Perfect Pitch

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BARRY HILLENBRAND Washington
Before Prime Minister Keizo Obuchi left for the United States, he admitted he was nervous about getting things across to the Americans. Would he be able to articulate Japan's policies on financial reform, trade issues, defense? And of only slightly less importance, would he be able to throw a baseball across home plate when he tossed out the ceremonial first pitch at a Chicago Cubs game at Wrigley Field? On his third day in America, Obuchi put on a blue Cubs jacket and lobbed a ball toward home-run hero Sammy Sosa, who scrambled to grab it before it hit the grass.Not exactly a strike. But it did the trick, and Obuchi's pitch was near-perfect for the rest of his six-day visit. In terms unusually frank for a Japanese leader, the Prime Minister conceded that his country's economic crisis was causing considerable pain at home and that additional reform measures were sure to upset the socio-economic structure of Japan. Flexible labor markets would begin to replace guaranteed lifetime employment, for example, and a ban on stock crossholdings would end cozy ties among companies. But unless things change dramatically, Obuchi noted, Japan is doomed to economic and technical decline.

In other words, this is not your typical Japanese leader. Charlene Barshefsky, the U.S. Trade Representative and hardly a pussycat when it comes to assessing Tokyo's economic policies, said she was pleasantly surprised that Obuchi opened his talks with U.S. President Bill Clinton by saying Japan was eager for an infusion of American investment. Starting out with this, she said, was indicative that, at a minimum, Japan does appreciate that something fundamental has changed in its economy which traditional measures cannot fully resolve.

Obuchi's push to improve Japan's investment climate has already attracted several American firms. In March, GE Capital, the industrial giant's financial arm, purchased Japan Leasing for $7 billion. Such moves are the mirror image of trends in the 1970s and '80s, when Japanese auto companies set up production facilities in the U.S. The Japanese then were creating manufacturing jobs at a time when the U.S. was in an economic slump. In effect, they revitalized the American car industry by forcing producers to become more competitive. Now the reverse is taking place, says Michael H. Armacost, former U.S. ambassador to Tokyo. Japan is struggling, particularly in the financial sector, and now American firms can come in and provide the best practices and jobs. After Yamaichi Securities--then Japan's fourth-largest broker--went bankrupt, Merrill Lynch hired 2,000 former Yamaichi employees, a development many Japanese applauded. Creating jobs has taken the edge off the usual nationalist reaction to any foreign involvement in their marketplace, says Armacost.

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Obuchi's success in Washington can be traced partly to his keen intuitive sense of America. The Japanese Prime Minister is shy, lacking the natural charisma of another recent visitor, China's Zhu Rongji. Yet Obuchi managed to charm Americans with tales of his first visit to the U.S. 36 years ago as a poor student. He told a glittering dinner in his honor at the White House that when he came to Washington in 1963, he paid only $1.50 for his night's stay at a YMCA. Now the deal is even better, he said: No charge. Obuchi stayed for free at Blair House, an official residence near the White House.

Obuchi's triumph can also be attributed to the prevailing, upbeat mood in Washington. True, the Clinton Administration is preoccupied with the fighting in Kosovo (guests at the state dinner were kept waiting while Clinton met with Russia's special envoy for Kosovo, Viktor Chernomyrdin, who also grabbed the opportunity to meet Obuchi the following day). But war aside, the American economy is soaring, unemployment is at a historic low and Japan is no longer seen as a threat to U.S. jobs. No doubt Americans are annoyed with a lack of access to certain Japanese markets. And Clinton warned Obuchi about unfair trade practices, such as dumping steel. Yet the two sides have made a great deal of progress on trade. It would be counterproductive for the U.S. to slap Japan around at this time when they are hurting and have already taken action to correct many problems, says Clyde V. Prestowitz Jr., a former U.S. trade negotiator and now president of Economic Strategy Institute, a Washington think tank. Besides, Obuchi might just be able to pull off some more reform.

The recent souring of Clinton's flirtation with China doesn't hinder Japan's cause, either. Amid reports of Chinese nuclear spying and fresh human-rights violations, Japan suddenly looks more and more like America's true friend in Asia. Obuchi never missed a chance to remind his audiences that Japan and the U.S. share the universal values of freedom and democracy. Unsaid, of course, was that these are values China does not particularly embrace. Obuchi was heartened by the smiles he earned from audiences in America. But back in Tokyo he will need pluck and ingenuity to sell his tough-love message of reform and restructuring to a more skeptical audience: the Japanese people themselves.

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