MITI Plays Old Game With Trial Balloon on Car Quotas
Japan is unlikely to increase its auto exports to the United States next year, and recent contradictory comments from Japanese trade officials on scrapping the nation’s 5-year-old system of voluntary export restraints were only trial balloons, auto industry analysts here say.
Officials at the Ministry of International Trade and Industry stirred confusion by first saying that the voluntary auto export quotas would be lifted next year and then stating that no policy had been set.
Some U.S. senators in Washington, possibly unfamiliar with the trial-balloon tactic that the Japanese refer to as “purposeful non-transparency,” lashed out against the announced plan to abandon the export restraints on U.S.-bound autos.
In Tokyo, however, industry analysts interpreted the MITI statements as a Japanese attempt to “test the waters.” These analysts maintain that there are good reasons to believe that the Japanese will want to continue to limit their exports of cars to the United States in 1986, keeping the quota at roughly this year’s level--2.3 million passenger vehicles.
The trial-balloon game began last Thursday, when a senior MITI official told reporters that Japan has had enough of self-restraint in auto exports to the United States and that his ministry was not thinking of continuing the practice after March. The remarks drew a predictably strong response from Congress.
“It’s unreasonable, it’s unfair and it’s an act of national arrogance,” Sen. Donald W. Riegle Jr. (D-Mich.) told reporters in Washington last Friday.
By Monday, another MITI official in Tokyo went on record as saying that his ministry was “monitoring the U.S. automobile market” and that “no decision has been made so far on the subject” of restraints.
Although MITI officials appeared to be engaging in some quick backpedaling, in fact they were straddling the fence, expressing support both for free trade and continued export quotas. Analysts said MITI might well be pursuing a course combining the two policies.
“Until the decision is finally made, MITI officials do not want to be wedded to any position--either for or against continued restraints,” said Steve Usher, an American who monitors the Japanese auto industry at the Tokyo office of Kleinwort Benson, a British investment banking firm.
Analysts such as Usher are betting that MITI and the Japanese auto makers will continue restraints on exports to the United States next year at roughly the same level as this year. But, between now and March 31, when this year’s commitment expires, MITI officials will have to mold a consensus out of widely divergent domestic interests.
Large-scale manufacturers such as Toyota and Nissan, whose exports together account for more than half of the 2.3 million cars in the quota, have reason to be happy with restraints on exports. But a number of smaller Japanese makers are eager to increase their sales in the U.S. market.
Shoichiro Toyoda, president of Toyota, hedged his bets Tuesday when he said he was sorry that “voluntary restraints on exports of Japanese cars have been maintained this year” and then added that, “at the same time, it is important that we are careful to keep exports orderly.”
As analyst Usher explained: “If Japanese car makers increase their quotas this year, they will undercut their own leverage in raising prices.”
A stronger yen already has increased the cost of production in Japan, forcing most makers to raise prices by about 5%. Sending more cars to the United States would make it more difficult for the Japanese to keep prices up.
Although the stronger yen is squeezing their profit margins, Japanese auto makers cannot turn to the domestic market to make up the difference. Competition there is so heavy that, for years now, car makers have relied on their sales in the United States for the lion’s share of their profits.
Thus, while smaller car makers such as Isuzu, Suzuki and Mitsubishi--whose combined share of the quota comes to less than one-sixth--are anxious to export more, a sudden increase in shipments to the United States is not likely to be good for the industry as a whole. For this reason, the strong U.S. response last week against the prospect of increased Japanese exports may have played into the hands of MITI officials.
“There is a pattern by which Japanese officials will from time to time seek foreign pressure as a means to justify actions which would otherwise not go down well at home,” said Tony Moyer, an auto industry analyst with W. I. Carr, a British brokerage in Tokyo. Among the beneficiaries of continued export restraints would be the MITI officials who oversee the annual parceling out of U.S.-bound car exports.
This spring, negotiations between car makers and MITI on that issue will give officials stronger control over one of Japan’s strongest industries.
