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JAPAN: Toyota steers into controversy over role in Japanese politics

by David IbisonThe Financial Times
October 7th, 2005

Five days before Japan's general election on September 11, Katsuaki Watanabe, the president of Toyota, visited a Liberal Democratic party office in Aichi prefecture and informed the attendant journalists of his strong support for Junichiro Koizumi, the LDP's prime minister.

Around the same time, Fujio Cho, Toyota's former president and now vice- chairman, attended an LDP rally in Aichi. It was a popular event, not least because Toyota employees were transported to the rally in Toyota buses, officials at the carmaker have confirmed.

Also in the run-up to the election, Hiroshi Okuda, the company's chairman and head of the powerful Japan Business Federation, or Keidanren, urged the public and owners of businesses in Aichi to support the LDP in the coming poll.

Not content with running the world's most profitable carmaker, the top executives at Toyota have made the leap from camshafts to the campaign trail and are now seeking a larger role in deciding who runs the country. "Toyota's management think they are Japan - and there is a certain element of truth in that," said Ikiro Kume, professor of political science at Waseda University.

They provided powerful voices of support. The Toyota name carries significant weight in Aichi, which is home to the company's global headquarters. One indication of its local prominence is that the rally Mr Cho attended was held in Toyota Stadium, in Toyota City, a town that changed its name to reflect its largest resident and benefactor.

Toyota's tentacles spread throughout Aichi. Its employees live and spend in the area and it supports a network of component manufacturers whose employees do the same.

In 2003, the latest figures available, Aichi had a trade surplus of $72bn (€59bn, £40bn), about 60 per cent of the national surplus, having shipped a record Y35,000bn ($308bn, €254bn, £174bn) in manufactured goods.

The carmaker's success has trickled down and, alongside other manufacturers, helped Aichi achieve a gross domestic product of some $270bn, around the same as Taiwan. In short, an LDP victory in Aichi would represent a vote of confidence from the country's premier manufacturing hub and provide a stepping stone to victory nationwide.

The presence of Toyota's top brass appeared to have an effect, said officials from the opposition Democratic Party of Japan. There are 15 constituencies in Aichi and in the previous election in 2003 the DPJ won 10. This time it won six.

While this was in line with the LDP's landslide nation wide, the swing in Aichi was considered particularly pronounced as it occurred in a DPJ stronghold, officials said.

The Toyota board members' role as political activists has prompted an angry response from its main labour union and reopened a debate about possibly unhealthy links between big business and government in Japan at a time when these links were thought to be on the way out.

Toshihiro Kato, vice-chairman of the Federation of All Toyota Workers Union, said in an interview that it was unwise of Toyota to take a particular political stance as it might alienate customers in Japan and around the world who did not agree with its politics.

"I am not in favour of a company like Toyota, whose name is known to the world, showing its political colours to consumers," he said.

"I would like the management to think carefully how it would affect Toyota workers by showing its clear political colours, considering Toyota's position."

Prof Kume said: "It is dangerous for Toyota's management to make clear that they support the LDP. Some citizens may think Toyota is taking the side of the winners against the losers and this may cause a backlash against Toyota's marketing strategy."

He warned that any perception of impropriety would be a backward step for Japan, which has spent much of the past decade trying to eradicate the injurious links between big business, bureaucrats and politicians, known as the "iron triangle". "It is still using the old way of doing business - it was like the good old days," he said.

The company's pro-LDP stance is reflected in its political contributions. Toyota is the largest single corporate backer of the LDP, but gives nothing directly to the DPJ, which has to make do with a share of the funds Toyota gives to the Japan Automobile Manufacturers Association.

There are no indications that Toyota's political activism is having any effect on sales.

The company dominates the Japanese market with about a 40 per cent share and is well on the way to being the world's largest carmaker in terms of units sales. It is already the most profitable by far.

The company played down concerns over its politics. Paul Nolasco, a spokesman, said its executives were simply being "good hosts" to the visiting members of the LDP.

He confirmed, however, that Toyota's neighbourly hospitality was not extended to members of the DPJ who also visited Aichi.




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