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Hosokawa Wins Plaudits For Tough Summit Stance

Japanese approve rejection of targets, promise to appeal to GATT if US imposes sanctions

PRIME Minister Morihiro Hosokawa returned home this weekend to Japan's heaviest snowfall in a quarter-century, but it was the only frosty thing about his reception, after a summit with President Clinton Friday, where he rejected demands that he implement an affirmative-action program for American products.

Echoing the views of Japanese business, Nissan chairman Yutaka Kume said: ``We highly praise the Japanese government for refusing US demands.''

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The summit was arranged to resolve Washington's long-standing irritation over Tokyo's nearly $60 billion bilateral trade surplus. But the two sides failed to agree on ``objective criteria'' to measure whether Japan is fulfilling promises to buy more US-made goods. The Clinton administration demands numerical targets for Japanese imports of American cars and car parts, telecommunications, medical equipment, and insurance.

But Japan rejects what it says amounts to quotas. ``We do not want managed trade, and I think I'm speaking on behalf of everyone when I say that,'' Mr. Hosokawa told a news conference after the summit.

His comment underscores an extraordinary reversal of roles: By demanding special treatment, the US has yielded the free-trade moral high ground to Japan.

A trade war is now a serious possibility. The Clinton administration is reportedly preparing to announce trade sanctions on some Japanese imports as soon as tomorrow. The US has already slapped punitive duties on Japanese steel in a dispute over dumping. Similar sanctions on Japanese telecommunications equip- ment and other exports could soon follow.

Japan is unlikely to meekly accept such an American attack. Chief Cabinet Secretary Masayoshi Takemura told viewers of a Sunday TV program that if Washington imposes punitive tariffs on Japanese goods, Tokyo will appeal to the General Agreement on Tariffs and Trade, the world trade watchdog. ``In the Uruguay round of trade talks last year, member countries set up a new function to settle disputes over trade, and it's one way [to deal with any US sanctions,]'' Mr. Takemura said.

Tokyo is bracing for post-summit tremors. Stock prices are expected to tumble early this week. The Bank of Japan is contemplating intervention against any American effort to further drive up the value of the yen. Speculation that Washington will fulfill threats to boost the yen has pushed the Japanese currency to its highest level in three months. The yen closed in New York Friday at 107.13, up sharply from 108.25 late Thursday.

The high yen is squeezing Japanese manufacturers by making imported goods cheaper in Japan, and Japanese exports more expensive overseas. It comes as Japan is mired in the worst recession since World War II. Joblessness is rising, corporate profits are deep in the red, and consumer and business confidence has plunged.

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Japanese officials say that, during the summit, Clinton criticized Hosokawa's recently unveiled $140 billion economic stimulus package as insufficient. ``The US policy toward Japan is inconsistent,'' complains political commentator Hideaki Kase. ``On one side the Americans are asking us to boost our economy, and at the same time, Americans are driving the yen upwards.''

Nonetheless, Hosokawa's tough resistance in Washington is winning him badly needed popularity at home, where his creaking coalition government has twice nearly disintegrated over electoral reforms and a botched attempt to impose an unpopular tax. While applauding Hosokawa's rejection of numerical market-share targets for American goods, Japanese business leaders swiftly urged further discussion.

``They should continue their dialogue from a viewpoint that Japan-US relations are the most important bilateral relationship for both countries,'' urged Takeshi Nagano, chairman for Nikkeiren, an influential federation of companies.

Emerging from the summit, Hosokawa and Clinton stressed that trade difficulties did not undermine other aspects of the US-Japan relationship, particularly security. But many Asians are wary of Clinton's priorities.

``The Japanese would love to have the good old days of focusing on security rather than economics,'' says Robert Orr, an American executive who deals with the Japanese government in Tokyo, ``but I think there's been a shift in American policy towards placing commercial above security interests.''

In what many Japanese regard as the most alarming policy shift, Clinton, last autumn in Seattle, linked the reduction of US trade deficits to the continuation of the US security umbrella over the Pacific.

Asian leaders are likely to be dismayed by the impasse at the summit. ``It's really shocking,'' said Mr. Kase. ``The United States is the only country that can act as a policeman in this region. And that policeman is now complaining that unless he's paid handsomely, he will not patrol the area.''

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