Japan hopes to calm US protectionism by limiting auto exports
In a bid to calm down protectionist sentiments in the United States Congress, the Japanese government announced it will extend its five-year voluntary restraint on auto exports for another year. Japan's burgeoning trade surplus with the US last year left Tokyo with little alternative than continuing the export curbs. ``Without doing this kind of thing,'' a trade official here said, ``free trade will not be maintained.''
``There was a clear request from the US side,'' the official stated, citing a bipartisan letter sent last month by 13 US senators, calling on Japan to ``make every effort'' to maintain the rein on car shipments.
International Trade and Industry Minister Michio Watanabe told reporters yesterday that Japan will hold auto shipments to 2.3 million units in fiscal year 1986 (which starts April 1) -- the same as in the past year. Mr. Watanabe said that Japan cannot allow ``torrential'' exports of cars to the US.
One trade official estimated that without restraints, Japanese auto exports could grow by as much as 20 percent. Last year the limit on auto exports was raised from 1.85 million cars to the current 2.3 million. largest trade surplus for that month ever.
According to trade officials, that increase was responsible for a third of the record increase of Japan's trade surplus with the US, which rose last year from $36.8 billion to almost $50 billion.
Though the decision was hardly a surprise, the Japanese auto manufacturers immediately expressed their unhappiness with the policy.
``It is clear in terms of the problems in the automotive industry,'' said Shoichiro Toyoda, President of Toyota Motor Corporation, ``that there is no need to continue the voluntary export restraints.'' The head of Japan's largest carmaker called the decision a ``top political judgment,'' but conceded that ``we cannot help but accept it as is.''
Japanese carmakers say US automakers are reaping big profits from the recovery in the car market and no longer need the protection first given them in 1981.
The auto quota is allocated among eight Japanese automakers, with the big three companies -- Toyota, Nissan, and Honda -- getting almost 70 percent of the amount. The smaller companies -- Mazda, Mitsubishi, and others -- have complained most strongly about the restraints because it blocks them from expanding their sales even at the expense of other Japanese companies. The larger companies have been able to compensate in their profitmaking strategies by substituting more expensive models for the cheaper compact cars which had been the mainstay of Japanese exports.
The restraints, and the fear of protectionist barriers, have encouraged the Japanese companies to set up increasing numbers of production plants in the US. Cars made in the US by Honda, Nissan, and Toyota are not counted in the quotas.
Japanese companies are also beginning to feel the impact of the rapid rise of the yen's value, which has risen more than 20 percent relative to the dollar in the past four months. This increase has not been fully passed on to buyers. Prices of Japanese cars in the US have risen, officials here say, about 3 to 6 percent. The profit margin on Japanese cars will allow manufacturers to keep price increases to a minimum, a trade official predicts.
With increased competition, including low-priced compact cars made in Korea and Yugoslavia, the Japanese companies' priority will be to maintain their current share of the US auto market -- which now exceeds one-fifth of the total market.