For many months, the pressures on Japanese industrial circles have been mounting as the yen continues to appreciate against the U.S. dollar. The result is that more and more of the country's corporations are moving their production plants abroad in attempts to remain competitive on world markets.

Nobody can really say how far it will go, but about a third of Japan's manufacturing companies have stepped up their direct foreign investment plans and are decreasing their projected domestic capital spending due to the yen's appreciation, according to Long-Term Credit Bank of Japan. This has been especially so since the currency hit 180 yen to the dollar. It is now much closer to 150 yen.Apparently most of the new Japanese investments abroad are going to the United States, the countries of Western Europe, Hong Kong, Taiwan, South Korea, Singapore and even China, the bank reports.

A recent survey conducted by the institution, for example, shows that 39.2 percent of 682 Japanese large- and medium-size firms answering the questionnaires plan to establish overseas offices or production facilities. Evidently, the products turned out in Japanese plants already established abroad are not only going to the markets of the host countries but also to third nations.

Those participating in the survey advised that this situation would prevail for their new overseas facilities as well. One of the bank's key economic analysts says that this unprecedented trend already is causing a certain amount of hollowing out of Japan's industrial structure at home and exerting an adverse effect on domestic employment.

It is evident, for instance, that such overseas production investments are particularly heavy in the automotive and parts fields as well as in the consumer electrical/electronics, precision machinery and petroleum sectors.

A similar survey of the implications of the yen shock released by Japan's Economic Planning Agency estimates that fully 20 percent of the country's manufacturing output will take place abroad by the turn of the century, compared with the current level of only 2.4 percent. It was pointed out, in contrast, that the value of manufacturing production in 1984 (measured by net domestic product but in current prices) was $319.5 billion.

With some analysts predicting that the yen will appreciate to the 130 yen to 140 yen-level before the end of next year, it is not surprising that the feeling in Tokyo is that many more of the nation's component makers will decide to accompany their parent firms overseas.

Indeed, this is already happening. Rohm Co., a Kyoto electronics parts manufacturer, only recently bought out Xtel Corp., a Texas maker of electronic parts known for its sophisticated techniques in the design and assembly of microcircuit substrates for computers, for example.

In another typical case, Toyoshima Special Steel Co., a leading Japanese maker of automotive springs, has taken over the Service Spring Co. of Indianapolis with the intent to supply Japanese auto manufacturing plants inside the United States.

What we are seeing is a significant rush for overseas production, which shows every indication of amounting to a critical turning point in the history of Japanese industry - and there is nothing in the foreseeable future that might suggest that this situation will undergo a drastic reversal.

The cost of labor is a major reason for this change. The Industrial Bank of Japan notes that at 180 yen to the dollar, the average hourly rate of pay in the U.S. manufacturing sector was $9.52 against $9.25 in Japan. Yet at the higher exchange rate of 160 yen to the U.S. currency, the Japanese average hourly rate was increased to $10.42 compared with the U.S. rate of $9.52.

By contrast, Data Resources of the U.S. found in 1984 that the difference in labor costs between the manufacturing sectors of the two countries was not really comparable. The U.S. cost level was at a ratio of 100 to Japan's 60 at that time. We have witnessed an almost revolutionary turnaround in labor costs between the United States and Japan in such a very short time, comments one Japanese economist. I don't think our competitors in American industry realize the extent of what has happened since September of 1985.

Obviously this situation has not gone unnoticed by Japanese labor, which can be expected to launch determined efforts to stem the outward flow of manufacturing operations by the nation's corporations.

A recent publication issued by Japan's Ministry of International Trade and Industry concludes that expansion of direct overseas investments by the country's corporations will slash domestic employment by the year 2000 by a total of some 560,000 jobs, while creating more than 2,000,000 new positions overseas. This view is rapidly gaining supporters within Japan, with some analysts contending that the ministry's estimates may be far too low, especially if, as a rising number of economists are predicting, such direct foreign investments by Japanese manufacturers total well above $530 billion in value by the end of this decade.

The main worry of Japanese industrialists at this point is that if the nation's companies, big, medium and small alike, continue to move their production facilities abroad to avoid the effects of a drastically appreciated yen, the nation may come to rely far too heavily on overseas manufacturing outlets - a type of domestic production drain that ultimately could prove dangerous.

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