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No. 9 — March 3, 2000

Feature Article

DOES TRADE DOMINATE U.S.-JAPAN RELATIONS?
FINDING ANSWERS WITH EVENTS DATA

Arthur J. Alexander

Summary

Events data for the 1948-97 period provide insight into U.S.-Japan relations in the economic, political and military spheres across those 50 years. As defined by scholars, an "event" is a discrete occurrence with a beginning and an end and an actor and a target that has sufficient prominence to stand out from the background of normal developments. An analysis of more than 4,000 such transpacific records indicates that military events were the most numerous in the 1950s, political activities characterized the 1960s and economic issues have shaped the U.S.-Japan relationship since the 1970s. In fact, in the 1980s, economic interactions came to dominate bilateral affairs. The expansion of two-way trade between the United States and Japan was the main force making economic events preeminent.

Regardless of the sphere, most U.S.-Japan events are routine, reflecting the many activities that require governmental attention in daily dealings between the world's two largest economies. Although the number of conflictual events has jumped, especially since the 1980s, the volume and the intensity of cooperative developments have increased even more.

A major finding of the analysis is that neither positive nor negative transpacific economic incidents have much effect on bilateral political or military relations. However, a higher level of political conflict, stimulated largely by random events, appears to produce more economic and military cooperation. One interpretation of this result is that diplomats react to political conflict by working harder to maintain harmony in other parts of the complex U.S.-Japan relationship.

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Weekly Review

WIN OR LOSE, MORE PLAYERS JOIN JAPAN'S MERGERS AND ACQUISITIONS GAME
--- by Jon Choy

The opposite results of two recent bids to gain control of Japanese companies illustrate how far Japan's mergers and acquisitions market has developed — and how far it remains behind its American and European counterparts. In the first case of an attempted hostile takeover of a domestic business by another Japanese firm, Merger & Acquisition Consulting Inc. failed to win the support of major institutional shareholders of its target, Shoei Co., Ltd., a real estate holding company, leaving it well short of a controlling (33.4 percent) interest. In contrast, Boehringer Ingelheim GmbH, one of Germany's larger pharmaceutical makers, successfully completed an unwelcome but open bid to become SSP Co., Ltd.'s top owner by winning the support of the over-the-counter drug producer's individual shareholders.

 

JAPAN'S TOP FINANCIAL ADMINISTRATOR FORCED TO RESIGN
--- by Douglas Ostrom

Japan's financial mess refuses to go away. Just when regulators seemed to be getting matters under control, another controversy arose. Michio Ochi, the cabinet-level head of the Financial Reconstruction Commission, was heard February 24 in a tape recording making remarks to bank executives that led analysts and some government insiders to question his commitment to financial reform. Once made public, Mr. Ochi's statements quickly led to his forced resignation and replacement February 25 by Sadakazu Tanigaki, widely considered a rising star in the Liberal Democratic Party.

 

OPPOSITION CONTINUES ATTEMPTS TO EMBARRASS OBUCHI GOVERNMENT
--- by Barbara Wanner

For the past three months, Japan's main opposition parties have tried to capitalize on the slide in Prime Minister Keizo Obuchi's approval ratings to force the embattled premier to dissolve the Diet for lower house elections. The Democratic Party of Japan, the largest opposition group, orchestrated an unprecedented 11-day boycott of Diet proceedings at the mid-January start of the 2000 legislative session. That protest of the governing parties' allegedly undemocratic consideration of a Diet seat-reduction bill ultimately proved ineffective in moving up the elections from their October 19, 2000 statutory deadline. Boosted by the early February victories of coalition-backed candidates in key local races, Mr. Obuchi has been adamant in his refusal to consider calling the elections before the late July summit on Okinawa of the leaders of the Group of Seven industrial nations plus Russia (see JEI Report No. 6B, February 11, 2000).

 

SAKAKIBARA OFFICIALLY NOMINATED TO HEAD IMF
--- by Marc Castellano

With the global search languishing for a new managing director of the International Monetary Fund, Tokyo formally named former Vice Finance Minister for International Affairs Eisuke Sakakibara as its candidate. The February 23 move was not entirely unexpected, but it still raised eyebrows in Western capitals. The top IMF job, vacated by Frenchman Michel Camdessus earlier in February, traditionally is reserved for a European.

 

NOTES

Despite frenzied eleventh-hour negotiations, Tokyo-based Arabian Oil Co., Ltd., Japan's biggest oil producer, failed to convince Riyadh to extend its drilling rights in the Saudi-controlled section of the Khafji oil field in the Persian Gulf (see JEI Report No. 8B, February 25, 2000). These rights, going back 40 years, expired February 27. A Saudi company will take over this part of Arabian Oil's business. The rest of its production facilities, located in an area controlled by Kuwait, will continue to operate under Japanese management at least until January 2003, when this contract also is up for renewal. Arabian Oil's president said that the firm would post an extraordinary loss in FY 1999 and that it would search for merger opportunities to rebuild its position.

 

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