Japananese Seek Wider Economic and Diplomatic Openings in Europe

AS he is whisked about Tokyo during a visit this week, French Prime Minister Michel Rocard may catch a glimpse of the many new Peugeots on the street. Buying a European automobile has recently taken on almost as much status among the Japanese as owning a C'ezanne. Back on the streets of Paris, however, the French leader would be hard pressed to find a luxury Japanese car.

Such a contrast points up Japan's difficulty as it eagerly seeks a wider diplomatic and economic niche for itself in a fast-changing Europe.

Both feared and admired by European leaders, Japan has stepped up a diplomatic drive over the past year to avoid being excluded by a Europe which is rapidly reshaping its security and economic boundaries.

Just this month, a Japanese foreign minister, Taro Nakayama, made an official visit to Switzerland for the first time ever, even though that European nation is the second-largest investor in Japan.

Tokyo officials fear that a growing anti-Japanese mood in the United States may influence Europe, and they hope to block it with an assertive diplomacy. In fact, Japanese officials hope to improve links with Europe to counterbalance US pressure on trade and other issues.

Also for the first time, a Japanese foreign minister participated last month in a meeting of NATO, seeking a new voice in the reunification of Germany and talks with the Soviet Union on security. Japan was also quick to aid East European nations, offering $1 billion to Poland and Hungary last January.

``Japan is indeed an economic superpower,'' says Stephen Bosworth, chairman of the US-Japan Foundation, ``and there is an inexorable and unavoidable trend which will result in Japan becoming a global political power.''

Last January, Japanese leaders bristled when the French minister for European affairs, Edith Cresson, accused Japan's corporate giants of being adversaries ``that want to conquer the world.''

Oddly enough, despite France's image among European nations as being the most resistant to Japan, Mr. Rocard's visit from July 19 to 22 may prove to be an opening for the Japanese.

``France sees the benefit of stronger ties with Japan now that it must deal with a stronger and unified Germany,'' says a Japanese foreign ministry official. Rocard's agenda, in fact, is to invite Japan's high-tech firms to invest in France to help make it more competitive after 1992, when the European Community (EC) largely drops protectionist walls among the 12 member nations to create a single market of 320 million consumers. Accompanying the French prime minister are the ministers for industry and for research and technology.

France's voice will be crucial for Japanese exporters and investors as many of the final rules for the EC's new market will be finalized by year's end, especially regarding imports of Japanese cars.

``France has wanted to protect its industries more than other EC countries,'' says the foreign ministry official. But French investment rules are rapidly easing, he adds, ``and this message has been passed to the Japanese side.''

The message has hit home. Out of all Japanese investment in France since the end of World War II, over one-third was made last year, according to Japanese figures. Only Britain is exceeding France among EC nations in the number of new Japanese investment projects.

In all EC nations, the pace of Japanese investment has more than doubled recently, rising from $6.2 billion in fiscal year 1987 to $14.0 billion last year.

The most notable corporate link-up was a ``cooperative'' arrangement made this year between West Germany's Daimler-Benz AG group and the Japanese Mitsubishi group of companies.

Total Japanese investment in Europe is still only about half that in the US, but Japanese companies are racing against time to avoid any post-1992 trade barriers. Getting an investment toe-hold in one EC country will allow a foreign company to sell freely in the post-1992 EC market. Four Japanese car-makers already have opened manufacturing plants in Europe, with more on the drawing boards, for both east and west Europe.

The stickiest EC issue for Tokyo is a French position to protect domestic carmakers by not allowing Japanese car imports for up to 10 years after 1992, and perhaps even restricting the sale of cars made in the EC that have a high content of imported Japanese parts.

Japan is willing to accept a transition period of about five to six years. At present, France limits Japanese car imports to about 3 percent of its market.

Japan and France cannot even agree on what is the exact trade imbalance between their two nations. France claims a $4.5 billion deficit, while Japan says it has a deficit of $248 million with France. European nations may demand greater access to the Japanese market in return for loosening EC rules in favor of Japanese companies.

The total EC trade deficit with Japan has hovered around $20 billion for the past three years. Japan's economic thrust in Europe is one sign of its recent moves to reduce its dependency on the US market, as well as to reduce its political vulnerability to the US.

Last November, Japan's trade with Asian nations exceeded its trade with the US for the first time in the postwar period, says Kenneth Courtis, strategist for DB Capital Markets brokerage firm in Tokyo. And Japanese trade with the EC has yet to reach the level of trade between Japan and Asia's four so-called ``little dragons'' - South Korea, Singapore, Hong Kong, and Taiwan.