Will the 21st century belong to Japan?

• Author: Selimuddin, Abu

". . . Challenged by forces from within and outside, Japan may see its economic lead threatened and its future shadowed and complicated."

A QUARTER of a century ago, America commanded almost 46% of the world's Gross National Product. In international commerce, it enjoyed a monopoly in most manufacturing exports. In technology, the U.S. invented most advances, from the jet plane to the computer, and pioneered the transition from an industrial to information society.

Things sure have changed. Diminishing economic horizons, fewer jobs, stagnating real income, faltering living standards, escalating health care costs, a ballooning national deficit, and accumulating personal and business debts are becoming the critical concerns besetting an America in decline. Not only that, the U.S. has traded places with Japan and complacently watched that nation take the lead in world economy today.

By comparison, Japan has made technology its arts, commerce its religion, and frugality and patience its culture. Japan's three trillion-dollar-a-year GNP accounts for 15% of the global share, making it the world's second largest economy. Nevertheless, even Japan, for all its stunning success, has some serious structural flaws and will be met with tough challenges, emanating from within and outside. So the question is not whether Japan will go unchallenged. Rather, it is: Will the 21st century be Japanese?

Japan's toughest international competitors will be the best and the brightest U.S. companies, which are becoming lean and efficient by streamlining organizations and cutting costs. With the help of innovative home-grown technology, they will stage a quick comeback with renewed strength. For instance, a powerful new technology called digital signal processing will help blue-chip companies such as AT&T, Motorola, Texas Instruments, and IBM reclaim part of America's lost electronics market. In addition, other U.S. manufacturers--many of whom have gone through severe belt tightening in recent years--have become more productive and competitive enough to challenge Japan effectively. American labor costs--growing slower during the past few years than Japan's--also will add to the U.S.'s competitiveness.

What's more, the free trade agreement with Mexico will allow American companies to gain a cost advantage. For example, today's weakened U.S. auto giants will be able to draw low-cost and high-quality labor from an almost unlimited supply of Mexican workers. These companies quickly will switch to relatively cheaper labor-intensive techniques of production because they can cut capital cost by using fewer expensive robots and less pricey machinery. As a result, the U.S. will bolster competitiveness to meet Japan's price and quality challenges in the global marketplace.

Japan's competition from Asia's newly industrializing countries (NICs) will intensify further in the future. These emerging...