How Japan Does It

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approximately the same as in the U.S. The corporate tax rate on business profits ranges from 22% to 40%, which is similar to the 17% to 46% rate that applies to American business. Both countries have a range of exemptions and deductions that are virtually impossible to compare.

The most important factor in the business-government relationship is that, as in all other areas of Japanese society, agreement is reached only after long discussions. If talk fails, the government can turn to "administrative guidance," a procedure rather akin to American-style jawboning. Even then the private companies can simply refuse to accept the government's recommendations. In the late 1950s, for example, the Japanese government suggested that the nation's automakers join forces to produce a low-cost "people's car" modeled after the Volkswagen in order to crack the U.S. market. The automakers refused and launched their own separate products.

Despite Japan's enviable economic progress in the past quarter-century, the nation is hardly without its social and economic problems. Many of its shortcomings are side effects of the same qualities that have helped it to achieve so much. The sense of national unity and consensus has resulted in a society that tends to reject anyone who is different. One example: the burakumin—descendants of pre-17th century social outcasts, are still not considered full members of society. Some 600,000 Koreans, many of whose families have lived in Japan for generations, are likewise not integrated into the mainstream of Japanese life.

Power in Japan is concentrated within the upper echelons of business, banking and the pro-business Liberal Democratic party, which has ruled continuously since 1955. Relations are much cozier than would be accepted in the U.S. or Western Europe. Members of the nation's power elite, whatever their profession, often have known each other closely for a half-century. When executives retire, they frequently become corporate advisers, honorary chairmen and industrial counselors. Likewise, when senior civil servants leave government they may become top advisers in the very corporations they once regulated; the custom is called amakudari or, literally, "descent from heaven."

In Japan's pell-mell rush to grow, so much of the nation's wealth has been invested in industry that little has been left over for anything else. Even such basic amenities as sewers and housing remain inadequate by Western standards. Housing space is so cramped that building plots cost up to nine times as much as they do in the U.S. and room occupancy rates are 50% higher.

Japan is already finding its resources strained even before it begins to tackle those public services. To keep the economy expanding and at the same time boost government social spending, the Liberal Democrats since 1975 have relied increasingly on debt financing. Deficit spending for the current fiscal year is now projected to top $71 billion, or 33% of the nation's $213 billion budget. By comparison, the 1980 fiscal deficit in the U.S., though $59 billion, was only about 10% of total federal spending.

Yet even with its budget difficulties, Japan this year should have the best overall economic record of any major industrial nation. Growth is expected to be 5.3%, and the inflation rate should be no more

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