The media's Japan problem.

The "right-hand drive" story circulated quickly through the American editorial pages. The U.S. threat to impose nearly $6 billion in tariffs on Japanese luxury car exports unless the Japanese opened their markets was ill-advised, the editorials argued, because it was American car makers who were at fault. The arrogant Big Three automakers had consistently failed to make cars with steering wheels on the right side, badly hurting sales in Japan. United States Trade Representative Mickey Kantor, the argument went, was flirting with a trade war over a non-issue.

But American auto companies make plenty of high-quality right-hand drive cars in their European plants. Many foreign car buyers in Japan actually prefer the steering wheel on the American side. It's a status symbol. Yet all these cars, wherever the steering wheel configuration, have long sold poorly in Japan because most auto distributors are under the thumb of the Japanese automaking industry.

You'd never know that from the media. On even the simplest and most easily verifiable aspects of this essential international relationship, the American press can be utterly unreliable. As a result, U.S. efforts to break down Japanese trade barriers have been consistently undercut.

Although no major publication regularly read in America can claim a good record of reporting on Japan, The Wall Street Journal and The Economist deserve special recognition as sources of slanted misinformation. In 1989, for instance, commenting on Japan's extraordinarily small appetite for manufactured imports, The Economist's editors went so far as to assert that "there is no evidence that protection is the cause of it." The Journal, meanwhile, has wantonly underplayed the importance of trade deficits. In 1994, one editorial stated: "The best solution for the [American] trade deficit would be to stop reporting it."

The shortcomings of these publications are all the more significant because American reporters turn to them as the experts in business journalism. Consequently, the mistakes of the Journal and The Economist--most of which serve to remove responsibility from Japan for the continuing U.S. trade deficit with that nation, now pegged at $66 billion--quickly become the conventional wisdom to be aped by other newspapers and magazines. And the American reading public, subjected to naive and superficial journalism, is left with virtually no sense of what a powerful challenge Japan's continuing economic expansionism presents to the West.

Perhaps the single most pernicious part of the conventional wisdom is the idea that Japan "shoots itself in the foot" by practicing protectionism. Wait long enough, the theory goes, and the Japanese will snap out of their foolish xenophobia and open their doors to American products. But Western economists have always known that a program of intelligent protectionism powerfully boosts a nation's savings rate, and helps it to weather recessions. While economics reporters persist in portraying high tariffs as anachronisms, East Asia's miracle economies have ridden tariffs to rapid and sustained growth.

The apologist's take on Japanese trade practices is bolstered by what we are led to believe is the Japanese economy's terrible "slump." Stories of hard times in Japan have been so persistent and so graphic in the nineties that most Americans are understandably convinced that a resurgent America really has turned the tables on a floundering Japan. Yet in virtually every way that an economy's external clout is measured, Japan has continued to improve its position at America's expense.

Don't believe it? Here are a few significant indicators of Japan's economic strength. Just for fun, why not keep track of how many you've seen in the American press:

* Measured at current exchange rates, the Japanese economy is more than 85 percent the size of the American economy--up from just 55 percent at the end of the eighties.

* Japan's per-capita income at current exchange rates is now the world's highest.

* Japan's net national savings totaled $819 billion in 1993--representing 56 percent of all new savings in the OECD group of advanced nations. By contrast, America's share was just 5 percent.

* Japan is now the world's biggest source of foreign aid. It is outspending the United States by as much as 20 to one in key East Asian countries.

* Japan's share of world exports continues to soar and, with just half the population of the United States, it now exports more manufactured goods.

* Japan's unemployment rate remains the lowest of any major industrial nation--and, while the Western press goes on about supposed layoffs in corporate Japan, Japan's total job base has increased a net 3.2 million since 1990.

Despite the facts, the American press has persisted in peddling the America-vanquishes-Japan story. And why not? It's the sort of chest-pounding, feel-good story American editors and readers love.

The problem is that it is a fiction with consequences. As Japan's Ministry of International Trade and Industry (MITI) well knows, Americans tend to be more patient with Japan's trade barriers at times when the Japanese are perceived to be in economic trouble. The Wall Street Journal made this point explicitly when it argued last May against Mickey Kantor's attempt to impose a sanction against Japanese autos. The Japanese economy, they wrote, would collapse under the strain.

Despite the consequences, though, false stories about Japan are practically a cottage industry. Take, for instance, an article a few months ago in The Wall Street Journal about the Quantum Corporation's supposed success in making disk drives. "American companies," the Journal enthused, "have wrested the burgeoning disk-drive industry away from the Japanese by speeding up innovation and product cycles, and right now, none is moving faster than Quantum Corp." This probably came as a surprise to the Japanese disk-drive maker Matsushita-Kotobuki. Why? Because Matsushita-Kotobuki manufactures most of Quantum's drives.

American observers wrongly assume that if a product bears an American brand name it is necessarily made in America. This same error is behind the well-told tale of Hewlett-Packard's triumph over the Japanese in computer printers. If you are to believe BusinessWeek, Hewlett-Packard has been "murdering" the Japanese in the laser printer market. But this death has no sting for the Japanese because their own Canon Corporation supplies the most sophisticated components in Hewlett-Packard's printers. So far ahead are the Japanese in this area that, even with the yen in the stratosphere, Hewlett-Packard continues to import from Canon.

Some America-is-winning myths are repeated so often they bring to mind Mark Twain's comment about the difference between a cat and a lie: A cat has only nine lives. Take, for instance, the widely publicized story last year that American electronics companies had snatched the lead in semiconductor manufacturing from the Japanese. The story was entirely a hoax, as anyone who checked the actual trade figures could see. The error arose because journalists misread a statistical report from the Dataquest organization which said that the American companies had passed the Japanese in "shipments" of semiconductors.

Unbeknownst to the press, however, chips listed as shipped by American companies are not necessarily made by them. Far from it. In reality, a growing proportion of chips shipped under American companies' brand names are actually made in Japan; many of the rest are made in South Korea or Taiwan. But, of course, the story circulated and the misguided conclusion that America has Japan on the ropes had yet another confirmation.

If Japan has been doing so well, you might ask, why do the Japanese themselves seem to think otherwise? They, too, have been telling economic sob stories. The explanation is quite simple: Since reaching a low in April 1990, the yen's dollar value has nearly doubled. An exchange rate move of this size has put Japanese industry under enormous pressure. But it is healthy pressure. Not a single major Japanese manufacturing company has gone out of business in many years. Straining to cope with ever higher yen exchange rates, corporate Japan is like a fit young cyclist pedaling steadily uphill. Meanwhile, eased by a falling dollar, America is like a flabby retiree happily coasting downhill. At the end of the day, corporate Japan will be at the top of the mountain while corporate America will be lost in the foothills.

At the root of the West's difficulty in interpreting Japan is a free-trade-at-all-costs ideology. Again, the most conspicuous culprit is The Wall Street Journal. As Chalmers Johnson has pointed out, the Journal is a sort of American Pravda that visibly runs away from information that might cast doubt on its belief system. The Journal, for instance, was alone among the business press in not reviewing Trading Places, Clyde Prestowitz's devastating critique of the Reagan Administration's Japan policy. The Journal rarely prints letters or editorial page contributions from intellectual opponents, particularly well-informed ones who can go toe to toe with the editors on the facts. As James Fallows has pointed out, these editors champion the need for free debate --they just don't want it in their own pages.

There is another ideological blinder. In their hearts, many Western journalists are convinced that Japanese society is essentially inferior. The New Republic memorably exemplified this spirit a few years ago in an article on trade friction. In a novel proposal to strong-arm Japan into opening its markets, the magazine suggested that every Japanese citizen be given the right to immigrate freely to the United States. So many talented Japanese would flee to America's shores, the article reasoned, that Japan would soon be brought to its knees.

Clever, yes, but it overlooks the fact that the Japanese--surprise!--actually like their country and its culture. So much so, in fact, that they are famously unwilling to work for American employers, even in Japan. Top American investment banks in Tokyo, for instance, cannot hire capable staff even when they offer two or three times the salaries paid by Japanese firms.

Then again, underestimating Japan is nothing new in America. From the dawn of relations between the two countries, America has considered Japan to be idiosyncratic and backward. This assumption has never failed to help Japan. Baseless Western pessimism about the Japanese economy in the late thirties, for instance, helped quell American anxieties about the Imperial Army's intentions in China. In the early fifties, similar misconceptions helped Tokyo sidestep heavy war reparations in its peace treaty with the United States. Japan's total war reparations were held to just $1 billion, a tiny fraction of Germany's $80 billion.

Being underestimated worked nicely for Japan again in the mid-seventies, when the Western press painted Japan as the worst victim of the oil crisis. Always first with the bad news on the Japanese economy, The Economist reported that with Japanese employers supposedly cutting output by up to 55 percent, "conditions approaching anarchy" might break out in which militarists or communists could seize power. Washington did all it could to make sure Japan got as much as possible of the world's then desperately scarce oil supplies.

Needless to say, the Japanese economy did not collapse and, as in the early nineties, the crisis blew over with virtually no increase in unemployment. In fact, from the point of view of Japan's economic leaders, the crisis was a veritable godsend: Japanese corporations were already more energy-efficient than their American counterparts, and the oil crisis enabled Japan to vault to global leadership in many energy-intensive industries--most notably in automobiles.

To be fair, there are reasons the reporting from Japan is so poor. Japan is one of the most baffling and dispirting environments a Western correspondent is ever likely to experience. And given the failure of Western employers to invest in educating their reporters in language and culture, most individual correspondents report from Japan as well as can be expected.

Still, the profound consequences of the press' failure cannot be overlooked. Before long, the Japanese economic machine will be light years ahead of the U.S. economy. And the American media--with their readership in tow--will be left shaking their heads in disbelief, wondering what happened.