2 in Japanese Cabinet Support U.S. Call for Reforms

The United States won some unexpected support from two Cabinet ministers Tuesday in its new bid to persuade Japan to revamp its economy “to give ordinary Japanese a better shake.” The two separately supported American appeals for reform.

Hikaru Matsunaga, minister of international trade and industry, told reporters after a Cabinet meeting that Japan will specify some changes in its distribution system and in other areas in which the United States demanded reforms by next spring.

Construction Minister Shozo Harada, in another news conference, agreed with the United States that spiraling land costs in Japan are restraining housing construction and spending on public works. He promised to support “a fundamental revision of land taxation,” including abolishing low taxation on urban land reserved for farming. Such a step would increase the supply of land for housing and business use, and, in the view of the American officials, promote imports into Japan.

The statements represented a more positive response to American appeals for Japanese to change their ways of doing business--and even their life styles--than President Bush received from Prime Minister Toshiki Kaifu at the White House last Friday.

While promising to consider reforms “from the standpoint of the consumer,” the new Japanese prime minister told Bush he could offer no guarantee of progress by next spring, when an interim report is to be issued in the new yearlong talks, which started Monday.

$50-Billion Trade Imbalance

The talks, dubbed the “structural impediment initiative,” are aimed at removing impediments in business practices, customs and systems in both countries that stand in the way of imports in the case of Japan and exports in the case of the United States.

Japan’s trade imbalance with the United States is running at a rate of about $50 billion this year, a level that Assistant Treasury Secretary Charles Dallara called “unsustainable.”

Undersecretary of State Richard McCormack, who headed a large U.S. delegation to the talks, insisted that the United States would bear its share of restructuring to make the American economy more export-prone. But neither he, Dallara, nor any other officials involved in the talks here, pinpointed specific U.S. reforms.

Japanese officials spent about eight hours Tuesday enumerating their list of complaints about the American impediments that they said make it difficult for the United States to slash its trade deficits.

They said the United States needs to save more, consume less, make its corporations less short-sighted, increase production capacity to meet export demand, develop more advanced production technology, abolish export-inhibiting legislation, end takeovers and levered buyouts that sap industrial competitiveness and train its workers better.

“We agreed with a great deal of the suggestions made by Japan,” McCormack said.

He and other U.S. officials rejected suggestions that the United States is trying to impose its ways of doing business on Japan.

Undersecretary of Commerce Michael Farren said that “all of the points we raised and the facts we cited really originated in Japan, like the Maekawa Report,” a 1986 government recommendation for a restructuring of the Japanese economy to make it dependent upon domestic demand, not exports, for growth.

McCormack, however, said he found it “shocking that Japanese products are often more expensive in Japan than abroad,” and added: “I find it remarkable that this situation is tolerated here.”

‘First Step’

The American proposals for Japanese reforms, he said, amount to a request for Japan “to distribute its abundance” to give “ordinary Japanese a better shake.”

Michihiko Kunihiro, deputy vice foreign minister and head of the Japanese delegation to the talks, said Japan would try to make the interim report due out next spring “one that will show as much as possible that the talks are moving forward.” But he added that the two-day session here was but “a first step in long and difficult talks” from which he, personally, emerged with “a feeling of tension.”

The next round of the talks will be held Nov. 6-7 in the United States, McCormack announced.