japan's largest corporation, with annual sales of $3.1 billion. Together the two companies last year produced 31.5 million tons of crude steel, or 36% of Japan's total. In a period of resurgent Japanese nationalism, the merger has symbolic as well as business significance: Yawata and Fuji were parts of a single firm, also called Nippon Steel, until U.S. occupation authorities split them up after World War II.

Nippon officials already talk of overtaking U.S. Steel by 1972. But an open confrontation in world markets between the titans is not likely soon. After severe prodding by Washington, the Japanese in 1968 agreed "voluntarily" to limit their shipments to the U.S. to 5,200,000 tons a year. So far, the move has been relatively painless for Japanese steelmen, who have found new markets in Europe and China to bolster home markets that are rising fast. After years of skimping on domestic needs to concentrate on exports, the Japanese are at last expanding and improving their inadequate housing, roads and harbors.

The Yawata-Fuji merger, which markedly strengthens Japan's basic industry, comes at a propitious time. The government will soon inaugurate a new economic plan that calls for an annual growth rate of 10.6% and a doubling of the per capita income to $2,778 by 1975. Since the impossible is commonplace in the Japanese economy, critics are already calling the plan too conservative.