Japan Won’t Be Remade, American-Style : Economy: Vice minister’s candor offers opportunity for a trade policy based on hard truths, not wishful thinking.

Heroes, Bernard Shaw wrote, face the truth however threatening. Heroic then is Tadao Chino, Japan’s newly appointed vice minister of finance and gallant ripper of Japanese economic policy myths.

Chino vowed in a recent New York Times interview to chart a course of economic policies for Japan that is “defiantly independent from the United States.” He promised to use Japanese foreign aid to facilitate the globalization of corporate Japan, to remain unyielding to U.S. demands that Japan change its keiretsu corporate conglomerates and refused to acknowledge any need for new regulatory supervision of Japanese investment houses in the wake of the recent stock scandal.

Chino’s candor is rare in Japanese officialdom, and is a demeanor prefigured by his predecessor, Makoto Utsumi. Earlier this year Utsumi leveled a stern warning to U.S. officials that any sanctions imposed on Japan aimed at opening up its financial markets would be dealt with by a slashing of Japanese credit to the United States.

These latest guidelines are an affront to those who for years have based U.S. trade policy on the assumption that Japan’s divergent economic system could essentially be recast in the American mold. The caustic language has also sounded alarms in Japanese and American diplomatic circles, with each side scrambling to douse fires in the bilateral relationship. It would be unfortunate, however, if the diplomatic and trade corps miss a rare and valuable opportunity to deal with the realities of the relationship--and, for mutual benefit, let the fires burn.

For years, a priority to preserve the appearance of a cordial U.S.-Japan relationship has put a sock in the mouth of any official whose message was anything less than rosy. This lack of candor is evident in Washington and is the rule in Japan. Instead of a dialectical discussion of how to live with our differences, both countries have struggled to pretend that major divisions don’t exist. And increasingly, these self-imposed gag orders are making the partnership almost untenable.

In truth, Chino’s agenda is little more than a continuation of the same policies that have been in effect throughout the postwar period. What he offers, though, is the shot in the arm that both countries desperately need: a frank and simple affirmation that Japan will not be made over in the image of the United States.

Chino’s candor recognizes that Japanese role-playing and feigned acquiescence to the trade negotiation process is an ultimately destructive pattern. Biennial promises to break open Japanese financial markets, impose U.S.-style anti-trust enforcement and bring down corporate combines that have existed for more than a century were all well beyond the capabilities and intentions of Japanese bureaucrats. Japan has made no small effort to ease international tensions, and but continually feeding the charade that it is prepared to change has only fueled passions of deception through round after round of unfulfilled promises.

And whether Americans like them or not, the basic structures of the Japanese economy are simply beyond the means and jurisdiction of U.S.--and Japanese--officials to change.

Take, for example, the ongoing efforts to open Japanese financial markets. Had the Japanese fully adopted the American model at the height of Japan’s bubble economy, its relative economic deflation might have looked more like an implosion. With price/earnings ratios at three to four times U.S. levels, compounded by astronomical debts, only the largest 1% of Japanese companies would be able to weather open markets without a foreign acquisition or bankruptcy. Of course, this lack of reciprocity in Tokyo has a very negative impact on American competitiveness, and it is an imbalance that somehow must be corrected. The current course of business as usual is not an acceptable tack for American policy-makers. But a reciprocal opening of Japanese financial markets, while fair, is not a responsible or realistic alternative for Japanese bureaucrats.

Rather than being tempered or discouraged, the candor emanating from Japan should be welcomed. For the first time a window of opportunity may be opening for a constructive--albeit rocky--dialogue founded on hard truths rather than wishful thinking and economic idealism.

A new course for U.S. trade policy will not be an easy one. So far, Chino and Utsumi have only told America to face the music: Japan is not prepared to change, and a reactionary U.S. policy will also have its consequences. But even this bleak picture is an inherently brighter one than the current collision course of mutual deception.

Despite the current civil upheavals, the end of the Cold War and our rapprochement with the Soviet Union remains among the most significant foreign policy achievements in our nation’s history, and it offers some valuable lessons. While our many differences remain deep-seated, the United States and the Soviet Union have taken grand steps in the right direction by acknowledging these differences; facile and unenforceable arms agreements didn’t bring us to where we are today. Neither did a top priority of maintaining a cordial relationship.

As a Shawian hero taking on the most steadfast of Japanese economic myths, Vice Minister Chino may be uncovering some uncomfortable truths--ones buried dangerously long--but he is just the kind of hero America needs.