Yen Wars

A lot of what occurs on markets is as much war as greed. And a lot of what happened with the earlier free-fall of the yen -- and is happening now with the free-fall of the dollar -- is war. In fact, maybe just about all of it is war.It's not widely known in the United States, but one single reference to Japan attributed to a former high U.S. official has enraged a lot of important and ordinary Japanese. Writing in the Sept./Oct. 1997 issue of Foreign Affairs, Zbigniew Brzezinski, former director of the National Security Council during the Carter administration, suggested that "Whether Japan is to be America's vassal, rival or partner depends on the ability of Americans and Japanese to define common international goals and to separate the U.S. strategic mission in the Far East from Japanese aspirations for a global role." The word that stuck in too many Japanese throats was "vassal."Japanese know full well that vassal means servant to a higher lord. It was vassals, brimming with rage against the 250 year long rule of the Tokugawa shoguns who in 1868 overthrew it and created modern Japan. Japanese have long since ceased being grateful for the progressive American post-war occupation. Now they see Uncle Sam as an arrogant, flawed shogun taking his Japanese vassal for granted.For much of this year the Clinton White House has been badgering Japan about revving up its economy. Treasury Secretary Rubin keeps on repeating that such a move is absolutely vital to prevent a global depression. But the Japanese kept stalling. And the yen went down and down.Meanwhile East Asian economies were barely recovering from the devastating attacks on their currencies by speculators. Their orders for American goods, especially high-tech wares, went way down. So did Japanese orders, a result of the country's six-year slump.Greed was an element, but so was anger -- which expressed itself in financial moves. Loud Japanese voices began reacting to the Brzezinski slur and vowing to show that Japan could no longer be treated as a vassal.Few were louder than Shintaro Ishihara, author of the best-seller "The Japan That Can Say No." In a major piece in Japan's most prestigious monthly magazine, the Bungei Shunju, he cried out "Japan is not America's financial vassal." In a country where people are voracious readers that cry was heard everywhere.And to drive the point home the editors followed with a piece by Malaysian prime minister Mahathir Muhammad entitled "Looking east doesn't mean death." The Western media have long shown their disdain for Mahathir and he has amply reciprocated.What began to scare Washington officials was not just words from Ishihara and Mahathir but the fact that influential Japanese were beginning to talk about forming a "yen bloc." Last July Ishihara reminded the world and the U.S. in particular that "as for economic fundamentals Japan is much better placed than the U.S."As the Japanese Diet fumbled along with its plan for economic revitalization, Washington's talk became more and more insistent. Up and up went the dollar. Down and down the yen.Then, all of a sudden, at the end of September the Japanese government announced big new investments in Southeast Asia. And that was followed by the bombshell announcement that the revitalization plan had been finalized.With startling suddenness the dollar-yen relationship turned upside down -- and more. With at least one major U.S. investment house now saying a US recession is possible in 1999, the U.S. -- and the West in general -- could soon face what the Japanese have gone through these past six years.Ishihara has made it clear he does not want to wreck the global economy. "I don't mean all-out economic war," says Ishihara, but he does talk of wanting Japan "to turn into a tiger and confront the U.S. over certain issues."Not just confront -- "At times intimidate, at other times coax, that's what diplomacy is all about." That statement also brings to mind Mao Zedong and Ho Chi Minh's tactics of "fight, fight but talk, talk."Many influential people in East Asia now believe that the wars of the coming century will be much more economic than military. If so, this dollar and yen roller coaster is really a battle in a war over who shall be lord and who vassal in the global economy.The Japanese appear to have aimed a big challenge at the United States -- saying, in effect, from here on either treat us as equal partners with the American shogun or we'll look in new directions. America has a long history of liking to be honcho -- a word from street Japanese, brought back by U.S. soldiers from the occupation that means number one boss. Japan is now saying either we are a real co-honcho or no go.