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Monday, Jan. 17, 2000
Fukushima exits chamber on bright note
To the eyes of the former president of the American Chamber of Commerce in Japan, the Japanese business environment has changed over the last several years, thanks in part to an influx of foreign companies and capital.
"Japan is becoming more receptive to foreign direct investment, including acquisitions. The market is operating more freely than before," said Glen S. Fukushima, who completed his two-year term as ACCJ president in December. "It also shows that many foreign companies are optimistic about the future of Japan."
The former ACCJ chief, who heads the Japan operations of Arthur D. Little, Inc., a leading U.S.-based management consulting firm, is also confident that the American companies in Japan have played a role in bringing about that change.
The ACCJ has continued its efforts to open the Japanese market by raising the concerns of the U.S. business community in frequent meetings with key members of the Japanese and U.S. governments, he said in a recent interview.
Citing the activities of such U.S. companies as GE Capital Services Corp. and Merrill Lynch & Co. Inc. as examples, Fukushima said that the number of mergers and acquisitions in Japan grew 38 percent between 1997 and 1998.
"Mergers and acquisitions, until a few years ago, were not very welcome in Japan, especially acquisitions by foreign companies. But a 38 percent increase in one year is quite significant," he said.
However, the actual number of mergers and acquisitions in Japan, which numbered 929 in 1998, appears modest compared with the 2,278 in the U.K. and the 11,400 marked in the U.S. in the same year.
For 1998 and 1999, the ACCJ focused on five priorities:
* Improving market access;
* Promoting foreign direct investment in Japan;
* Supporting deregulation to open markets;
* Implementing trade agreements;
* Backing reform in corporate governance to make the system more transparent and less discriminatory.
To examine the impact of trade agreements, the American business organization, under Fukushima's initiative, published the book "Making Trade Talks Work" in 1997 to review major trade agreements between Japan and the U.S.
"There have been many U.S.-Japan trade negotiations and agreements, but until recently, few examined the results of the agreements," said Fukushima, who has long experience brokering bilateral relations.
Before coming to Japan in 1990 as vice president of AT&T Japan Ltd., the wholly owned subsidiary of AT&T Corp., Fukushima was director for Japanese affairs at the Office of the United States Trade Representative, and the deputy assistant U.S. trade representative for Japan and China.
According to the book, 13 of the 45 major trade agreements hammered out by the U.S. and Japan between 1980 and 1996 are producing the kinds of results U.S. companies had expected, he said.
The study was greeted with mixed reactions. Some said 13 of 45 is not good enough because it is fewer than a third of the total. Others felt it showed it is possible to reach agreements and produce significant results if the governments put their minds to it.
"In any case, the book was a landmark study. . . . Since quite a few agreements were not producing satisfactory results, a top priority (of the ACCJ) has been to ensure the agreements concluded do produce satisfactory results," he said. "And that requires monitoring and implementation."
Fukushima said a rise in foreign direct investment may help to change Japanese corporate practices.
"If the increase of foreign direct investment continues in Japan, it is likely to have an impact on Japanese management methods," he explained. "For instance, promotion and pay based on merit as opposed to 'nenko-joretsu' (seniority system) and 'shushin-koyo' (lifetime employment)."
In addition, the roles of women and non-Japanese, and the use of stock options, outside consultants and outside board members may also change in Japanese corporations.
"It'll force Japanese companies to place greater emphasis on speed, merit, performance and results," he said.
While acknowledging that financial services and telecommunications are two sectors that over the past three years have witnessed significant change in Japan, the former AT&T executive remained troubled by the high access fees being charged by NTT Corp.
Interconnection charges, one of the biggest stumbling blocks in ongoing bilateral deregulation talks, are several times higher than those in the U.S. and many other countries, Washington says.
Fukushima said that given the tremendous changes taking place throughout the world in the area of information technology, "Japan is falling behind because of its high interconnection charges."
"Before long, I expect that people in Japan will start to realize that they have been seriously disadvantaged by not having a more competitive telecommunications services sector. This will lead them to undertake serious reforms."
Touching on the ACCJ's achievements over the past two years, Fukushima said membership has grown to 3,025, the largest in its history.
He also said the chamber has strengthened its ties with Japanese business organizations, such as the Japan Association of Corporate Executives (Keizai Doyukai), and increased its visibility in Japan and abroad.
Now that he has completed his two-year term as ACCJ chief, Fukushima's next step will be to focus his energies on growing ADL's business in Japan.
The changes taking place in Japan now are creating a much greater demand for management consulting services than in the past, he said.
"For example, there are more joint ventures, strategic alliances, and mergers and acquisitions between Japanese and foreign firms, and the differences between Japanese firms and other firms will often make it prudent to use outside assistance to manage effectively," he said.