Japan patching up trade relations before Reagan visit

With an eye to President Reagan's visit in November, Japan is making fresh wide-ranging efforts to reduce trade friction. For political and other reasons, there is a strong desire to avoid the presidential visit's being dominated by American demands that could provoke domestic controversy.

In both the public and private sector, therefore, a detectable upsurge in activity appears aimed at either going some way toward meeting American complaints about allegedly ''unfair'' Japanese trade practices or demonstrating that these are misguided.

Japanese farmers, for instance, are taking their case for protection of their domestic market to the US. The first issue of a monthly newsletter in English has just been mailed to US congressional leaders and ranking US and European government officials seeking their understanding of the plight of Japanese farmers if imports are expanded.

The same message - particularly the fact Japan is already America's biggest customer for farm products - is being carried in one minute commercials to be broadcast over American cable TV networks every weekend for the next six months starting in September.

On a governmental level, the biggest initiative involving the Japanese-American trade dispute involves a new economic package designed to stimulate domestic demand and hopefully boost imports. If a workable consensus can be achieved - and this no easy task - details are expected to be announced next month.

There is a growing sense of urgency as Japan's international balance-of-payments surplus reaches massive proportions.

In the first six months of the year, a trade surplus of more than $7 billion was reported with the United States as well as a $5 billion surplus with Western Europe.

Official and private forecasts, backed by projections of the Organization for Economic Cooperation and Development (OECD), foresee a trade surplus of $30 billion and a current account surplus (the current account covers other money flows, such as tourism and investment earnings, besides trade) of $20 billion this year, both records.

While Prime Minister Yasuhiro Nakasone's repeated promises not to seek an export-led economic recovery are being kept, Japanese good intentions are being sabotaged by the collapse of import demand.

The trade council, the nation's top trade policy body headed by Mr. Nakasone, in late June stressed the importance of expanding imports, particularly of manufactured goods.

To stimulate domestic demand, key measures under consideration are a cut in personal income tax and increased public works spending.

But with the government already laden with enormous budgetary deficits, the austerity-minded Finance Ministry is not very happy about the idea of losing either vital revenue or increasing public spending. Any tax relief for the individual, it says, will have to be made up by increased business-related taxes.

Although there is little opposition here to the principle of an open market, howls of protests are immediately provoked by attempts to translate the principle into reality.

The Economic Planning Agency (EPA), for example, is pressing for a cut in tariffs on a wide range of products of specific interest to American and European exporters. It would also like to see import quotas on some agricultural products either expanded or abolished.

The key issues are beef and citrus fruits. The US wants all controls removed, which Japan maintains is impossible for the present. A senior Agriculture Ministry official is scheduled to visit Washington shortly to sound out American attitudes on a proposed stop-gap compromise expanding existing quotas.

Agriculture Minister Iwao Kaneko this month said the government hoped to settle the prolonged farm trade dispute before President Reagan's visit.

Farm trade talks resume here in mid-September, with the climax expected late October when US Trade Representative William Brock is due in Tokyo.

Even the Tokyo government's proposed compromise is bitterly opposed by farmers. Their powerful lobbying body, the central union of agricultural cooperatives (Zenchu), has already urged the government never to give ground to American pressure, and plans to back this with a national protest rally in Tokyo on September 12 and a signature-collecting campaign on a petition to Prime Minister Nakasone and the ruling Liberal Democratic Party (LDP).

But other trade areas look more amenable to solution. There is, for example, a growing belief that the current three-year agreement restraining Japanese automobile exports to the US will be extended for a fourth year, particularly to cool down American congressional criticism of Japan's trading practices.

To promote more purchases of foreign manufactured goods, the powerful Ministry of Trade and Industry (MITI) is considering various new import financing schemes and preferential tax treatment.

Of more immediate impact, a government-sponsored import promotion mission will leave for the US Sept. 6 with the aim of removing US business misunderstandings of the Japanese market.

Its leader, Mitsui Trading Company president Toshikuni Yahiro, said there was no quick relief in sight for the chronic trade imbalance between the two countries, but ''trade friction is getting too emotional.''

One of the mission members, Isao Nakauchi, chairman of Daiei, Japan's biggest chain store operator and retailer, said he planned to urge Americans to better understand Japanese consumer needs when he visits New York, Chicago, Washington, and Los Angeles.

An increasingly key role is being played by the Federation of Economic Organizations (Keidanren), often regarded as the country's ''shadow government'' of big business, which believes relations with the US will decide the fortune of the Japanese economy.

It is currently encouraging the motor industry to accept another year of export self-restraint and is pushing a campaign for liberalization of agricultural imports - arousing bitter condemnation from the farmers - and reduction of tariffs.