ECONOMIC SPOTLIGHT - JAPAN BUYING OVERSEAS FIRMS

  More U.S. And European firms will be
  falling prey to Japanese corporations bulging with cash and
  eager to extend their reach further overseas, according to
  merger and acquisitions specialists polled by Reuters.
      Already, rich Japanese companies have pounced on U.S.
  Banks, steel and other businesses.
      In the latest attempt, Fujitsu Ltd &lt;ITSU.T> -- Japan's
  biggest computer maker -- unsuccessfully bid for &lt;Fairchild
  Semiconductor Corp>, a U.S. Microchip maker which supplies
  components for supercomputers.
      Nomura Securities Co Ltd &lt;NMSC.T> and Daiwa Securities Co
  Ltd &lt;DSEC.T>, Japan's two largest brokerage firms, are seeking
  a niche in the U.S. And European securities markets, while the
  country's huge banks are looking for strongholds in overseas
  banking, the takeover specialists said.
      Major trading houses, which see their profits evaporating
  in the heat of increased competition in merchandise trade, all
  have foreign businesses on their shopping lists.
      Among manufacturers, car parts makers are under the most
  pressure to buy up overseas companies and follow the big auto
  makers they subcontract for as these move offshore.
      "The timing is favourable for Japanese parties to buy up
  potential overseas businesses, especially in the U.S. --
  Japan's largest market and where political risks are minimal," a
  takeover specialist at one trading company said.
      Japanese companies have become among the world's richest
  after a series of boom export years and as the yen has climbed
  against the dollar by some 40 pct in the past 18 months.
      But the yen's strength, which has also raised the costs of
  Japan's exports and allowed its Asian neighbours to move into
  its traditional markets, has frozen Japanese corporate growth,
  the specialists said.
      Looming trade friction is also threatening to erect more
  barriers against Japanese exports.
      Japanese firms see overseas acquisitions as a way to avoid
  the gloomy growth outlook and put their excess cash to work.
  Domestic interest rates, now at record lows, offer little
  investment opportunity.
      "Japanese interest in acquisitions has been continuous, but
  the recent economic factors have become a driving force," said a
  banking industry source.
      So far, though, the Japanese are being cautious.
      While mergers and acquisitions among U.S. Firms number in
  the thousands, Japanese buyouts of overseas companies have
  totalled just a few dozen, one merchant banker said.
      Another merchant banker said that a flurry of Japanese
  acquisition activity was originally expected five years from
  now, but that time span appeared now to be too long.
      Japanese firms are becoming more aggressive now, he said.
      A turning point seemed to be Dainippon Ink and Chemicals
  Inc's &lt;DIAC.T> takeover bid for &lt;Sun Chemical Corp> of the U.S.
  Last year, which some analysts saw as somewhat hostile, he
  added.
      Dainippon Ink bought Sun Chemical's graphic arts group for
  550 mln dlrs late last year, after an earlier unsolicited bid
  for the whole company. Sun Chemical refused to sell its entire
  business after learning that Dainippon planned to liquidate all
  but its graphic arts-related businesses.
      Hostile takeovers are considered unethical and frowned upon
  by the Japanese, the trading company official says. "Japanese
  people don't like fighting. They prefer peaceful amicable
  deals." But now after some experience overseas, Japanese
  companies are acquainted with local practice, he adds. "This is
  a healthy progression."
      However, the experts do not expect the Japanese to run the
  board meetings of any giant U.S. Or European concerns.
      "Japanese companies are not fully confident in managing a
  large U.S. Or European corporation," one banker said. "They will
  expand their operations only gradually, a typical way for
  Japanese business."
      A foreign merchant banker also noted, "There are not many
  mega-deals left to do in the United States. A lot of the big
  deals there have already been done."
      But medium-size and small concerns are potential targets of
  Japanese companies, the specialists said.
      Japanese will be aiming for new businesses in
  high-technology areas. "Japanese companies had used technology
  and quality to get where they are and are unlikely to deviate
  from that trend," one takeover specialist said.
      Many are watching the results of the first acquisitions. If
  these succeed, activity could build, the specialists said.
      But few such specialists are going to sit back and wait
  until the action begins. Already, they said, Japanese trading
  houses, long-term credit and commercial banks, brokerages and
  foreign merchant banks have set up research sections to act as
  go-betweens in deals or find good buys for themselves.
  

