Spendthrift Japan? : THE SUN ALSO SETS: The Limits to Japan’s Economic Power <i> by Bill Emmott; (Times Books: $18.95; 250 pp.) </i>

Ever since Toyotas and Nissans invaded the American market many years ago, books and articles about Japan have been written in successive waves. The first admired such Japanese business practices as teamwork, government-industry cooperation and long-term planning. Then came concern about America losing its competitive edge and prescriptions about how American policies must change.

Recently a new concept has caught on. America is handcuffed, so the argument goes, because Japan is fundamentally different from other Western nations: neither capitalist nor socialist but something more perniciously mercantilistic. According to this reasoning, Washington must press Japan to change fundamentally its economic structure and its social customs in order to import more and to save less--to be, well, more like us. If necessary, economic retaliation may be called for.

Bill Emmott’s “The Sun Also Sets” may not start yet another wave of opinion, but it should cause many of us to think hard about the latest hysteria. The book has at its core one powerful idea: Japan’s economic power arose incredibly quickly--just since the beginning of this decade--and it is likely to contract just as fast. As a result, Emmott says, fears about Tokyo’s buying up the world and having political clout to match are wildly misplaced.

Is this science fiction concerning a nation which is now banker to the world and expanding at breakneck pace its corporate empire to every corner of the globe? Not as presented here. Emmott’s notions are not based on predictions of an earthquake or a nuclear- reactor catastrophe or anything so accidental. Instead, the author, who is business and financial editor and former Tokyo correspondent of the highly respected British weekly newsmagazine “The Economist,” presents a logical and unemotional case for how underlying social and economic forces in Japan are causing it to save less and spend more, and how these changes feed on themselves and cause meaningful change.

The root of Japan’s economic power, says Emmott, is its enormous mountains of surplus cash, the result of phenomenal export performances and a consistently high savings rate. If you make a straight-line projection of current trends for another decade, he admits, Japan would be able to buy the equivalent of several European countries. But it is a big mistake to extrapolate that way, he warns, because Japan’s society is anything but static. His prediction: Well before the 1990s is over, Japan’s financial surplus will be gone.

“The nation of producers,” the author writes, “is becoming a nation of consumers, eager to accumulate material possessions, to buy foreign goods, and even to show off wealth in conspicuous displays. The nation of workaholics is becoming a nation of pleasure-seekers, eager to travel abroad, to enjoy leisure, and to find whatever is best in life. The nation of healthy, education-mad youth is becoming a nation of healthy pensioners, as the baby-boom generation ages and lifespans lengthen. The nation of squirrel-like savers, whose cash was controlled by the government, is becoming a nation of investors and, most astonishingly of all, a nation of speculators.”

Emmott traces each of the changes in Japanese society and shows how they will curb Japan’s financial power. One striking example is the growth of Japanese travel abroad. By 1991, about 15 million Japanese could be leaving the country each year, spending over $20 billion abroad, an amount equal to a reduction of Japan’s current trade surplus today by 20%. Another intriguing case is the impact of the graying population on the savings rate. Japan will soon have more citizens over 65 than any other industrialized nation, and pensioners are spenders and not savers. Other trends include: rapidly rising imports, particularly from South Korea, Taiwan, Thailand and the rest of Southeast Asia; massive requirements to spend more on housing and social services; and an increasingly deregulated banking system that will reduce government influence on how and where consumers spend and save.

“The Sun Also Sets” seeks to change the current framework for thinking about Japanese power. It is not predicting that Japan will become a second rate nation, but only that it will not be the superpower so many people seem to fear. Emmott says that upcoming economic pressures on Japan, together with the nation’s natural reluctance to assume visible leadership abroad, will assure very limited political and military clout in the world, with the one exception of East Asia where growing influence is well advanced and probably unstoppable.

Although the author has not done much original research, he supports his case with reference to a variety of respectable sources from governments, think tanks, and banks. There is no pretense of infallibility, but there is a high degree of confidence that tomorrow will not look like today. Emmott is throwing down a glove in front of the current “Japan is different and unmovable” school. “The Japanese are not a breed apart,” he says. “They respond to low prices by buying more imports; they respond to affluence by buying expensive things; they respond to financial freedom by seeking out good deals or a quick killing; they respond to better and more secure pensions by saving less of their incomes.”

The idea of the limits of Japan’s power was first published by Emmott last year in an essay that won top awards from a prestigious international panel of bankers, economists, and politicians. In that condensed form it was even more effective than the book, which suffers from diversions into tiresome issues like whether foreign investment is good for the United States, how Japanese banking was eventually liberalized, and why the United States should pay more attention to competitiveness, etc. Given the added writing space, however, Emmott might have given us a better context for evaluating his predictions.

Emmott is the latest of several new commentators on Japan from the press. In fact, America’s view about Japan is being heavily influenced today by journalists, not in their capacity as unbiased news reporters, but as authors of books and articles in which they present their personal views of problems and solutions, often in highly emotional form. James Fallows of “The Atlantic Monthly” has been attacking Japan’s economic aggressiveness. Karel van Wolferen, a distinguished Dutch reporter who recently published “The Enigma of Japanese Power” accuses Japan of having a feudal political system where no one makes decisions. Martin Tolchin of the New York Times warns about the threat from foreign investors in “Buying Into America: How Foreign Money is Changing the Face of Our Nation.” Free lancer Daniel Burstein’s view is evident from the title of his new book: “YEN! Japan’s New Financial Empire and Its Threat to America.”

We are fortunate to have top writers with access to people who make news, unlike scholars buried in library stacks. But we should beware, too, for journalists can be superb at following a single story line, even if it is too simplistic. They can be masters of the penetrating anecdote, even if it is misleading. And they are often preoccupied with what’s hot today , regardless of its connection to past or future.

Emmott may share the shortcoming of shallow research. However, he is way ahead of the pack in thoughtfulness, originality, and recognition of the interplay of dynamic social, economic and political forces. He is adding much needed balance and perspective to the raging debate about Japan and his book should be widely read and hotly debated.