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THE BUSINESS WEEK BEST-SELLER LIST

MAYBE THEY SAID IT ALL THE FIRST time. Without the blend of small-town wisdom and financial savvy that made The Beardstown Ladies' Common-Sense Investment Guide so compelling, the team's second book, The Beardstown Ladies' Stitch-In-Time Guide to Growing Your Nest Egg (Hyperion), No. 2 on this month's best-seller list, seems a bit threadbare.

Here are useful worksheets, a sample will, and a handy list of resources, but the homespun anecdotes and hands-on attitude are gone, as, for the most part, are the recipes. Here are tips for seniors, but most--such as where to get discounts on hot beverages--are of limited value. Nor is the advice for nonretirees original: "Keep increasing the amount of your assets or investments while reducing the amount of your liabilities or debts," we're told. The authors also recommend buying generic brands, checking out books and videos from the library, and bringing lunch to work.

The book deals in generalities--its most tangible advice is how to attire a ceramic goose for your yard. And it's too slick: The heavy hand of book packager Seth Godin Productions and the ladies' new co-writer, Robin Dellabough, is all too visible.

With their returns averaging 23% over 11 years, the Illinois squad's financial success has been an inspiration. But consumers may want to heed the ladies' advice and pick up the Stitch-In-Time Guide at the local library.BY KERRY CAPELL THE BUSINESS WEEK BEST-SELLER LIST HARDCOVER BUSINESS BOOKS 1 THE ROAD AHEAD by Bill Gates, with Nathan Myhrvold and Peter RineaReturn to top

DROWNING IN YEN

THE WEIGHT OF THE YEN

How Denial Imperils America's Future and Ruins an Alliance

By R. Taggart Murphy

Norton -- 352pp -- $25

Of all America's postwar alliances, none is more important or contentious than its link with Japan. Provided with Washington's pledge of security and open markets, Japan has responded with a flood of televisions, Toyotas, and money. But while the volumes discussing the nearly 50-year-old U.S.-Japanese trade relationship could fill a fair-size library, works that analyze the equally vital financial ties between the two countries have been few. So it was with keen anticipation that I turned to R. Taggart Murphy's The Weight of the Yen for an explanation of how the U.S. became dependent on Japanese cash, and whether it should be a matter for continuing concern.

Murphy emphatically believes that it should be, and I was more than satisfied with his lively arguments. A veteran Tokyo-based investment banker who first got hooked on Japan when his family moved there while he was in his teens, Murphy writes with an authority that can come only from having watched the growth of a phenomenon from within. And although this is his first book, it's hardly Murphy's initial treatment of the topic of Japanese money. His provocative 1989 Harvard Business Review article, "Power Without Purpose: The Crisis of Japan's Global Financial Dominance," appeared at the peak of the country's "bubble economy" and is one of my favorite analyses of how Japan refuses to subordinate self-interest to the greater good of the world financial system.

In his book, Murphy expands on the theme of blind self-interest, producing an engaging and witty analysis of the forces that have permitted Japan to pile up cash and the policy blunders that have kept U.S. Presidents from Nixon to Clinton in denial, as he puts it, about the challenge these forces pose. Murphy concludes that the Japanese amass and deploy their cash to achieve one strategic goal at the expense of everything else: domination of world markets.

Murphy recalls, for example, that the Reagan Administration mistakenly believed that the Bank of Japan's decision to open the monetary floodgates after the dollar was devalued in 1985 would rev up the Japanese demand for imports. Instead, Murphy says, since Japan's banks serve more as agents of national industrial policy than as independent financial institutions, much of the newly created liquidity was funneled into Japanese manufacturers' coffers. Bankrolled with dirt-cheap credit, corporations then launched a gargantuan spending campaign that added to Japan's gross national product the equivalent of the entire GNP of France--and left the deficit-fueled U.S. with record trade imbalances.

Murphy suggests the U.S. could have avoided this comeuppance had its leaders paid more attention to Japan's poor record at following through on international economic pledges, as well as its own lack of desire to reduce a spreading budget deficit financed largely by borrowing abroad. Writes Murphy: "Americans have paid a high price for choosing to borrow money rather than face up to the need for far-reaching debate on the hard decisions that are the genuine stuff of honest politics." With Congress and the White House grappling over a deal to balance the budget, that realization may finally be filtering down to policymakers.

In crafting his analysis, Murphy credits the likes of Karel van Wolferen, Chalmers Johnson, Clyde Prestowitz, and former BUSINESS WEEK Tokyo bureau chief Robert Neff, all prominent members of the "revisionist" school of authors, academics, and journalists who contend that Japan's economy marches to its own beat. In their Japan, and Murphy's as well, most of the nation's political leaders are little more than figureheads who are unable to deliver on most of the trade concessions that Washington demands, and consumers are subjugated to an unholy trinity of bureaucrats, banks, and manufacturers.

Although this line of argument is familiar by now, Murphy builds on it admirably. His discussion of the forces driving the Japanese banking system to lend with little heed to credit risk is particularly provocative now that the country's lenders are wallowing in hundreds of billions of dollars in bad debts.

To Murphy, blind obedience to the imperative of economic dominance carries dangerous seeds of instability for Tokyo and Washington alike. How, asks Murphy, can Japan demand unlimited access to foreign technology and world markets while running a cartelized mercantilist economy at home?

Murphy thinks Washington should pressure Tokyo to change its ways--but with a shift in tactics. The U.S. must learn to stop browbeating Japan and establish a powerful, dedicated force of specialists focused on the complex Japanese political economy. Approaching Tokyo much as it approached Moscow in cold war days, Washington "must learn to negotiate quietly, skillfully, and firmly," Murphy says, "reacting to intransigence not with hectoring and cheap talk, but with measures based on painstaking, detailed study designed to achieve the maximum results with minimum resentment."

Will this bring greater balance to the U.S.-Japan relationship? Murphy could have spelled out his recommendations in greater detail, but his analysis of what's amiss with the U.S.-Japan financial relationship is nonetheless arresting. America has gotten used to living off Japanese cash. Murphy shows that the cost of this money is high indeed.BY WILLIAM GLASGALLReturn to top


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