Japan to Extend Car Export Quotas to ’87 : Government Will Retain 2.3-Million-Unit Ceiling on Shipments to United States

The Ministry of International Trade and Industry is expected to announce today that it has decided to extend government-enforced limits on auto exports to the United States for a sixth year at the same high level now in effect.

Officials of the ministry, who informed foreign correspondents of the pending announcement late Wednesday Los Angeles time, declined to give any details in advance. But Japanese news reports said the ministry had decided to retain this year’s limit of 2.3 million cars.

Japan’s trade surplus with the United States reached a record $49.7 billion in 1985, and auto exports accounted for one-third of it. That was $12.9 billion more than 1984, and of that, an estimated $5 billion came from the increase that Japan allowed in the quota that it set last year.

When Japan extended the restraints for a fifth year last April, some critics called the 2.3-million limit so high as to be meaningless since it represented more cars than the Japanese had ever exported to this country before.

Concern Over Trade Imbalance

Fears that the overall U.S.-Japan imbalance would expand dramatically if export quotas assigned to each auto maker were lifted appeared to be the main consideration in the reported decision to retain the 2.3-million limit for fiscal 1986, which begins April 1.

Michio Watanabe, minister of international trade and industry, had predicted in January that an end of the unilateral Japanese limit would precipitate a 20% increase in car exports to the United States.

The current high limit, which covers the 12-month period ending March 31, triggered an explosion of anger in Washington when it was announced last March. President Reagan had just decided not to ask Japan to extend a program of mutually agreed restraints, which had began April 1, 1981.

Some members of Congress claimed that the 2.3-million car limit--up 450,000 cars from the fiscal 1984 limit--amounted to no restraint at all. Congress eventually passed a resolution calling for trade retaliation against Japan. The White House, despite Reagan’s public disavowal of a desire for continued restraints, also reacted with hostility to the decision.

This time, Japanese diplomats were reported to have secured assurances in advance from officials at the White House, the Treasury and State departments and the U.S. Trade Representative’s office that the United States would not object to today’s decision.

Smaller Firms Seek Expansion

All of the smaller Japanese car exporters--Mazda, Mitsubishi, Suzuki, Isuzu and Fuji Heavy Industries, makers of the Subaru--have made clear their desires to expand exports to the United States dramatically. And both General Motors, which criticized last year’s decision as too restrictive, and Chrysler have announced hopes to procure even more cars from their Japanese partners for sales through their American dealers.

Another auto maker, Daihatsu, a major manufacturer of “midget cars,” also has revealed its plans to start exporting to the United States.

In the current quota program, Daihatsu is excluded from exporting to the United States.

American criticism of Japan’s trade policies has subsided somewhat since the finance ministers of five advanced countries decided last September to work for appreciation of all major currencies against the dollar. The yen subsequently appreciated 22% against the dollar, making Japanese exports to the United States more expensive.

But Prime Minister Yasuhiro Nakasone was reported to be concerned that the rancor will reappear on the eve of the seven-nation economic summit that he is scheduled to host in Tokyo in early May.

The decision to enforce a sixth year of export quotas is expected to anger Japanese auto makers, who recently argued against any extension of limits on the grounds that South Korean automobile exports to the United States would eat into Japan’s share of the American market. Last year, that share amounted to slightly more than 20%, or below the level when the restraint program was initiated in 1981 with an annual limit of 1.68 million cars.

Only one South Korean maker, Hyundai, is now exporting to the United States and hopes to sell 100,000 cars there this year. It will be joined by two others in 1987, when South Korean exports are expected to rise to as many as 400,000 cars.