Japan Weighs Its Summit Options

DIPLOMATIC pressure is mounting on Japan to compromise on three issues before the mid-July summit of industrialized nations in London. Once only a fringe player at big-power summits, Japan's new status as an economic giant has forced it into making difficult choices for this summit to avoid more friction with its major trading partners.

Japan must decide:

*-Whether to aid the ailing Soviet economy.

*-Whether to pledge to reduce its trade imbalance with the European Community.

*-Whether to loosen its ban on imported rice as a way to help the Uruguay Round of multilateral trade talks.

A proposal by Britain, the summit host, to invite President Mikhail Gorbachev to the summit was openly opposed by Japan. Mr. Gorbachev will instead meet with the leaders of the Group of Seven industrialized nations only after the summit.

Worried that Germany and France may try to highlight the need for aid to Moscow, Japan is concerned that it might be pressured into a corner since it is the world's largest aid giver. But it is also reluctant to help the Soviet Union until the two nations settle a dispute over the Kurile Islands.

Japanese leaders look to Canada and the United States to back up their position. But Japan was surprised recently when President Bush gave Moscow $1.5 billion in credits for grain purchases. Japan has not committed itself yet to a US proposal to grant the Soviets associate membership in the International Monetary Fund (IMF). Although such a step would provide only economic advice, it opens the possibility of the Soviets eventually receiving IMF loans, a large portion of which would come from Japan.

In a historic visit to Tokyo last April, Gorbachev received no response to his request for economic help, although Japan did offer $400,000 for training and technical support to trade-related Soviet enterprises this year.

Japan's reluctance to aid Moscow is reflected in the attitudes of private Japanese businesses. Private banks stopped giving trade credit to Moscow last month. And of 2,050 joint ventures made by foreign companies in the Soviet Union through 1990, Japan accounts for 1.6 percent, compared with Germany's 13.7 percent and 12 percent for the US, according to the Japanese government.

But not wanting to appear inflexible, Japan is considering a shift in its position, citing the recent election of Boris Yeltsin as Russian president as perhaps altering the Soviet situation.

"We have to listen to what Gorbachev has to explain to us," says Taizo Watanabe, a Foreign Ministry spokesman.

Like the US, Japan is considering bypassing Gorbachev by helping Soviet republics. The Russian prime minister, for instance, is expected to visit Japan soon, as are other Russian officials.

BESIDE the post-summit talks with Gorbachev, Japan also plans to use the meeting to sign a joint declaration with the EC as an important step to take before the EC market is unified in 1992.

Often feeling estranged from Europe and the US, Tokyo has been eager to sign a declaration of principles of cooperation that would imitate an accord between the EC, US, and Canada last year.

"Japan needs to consolidate the relationship," says Kaoru Ishikawa, a Japanese Foreign Ministry official for economics.

Japan wants a general, noncommittal statement. But EC negotiators have insisted that the declaration commit Tokyo to a balance of trade and investment, something that smacks of "managed trade" to Japanese leaders.

The dispute is expected to influence how much access Japanese companies will be given to the post-1992 EC market.

If the EC-Japan talks conclude in coming weeks, Japanese Prime Minister Toshiki Kaifu is expected to sign the declaration just after a summit with European Commission President Jacques Delors and the incoming EC chairman, Dutch Prime Minister Rudolphus Lubbers.

The EC demands greater access in the Japanese market for European goods and investment as a way to reduce its rising trade deficit with Japan. The deficit for the first five months of this year was $12.06 billion, a steep rise from $7.3 billion for the same period last year.

"I have no miracle remedy" for the deficit, Mr. Delors said on a visit to Tokyo last month. "But history teaches me that if a powerful nation cannot make good use of its power, inevitably it means tension and a dangerous situation for that country.

"If we arrive at the end of the year with a trade deficit of, for example, $30 billion, this will reinforce in Europe the camp of those who wish, in one form or another ... to restrict the possibilities of Japanese exports and investments of Japanese firms in Europe," he said.

The talks have been overshadowed by strong remarks from Edith Cresson, France's new prime minister, who wants the EC to protect key European industries from what she calls Japan's "laser-guided" strategy to economically conquer the world.

Her comments drew an unusual rebuke from the Japanese Foreign Ministry, which called in the French ambassador in Tokyo to warn that Ms. Cresson's words "could lead the people of our two countries in the wrong direction."

HARSH criticism of Japan for a lack of international cooperation and corporate morals has begun to worry Japanese business leaders.

"The problem lies in the mind and heart of Japan," says Akio Morita, chairman of Sony Corp. "As with people, I think there is such a thing as company character, and this could be said of a country as well. However, I'm concerned whether Japan has such qualities."

Japan, he adds, "must create a mood and atmosphere of things that cannot be seen."

The third summit dilemma for Japan is how to respond to US pressure for a partial opening of the rice market as a gesture to help resolve a EC-US dispute over farm subsidies in the Uruguay Round of talks to liberalize world trade. The summit may be a turning point in the stalled round.

Mr. Kaifu and Mr. Bush will meet on the rice issue before the summit. Japanese leaders are hunting for a concession from the US to limit the political backlash at home to their expected decision.

"Japan should not be the only country to become bare naked," says Ichiro Ozawa, a prominent Japanese politician.