The New Battle Cry: If You Can't Beat 'Em, Join 'Em

TIM LARIMER TokyoIn a Japanese television advertisement for a canned coffee drink, a frustrated salaryman is in a bar, venting about globalization. The Japanese are being ridiculed by the world! he laments. We need to strike back. Just then, an American, a dead ringer for Bill Clinton, approaches him. OK, he says, give me your frank opinion. Strike back. The salaryman fidgets, pauses and takes a sip of his coffee. Nothing more is said. Caffeine-in-a-can to the rescue of global friction? It might sound odd, but the message strikes a chord with many Japanese who share the salaryman's ambivalent attitude toward foreigners. A prolonged, numbing recession has stirred feelings of both jealousy and admiration toward a U.S. economy that's barreling along at a pace Japanese themselves had become accustomed to in the 1980s. An already complicated relationship with foreigners is being tested as investors are, in the words of one Japanese stockbroker, circling like vultures, looking for ailing companies to gobble up at depressed prices. According to a report by KPMG Corporate Finance, a Tokyo investment adviser arm of the accounting firm KPMG, last year's 61 major foreign investments totaling 1.35 trillion yen ($11.2 billion at the current exchange rate) doubled the total in yen terms for the previous five years combined. Deals once considered unthinkable are now becoming routine: the U.S. tire company Goodyear's interest in Sumitomo Rubber Industries; GE Capital's still pending $6.5 billion acquisition of Japan Leasing; an alliance between Travelers Group and Nikko Securities. Behind this merger mania are the sputtering economy, ailing companies with low stock value, a rare and perhaps fleeting chance to invest in areas previously closed to outsiders and a gradual disintegration of keiretsu, the networks of companies doing business together.

Despite all the talk of a Nissan sale, most of the deals do not involve household names selling consumer products but instead less prominent firms in the finance sector. So people may not yet be aware of outsiders chipping away at the Japan Inc. empire. No Japanese politician has been smashing up a Ford Taurus, says Soichi Nakamura, a partner at KPMG in Tokyo.

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That allusion to the 1980s, when American politicians wielded sledge-hammers to protest Japanese investment, is a striking reminder of how dramatically things have changed. And if the foreign buying spree spreads beyond the brokerage houses and insurance companies, as many analysts expect, then sentiments could harden. The restructuring of the financial sector that's going on has probably started a domino effect to other sectors, says Nakamura. Why? Because the largest shareholders in many Japanese companies are ailing financial institutions, including banks. Facing bankruptcy, they're expected to accelerate the shedding of their stock portfolios. Corporations will have to have alternate partners, and that could result in another round of foreign acquisitions, says Nakamura.

The overseas deals, along with mergers between Japanese companies, could lead to downsizing--until now rare in a business culture accustomed to lifetime employment. So whether the vulture is Japanese or American, workers are scared. A 55-year-old deputy manager of a construction firm approached a Time reporter on a subway train last week. His division was shut down, and he's waiting to hear if he'll be transferred or forced into early retirement. This is not something I ever expected to happen to me, he says. You're an American--how do people live like this?

Dismantling the Japanese management style won't be easy. Executives in Japan have been primarily responsible to workers in the past, with cozy financial partners as shareholders. New owners will find the current management team isn't capable enough, says Ichiro Katagiri, director of management consultancy Watson Wyatt in Tokyo. If you get the older people out through early retirement, it's possible to succeed. For the brokerage firm Merrill Lynch, which last year set up 33 branches in Japan and hired 2,000 employees of the bankrupt Yamaichi Securities, that meant radical changes. We must be proactive, rather than reactive, says Satoru Ohyama, director of training and development. Each staff should think and act according to our philosophy, rather than waiting for an order from above. For the already jittery salaryman nervous about the future, a stimulant-rich drink like coffee may be the wrong beverage.

With reporting by Sachiko Sakamaki/Tokyo

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