Fighting for American Industrial Renewal; Industry and Manufacturing Advocacy Group for public Education

A history of trade with Japan

I haven't got anything against open competition. If they can build a better car and sell it for less money,

let 'em do it. But what burns me up is that I can't go into Japan. We can't build, we can't sell, we can't service,

we can't do a damn thing over there ... I think this country ought to have the guts to stand up to unfair competition.

 

- Henry Ford II (1969)

 

How many small Korean cars imported to Japan in 2008? 502!

 

Prior to World War II, U.S. auto companies were the major force
in Japan's auto industry. The U.S. presence in Japan started in
1909, when Ford first established an agent to handle its imports
into Japan. General Motors followed in 1915, Dodge and Chrysler

started Japanese operations in the 1920s.

The Japanese Government began to restrict activities of foreign automakers

in Japan in the mid-1930s. In 1935, Ford was prevented from carrying out a

planned expansion. Shortly after that, the Automotive Manufacturing

Industries Law was passed, which protected the domestic industry and

limited production by foreign-owned plants. Nissan and Toyota became the

only authorized domestic manufacturers. By 1939, foreign-

owned production had stopped in Japan, and remaining U.S. assets were
expropriated by the Japanese Government in December 1941

 

After World War II, occupation forces concentrated on getting
domestic vehicle production re-established. They began by
authorizing domestic truck production and by banning sales of
imported vehicles to the general public. Car production in Japan
was resumed in 1947 on a limited basis. The import ban was partially lifted

in 1950, and lifted-entirely by the end of the Occupation in 1952.

By 1953, imports accounted for 60% of all registrations in Japan.


After the war, Chrysler, Ford and GM all re-established representation in Japan, but activities were severely limited by Japanese Government policies which protected and fostered their domestic auto industry The Japanese Government protected Japan's automakers through preferential allocation of foreign currency, providing technical assistance for auto parts makers, restricting foreign investment, restricting vehicle imports,
putting protective tariffs on imports, leveling high commodity taxes on large cars, establishing complex type-approval procedures, and by banning use of imported vehicles by
government offices.
The cumulative effect of these restrictions resulted in a drop in foreign share of Japan's market, from 60% in 1953 to around 1% in 1960.

Although economic conditions in Japan have changed significantly
over the past 50 years, import share did not reach 2% until the
late 1980s, and stands at 5.6% today.

 

Would American cars sell in Japan, if fairly marketed and priced?

 

 

Survey data says "yes". An independant study released,

known as the MOSS Motor Vehicle Survey reaffirmed that

access to the Japanese market was highly restricted.

 

It also identified a level of demand among the Japanese

public for imported vehicles significantly higher than present

sales levels. Of course it's unrealistic to think sales would take

off overnight, but the Japanese even have a word 

for the, "Ame-sha" (American Car) fanatics. More than likely

the cars would first sell to a youth sub-culture and after a

reasonable-sized market was identified, more "mainstream" 

products would be tailored for the Japanese market, much 

as was the history of the Japanese car builders in the United States.

After all, it took Toyota 7-years (1957-1964) to sell just 3000 units in the US.

 

 

While Japanese companies have gained the most from the opening of the world's markets over past decade, the Japanese market remains closed. Compare Japan to the rest of the industrial world: imports into the US market are over 30%, and that number reaches the 35%-59% range in the other G-7 countries. But vehicle imports into Japan from every country in the world last year totaled only 4.6%.

 

Chronology of US auto manufacturer history in Japan


1902 - 1920: Japanese entrepreneurs build prototypes, but no vehicle production facilities established.

1905: Ford exports its first vehicles to Japan in a private
sale

1909: Ford begins selling imported cars in Japan.

1915: Yanase begins sale of Buick and Cadillac models in Japan
for General Motors.

1926: General Motors (Japan) Ltd. is established.

1927: Dodge Brothers begins sales of cars in Japan.

General Motors begins assembly of cars and light trucks in
Osaka.

Ford installs Asia's first automatic conveyor assembly line at
Koyasu, which allows car and truck production of 10,000 units
per year, making Ford the top auto producer in Japan.

1930: Chrysler cars assembled in Yokohama

1933: Nissan starts production

1935: Ford purchases 91 acres of reclaimed land at Tsurumi,
Yokohama, in order to develop a steel mill and fabricate
components for vehicles assembled at the Koyasu plant. However,
plans do not proceed because the Japanese Government does not
approve the permits needed.

After the Ford expansion is prevented, the Japanese Government
passes the Automotive Manufacturing Industries Law. The purpose
of the law is to protect the domestic auto industry, provide
favorable tax treatment and incentives for Japanese
manufacturers, and to impose restrictions on foreign
manufacturers. Besides prohibiting Ford's expansion, the law
also limited GM-Japan production to less than 10,000 units per
year. Nissan and Toyota are the only Japanese manufacturers
authorized to build vehicles.

1937: Toyota starts production.

 

 


1937: Japanese Government begins to strictly curtail operations of foreign manufacturers.

1939: Foreign-owned manufacturers refused production or
assembly operations under Automobile Manufacturing Law.

1941: All assets of U S auto companies taken over by the Japanese

Government in December After Pearl Harbor, all equipment from

Ford's Koyasu plant is moved to Manchuria for
the assembly of military vehicles.

 

 

 

1941 - 1945 World War II

1945: Occupation General Headquarters (GHQ) approves
production of trucks by domestic manufacturers on September 25.

1946: Domestic truck production begins.

1948: Ford resumes imports under a license system.

1949: GHQ lifts restrictions on passenger car production

Foreign Exchange and Foreign Trade Control Law enacted This law
required any citizen who acquired foreign exchange through trade
to relinquish it to a government account. MITI administered the
law, so it was possible for the agency to allocate capital to
industries it considered to be most important to Japan's economy
The system was removed in 1964, but then replaced by a quota
system which lasted into the late 1970s.

Chrysler re-enters Japan, represented by independent
importers/dealers.

GM establishes a local sales office in Japan.

1950: Limited sales of imports allowed for specific
applications (taxis, etc.)

1951: Japanese Government regains sovereignty and states that
no foreign assemblers may enter Japan without a six-year plan for
domestic manufacturing.
Lack of clear policy on the treatment of
royalties and lack of guarantee beyond six years discourages
Ford from renewing activities in Japan.

1953: Imports account for nearly 60% of total registrations in
Japan (By comparison, by 1960 import share dipped to1% and did
not reach 2% until 1988 -- today it is about 5%).

1954: Concerned about Japan's $260 million trade deficit, the
Japanese Government puts strict controls on all imports.
.


1955: MlTI restricts allocation of currency for auto imports
and places: restraints on the sale of used American
vehicles in Japan

Japan levies a 40% tariff on imported cars.

 

 
1962: MITI claims imports create unfair damage to the Japanese industry

1967: "Unofficial" quotas established on engine imports

Government of Japan announces regulations that limit foreign ownership to no more than 7% of the stock of any existing Japanese company, among other restrictions.

U.S. Commerce Secretary Trowbridge calls for specific, high level negotiations to liberalize import and investment restrictions in the automotive sector, in light of Japan's emergence as the world's second largest producer of vehicles. Although Japan agrees to talks in December after much negotiation, at the last minute they announce that the head of
JAMA will lead the talks, with Japanese Government officials
acting only as observers, thus removing the Japanese Government
from being in a position to directly answer U S Government
demands. No substantive action results from the talks

1968: Japan refuses Borg Warner entry to Japan as a major
investor Borg Warner is only allowed minority investor access
and forced to release its patents to Japanese competitors.


1969: Toyota advises the government that acceptance of foreign

capital within the Japanese auto industry must be stopped

1974: Japan exports more vehicles than any other country. MITI
claims Japan still needs protection.


1975: First talks between U S. industry and Japanese Government on
certification and homologation barriers to U.S imports.

1979: Ford purchases equity in Mazda.


1981: Autorama, a Mazda-operated distribution chain, is
established to handle Ford-badged products.

1982: GM decides to handle all sales through single distributor
- Yanase.

1984: Japanese Government establishes preferred handling
procedures for low-volume imports.

1988: Chrysler Japan Sales Ltd. formed as a joint venture with
J. Osawa Co. to handle import sales.

1989: Changes in Japanese tax code. Commodity tax abolished, and
replaced with an across the board consumption tax of 6% on all
cars with engines displacement above 550 cc.

1992: 6% consumption tax reduced to 4.5%, instead of 3%
reduction promised by Japanese Government.

Source: AAMA (1993) and ACCJ (1995)