Japan Urged to Rely Less on Exports : Panel Asks Living Standards Boost to Ease Trade Friction

A government commission Thursday criticized Japan’s poor housing conditions, its high cost of living and its long working hours, and it announced a series of goals to improve living standards as a means of ending Japan’s reliance on exports for growth.

Haruo Maekawa, former governor of the Bank of Japan and chairman of a special commission on restructuring the national economy, submitted the report to Prime Minister Yasuhiro Nakasone’s Economic Deliberations Council.

Nakasone has said that he will take Maekawa’s recommendations with him to Washington next week as evidence that Japan will step up imports and emphasize expansion of domestic demand, as U.S. officials have urged.

U.S. Trade Representative Clayton K. Yeutter said the report contains more specifics than its predecessor. The 1986 Maekawa report called for reducing Japan’s dependence on exports in favor of expanding the domestic economy.

But Yeutter told Tetsuo Kondo, director of the government’s Economic Planning Agency, that speedy implementation of the new goals is essential.

“There is no time left to head off pressures against Japan in Congress,” he told Kondo.

Maekawa told reporters that he expects the restructuring to be carried out by 1993 or so, but he added that attention should be paid to implementing policies to spur reforms “in the next two or three years.”

The report specifies construction, petroleum-refining, distribution, financial services, transportation, telecommunications and agriculture as areas in which reform is needed.

Calls for Public Spending

It also recommends a strong injection of government spending, particularly in housing. It calls for deregulation to improve foreign access to Japan’s markets and stepped-up purchases of foreign products by the government itself.

Trade, it says, should become a minus factor in growth--with imports rising faster than exports.

Japan’s surplus in current accounts (the sum of trade and transactions involving shipping, insurance and tourism) “cannot be allowed to continue, either for the Japanese economy itself or for the harmonious development of the world economy,” the report says.

Last year the current accounts surplus reached $86 billion, or slightly more than 4% of gross national product--the biggest such percentage ever, for any nation.

Acknowledgment of serious trouble, however, failed to result in approval for a number of proposals that were debated in 43 commission sessions since last September.

Some members had proposed to cut in half, within five years, the current accounts surplus as a percentage of Japan’s GNP, but no such pledge appears in the final report.

Maekawa said the idea was dropped because Japan alone cannot rectify the current accounts imbalance. The report urges only that the surplus be slashed “as quickly as possible.”

If the United States fails to reduce its budget deficits and increase its industrial competitiveness, “the trade imbalance won’t be rectified,” Maekawa said.

Also absent from the report is a proposal by some commission members that Japan demonstrate its commitment to free trade by unilaterally abolishing tariffs on manufactured goods.

Instead, it calls for the unilateral lowering, or removal, of duties on imported manufactured goods that will not damage domestic industries. For other manufactured goods, it says, negotiations to abolish tariffs mutually should be undertaken in the round of discussions now taking place in Uruguay under the auspices of the General Agreement on Tariffs and Trade.

The report advocates a reduction of annual working hours from the present 2,160 to 1,800 (the equivalent of a five-day workweek with 20 days of annual vacation plus public holidays) as a measure to spur consumption. But it stops short of urging the government to adopt a five-day week for civil servants.

Maekawa’s report endorses the retention of Japan’s policy of self-sufficiency in rice and its ban on rice imports--the removal of which was sought this week by Agriculture Secretary Richard E. Lyng.

But the report recommends reducing the huge differential between Japanese and international prices for food, including rice.

To back up the report’s call for better living standards, the Economic Planning Agency calculates what Japanese living costs would be if American prices prevailed here. Based on 1985 prices at an exchange rate of 155 yen to the dollar, it said that monthly household expenses could be reduced by 28%, to $1,341 from $1,868.

In 10 categories, only education is more costly in the United States than in Japan, the agency says.