More Japanese Firms See Need to Change Ways : Commerce: They are embracing Sony Chairman Akio Morita’s idea that unless they become less fiercely competitive, their nation will face increasing trade tension.

Consensus is growing in Japan in favor of an almost revolutionary idea: to back off.

Japanese companies must rein in their pursuit of overseas market share at the sacrifice of profits, shareholder benefits and employee welfare, goes the new thinking, a turnaround from several months ago.

Corporations should raise prices, pay workers better for fewer hours and distribute fatter dividends. They should, in short, become somewhat less competitive and more like the Western rivals they’re outpacing.

Such ideas represent a bitter brew to many Japanese executives, particularly during a recession. Much dissent persists, especially over boosting pay and dividends.

But since January, when Sony Corp.’s chairman, Akio Morita, started the debate, the new thinking has found an ear among industrialists with huge investment stakes overseas and among government bureaucrats and politicians with a stake in the status quo.

The alternative to change could be far worse, they say. A recalcitrant Japan could become odd man out on the world stage, a post-Cold War bogeyman permanently hounded over trade by an increasingly protectionist United States and Europe.

“The sense of crisis among (government) bureaucrats is really serious,” said Yukio Okamoto, a former Foreign Ministry official. “If we continue our industrial policy unchecked, . . . we may profit in the short term, but in the long term it will destroy us.”

Already, change is afoot in Japan’s most competitive industries. Since January, for example, the two biggest auto companies, Toyota and Nissan, have said that they will raise vehicle prices and lengthen new-product cycles from four to five years. Similar moves were announced by consumer electronics giants such as Sony and Matsushita.

All would benefit foreign competitors worn down by the back-breaking pace set by the Japanese.

“I think what we’re seeing is a sea change in the overall strategy of the auto industry,” the key focus of Japan’s trade friction with the United States and Europe, said Steve Usher, an auto analyst with Kleinwort Benson Securities.

“It is a shift away from increasing market share and even increasing sales volume and a move back to greater emphasis on profitability,” he said.

However, he said, the change is only partly a response to trade pressures. Companies also want to accumulate investment capital for such expensive technologies as electric cars. That will make them tougher competitors in the end.

The call to throttle back from what Japan has done best for decades--flood foreign markets with cheap, high-quality goods that consumers love and trade negotiators hate--represents a dramatic shift from last fall.

During Prime Minister Kiichi Miyazawa’s election in November, Japanese officials and businessmen were saying stubbornly that Japan had granted almost all the concessions it could to ease trade friction.

They said the fault lay instead with Japan’s trading partners. Budget deficits and short-term planning were common complaints about the United States; productivity was even lower in the 12-nation European Community.

Japan’s trade surplus has kept soaring. It rose for the 14th straight month in February, registering jumps of about 30% with both the United States and the EC.

There was another development. Akio Morita returned from a trip to Europe.

The snowy-haired electronics wizard, once a champion of aggressive trade, said he was “shocked” by the complaints he heard from European industrialists about Japanese competition. For the first time, some Europeans contended that their companies couldn’t survive if Japan moved plants to Europe.

“The Japanese way simply will not be accepted,” Morita concluded in a speech afterward. “Japanese companies pay their employees less for longer hours worked, take slimmer profit margins and pay stockholders smaller dividends. This allows them to compete viciously on price.”