Japan's steps to let more US imports in appear to fall short
Yasuhiro Nakasone was in and out of New York last week, but the Japanese trade surplus didn't go away. The prime minister's get-together with President Reagan was almost ceremonial. Both agreed the yen should be kept strong. But that wasn't much in the way of news. As with most Japanese visits, the real news preceded their chat.
There was the ``action program'' Tokyo announced July 30 to increase foreign access to the Japanese market. At a meeting of the Group of Five industrial nations Sept. 22, Japan and the other participants agreed that a devaluation of the dollar would be appropriate. Since then, the yen has appreciated substantially, partly because of Japanese central bank intervention in the foreign-exchange markets, partly because Japan has discouraged its institutional investors from putting their money into the United
In mid-October Japan unveiled measures designed to stimulate its domestic economy and ease trade tensions with the US by prompting more imports.
Finally, Mr. Nakasone last week told the United Nations that Japan would increase its level of foreign aid to a total of $40 billion from 1986 to 1992. That would double Japan's current level of aid by 1992.
All these moves are welcomed in Washington as an indication of the Japanese desire to do something about its troublesome trade surplus. The devaluation of the dollar in yen terms may be the most helpful over time in improving the trade situation and alleviating protectionist pressures in the US.
But experts in the US State Department and elsewhere doubt the other measures will be adequate for substantially lowering its trade imbalance with the US of around $50 billion this year. Indeed, some expect that deficit to be even worse next year.
A State Department official says the ``action program'' might boost US exports to Japan by $5 billion. Japanese government officials say their stimulative measures might increase output by about $19 billion, or 1.3 percent. But that won't draw much more in US exports.
American Ambassador Mike Mansfield helped kick off a two-month Japanese government campaign to boost imports Oct. 5 at one of a series of 1,100 special fairs, but cheerleaders and marching bands may not help much.
As for foreign aid, Japan last year provided $4.3 billion to developing countries, up 14 percent from the year before. So presumably Mr. Nakasone was talking of more than $8 billion by 1992.
Japan is the world's second-largest provider of foreign aid after the United States in absolute terms. On the basis of aid as a percentage of gross national product (GNP), it ranks 11th of 17 industrial nations in generosity, at 0.32 percent. The US is last, at 0.24 percent. Saudi Arabia runs first, at 3.29 percent of GNP.
Economist Sam Nakagama contends one solution would be for Japan to sponsor a Marshall Plan for China: ``On the face of it, this may not seem like an appropriate remedy. But in view of the mechanics of exchange-rate determination and the historical patterns of trade and investment, it may be about the only viable answer.''
The Japanese-American economic consultant hopes Japan can provide the ``major underwriting'' for the economic development of China through loans, grants, creation of a China Development Bank, and other means. This would stimulate China's growth and expand its markets for both Japanese and American goods.
Mr. Nakagama maintains, for example, that it makes much more economic sense for Japan to be building new automobile plants in China than in the United States, which already has an abundance of such plants.
At the moment, China is sharply reducing its imports from Japan because of a foreign-trade deficit. Industrial production in China showed year-over-year increases of 23 percent in the first half of 1985 and 14.7 percent in the third quarter; Japanese exports to China more than doubled in the first half of the year.
But China's foreign-exchange reserves have plunged sharply, from $16.7 billion a year ago to less than $10 billion, Nakagama says. So China has cut back on its imports of Japanese motor vehicles, color TVs, and other consumer durables. As a result, business activity is slowing in Japan. Nakagama says it could even be negative in the current quarter.
So if Japan can provide China with more financing, the Chinese could buy not only more Japanese consumer and capital goods but US computers, telecommunications equipment, jet airlines, and oil-field equipment.
China is also exporting more farm products to Japan, eating into US exports of food. This year Japan has already contracted to buy 2.5 million tons of corn from China. This means the US share of the Japanese market for corn is expected to drop from 97 percent last year to 75 percent this year. China is also cutting into the US share of the Japanese market for cotton (51 percent to 25 percent) and will perhaps shrink American exports of wheat and soybeans, Nakagama says.
The New York economist concludes that the Marshall Plan for China, as well as boosting US exports, would use excess Japanese savings, provide enough growth in Japan to encourage that island nation to open its market to imports, give constructive jobs to skilled Japanese bureaucrats retiring at the normal age of 55, and encourage more US companies to tackle the Chinese market.
From a more political standpoint, this would help Peking to continue moving along the ``capitalist road,'' Nakagama says.
Japan already has a budget deficit equivalent to 6 percent of GNP, larger proportionately than in the US. That will prompt resistance to such a Marshall Plan within the Japanese Finance Ministry. Japan also taxes its citizens far less than most industrial nations.
Whether Japan could politically manage to help out financially its former enemy may be dubious. But if Mr. Nakagama is right, it may also help itself by reducing protectionist risks attached to its huge trade surplus.