THE Pacific : Attempt by Japanese Businesses to Aid U.S. Minorities Stalls : Enthusiasm Fades for $400-Million Harlem Project Because of Concerns Over Financial Viability

NEW YORK —  At a time of tension between Japanese business and American minorities, there was good news last fall when the Japanese began expressing interest in a huge development project taking shape on the edge of Harlem.

Japanese interest in the Harlem-on-the-Hudson project began with a visit in October, 1987, by Japanese Crown Prince Akihito and Princess Michiko, followed early this year by visits from a stream of Japanese executives. Major Japanese concerns appeared ready to back the 40-square-block waterfront project, which is expected to cost $400 million and include theaters and other cultural attractions, condominiums, retail stores and office space.

“I think it is time the Japanese do something for minorities in the United States, in view of the increasing trade frictions,” Masatoshi Furusawa, chairman of Japan’s International Cultural Exchange Assn., declared last January.

Friction Has Increased

Today, however, the much discussed Japanese interest seems to have all but evaporated. While Japanese officials continue to sporadically visit the site, their enthusiasm seems to have waned amid worries about the project’s financial viability, red tape and the overall strength of the Manhattan real estate market.

Some who have dealt with Japanese officials say they have found that their interest in improving minority relations has been less than they had hoped for. The project’s problems demonstrate again how elusive the goal of improved Japanese-minority relations is, despite expressions of good will from both sides.

“The Japanese are more interested in this kind of thing than they used to be, but there is still a long way to go,” says Katsuya Abe, a Japanese-born public relations executive in New York who has tried to interest Japanese firms in Harlem-on-the-Hudson. “They just don’t think like that.”

Their public relations problem with American minorities has complicated life for the Japanese in their most important foreign market. The friction has grown from several incidents.

Two years ago, former Prime Minister Yasuhiro Nakasone suggested that blacks and Latinos were lowering U.S. literacy and intelligence rates; this year Michio Watanabe, a strategist with the ruling Liberal Democratic Party, accused blacks of not honoring their debts.

There have been complaints about the small number of blacks and Latinos who hold Japanese auto dealerships in the United States. And, to cap matters, there was the outcry over the sale of Little Black Sambo dolls in Japanese department stores.

Some black American leaders have reacted furiously.

Japanese leaders readily admit the need for fence-mending. Japanese businesses “recognize that more should be done here,” said Yoshio Karita, deputy chief of mission at the Japanese Embassy in Washington. “The situation hasn’t been handled properly.”

After much talk about improving relations, the Harlem project seemed to offer a good way for Japanese business to do something concrete.

Japanese interest in the project was piqued by the fascination of many Japanese with jazz, whose history has been intimately connected with Harlem’s.

Would Be Departure

That attraction was mentioned as representatives of major Japanese firms, such as Kohnan Housing Co. and manufacturers Mitsui and Mitsubishi, have toured the site.

But much stood in the way of a deal. Japanese investment in the project would be a striking departure from the standard real estate investment strategy of the Japanese.

While the Japanese investment in U.S. real estate has boomed--direct commercial real estate investment rose 70% between 1986 and 1987 to $13 billion--the Japanese have pursued a conservative strategy. Until recently they have concentrated in the core business areas of the biggest coastal cities, such as Los Angeles, New York and Washington, and largely avoided other areas.

To reduce their risk, they seek out “brand-name” buildings, such as those in New York that house the corporate headquarters of Exxon and Capital Cities-ABC, parent of the ABC television network.

Drop in Prices

To invest in a struggling area, such as Harlem, “would be totally foreign to the way they think,” said Eugene Webb of the Webb & Booker real estate firm and a backer of the project.

Moreover, real estate prices have been softening in Manhattan, even in the core business areas. “Some of these companies are already counting their losses,” said Abe, who is president of Overseas Promotion. “That’s not going to make them want to take on too much more risk.”

And the bureaucratic complexity of the situation frightened the Japanese. Ahead is a complicated and lengthy process of securing permits and zoning changes.

It is still unclear how much of the tract will be sold or leased by the city, which owns about 80% of the property, Abe said.

Some backers of the project insist that hope has not been lost. “There is still real interest here,” said Don Cogshill, president of Harlem Urban Development Council, the state-funded group that developed the project.

But his is not the majority view. “If one company jumps in, then a lot of others will follow,” Abe said. “But getting that first one to jump may be very tough.”