Argues that the principal contributor to changes in Japan’s political economy is the decline of Japanese governmental control over capital flows and foreign exchange rates brought about by structural “gaiatsu”, or direct foreign pressure. Differs from previous analysis of gaiatsu by arguing that international capital and market forces generate gaiatsu, not foreign governments, and that its influence has been worldwide as well as deeper and more ongoing than bilateral negotiating sessions and joint communiqués related to trade. Discusses how the change has catalyzed a major increase in foreign direct investment by Japanese-owned corporations, a reduction in government’s ability to control corporate behavior, a diminution of intra-corporate linkages, conflict within national economic policies and the increased penetration of the Japanese economy by foreign financial institutions. Describes how the change has resulted in an emerging socio-economic gap in Japan between individuals, groups and organizations. Demonstrates how the Japanese experience suggests the transformative power of global capital markets on national political economies, particularly those that have been interventionist in nature.
