SURPRISE! JAPANESE NEITHER 10-FEET TALL, NOR INVINCIBLE

Were you just plain embarrassed by President Bush's trade mission to Japan, back in January? I was. And my embarrassment began before and had nothing to do with our President's late unpleasantness with the stomach flu. We live in an interdependent world economy, a fact we forget at our peril.

Recent tremors in the Nikkei stock index (the Japanese equivalent of the Dow Jones Industrial Average) have caused that key indicator to plummet from an incredible 39,000 to half that number in a few months. This has focused attention on a faltering Japanese economy; many are noticing, for the first time, perhaps, that the Japanese are not the 10-feet-tall economic actors of economic mythology. Far from being invincible predators on the world economic stage, they turn out to be mere humans, just like ourselves.

It can be extraordinarily difficult to cut through the cliches that dominate so much of our popular media coverage of world economic trends. A few have succeeded in cutting through the fog of doomsaying cliches about an America-in-decline-before-the-invincible onslaught-of-the-all-powerful-Japanese-who are going-to-own-America-and-enslave-us-all. Alan Reynolds is an economic writer who sees the world as it really is. He recently offered some worthwile insights on this subject. Consider:

"... Americans have been so bombarded by rhetoric about Japan's alleged superiority that they find it hard to believe Japan's economy is clearly sinking, just as the U.S. economy is showing signs of life.

"Japan's economy grew more slowly than the U.S. economy in the third quarter of last year, and actually contracted in the fourth. Even before that happened, Japan had become far less competitive on world export markets. The volume of U.S. exports increased by 13 percent a year from 1986 to 1990, compared with only 2.8 percent for Japan. ...

"The most serious trade threat from Japan is that country's economic weakness, not its strength. Because the Japanese economy is so feeble, Japan now imports less from many of America's best export customers Canada, South Korea, Australia, Europe and the Middle East. ...

"With Japan's stock market down by half, and profits and real estate prices down too, Japanese investors have good reason to be exporting capital to more promising economies, just as foreign investors have been abandoning the Japanese stock market for years. The return on ... capital has long been much lower in Japan than in the U.S. ...

"Japan is not doing so well on the export side either. Once the number one source of imported television sets in the U.S., Japan is now number six, and the same trend is now evident in the saturated VCR market. Japan has had little success selling computers in the U.S., and the few exceptions (such as portables) depend on U.S. hard disks, chip boards and microprocessors. In such important high-tech industries as chemicals, drugs and aircraft, Japan is not even a serious player.

"What about autos? Japan clearly produces excellent cars, but much of this production has been shifted to North America and Britain, where land and labor are not so scarce. ...

"Contrary to popular illusions, U.S. car and truck imports have been falling for four years, while U.S. exports of vehicles and parts have been rising quite impressively. Few Americans realize how many `Japanese' cars and parts are, in fact, produced in the U.S. and Canada. ... Two popular models, the Honda Accord and Mazda 626, already have a higher domestic content than the Ford Crown Victoria, and other Japanese `transplants' are rushing to catch up, to maintain `just in time' inventory control. ... U.S. imports of Japanese vehicles have also fallen every year since 1986.

".... The U.S. has a strong interest in seeing the Japanese economy get back on its feet, and bad trade relations are not going to help. So long as the Japanese economy and stock market remain so depressed, threatening the Japanese government is a waste of time. ..."

Alan Reynolds, director of economic studies at the Hudson Institute, Indianapolis, Indiana.