Japan to Retain Ceiling on Car Exports to U.S.

The Japanese government defied its domestic auto makers today and said it is retaining a ceiling on car exports to the United States at the current 2.3-million level to help defuse trade tensions.

“We decided to retain the export curbs for the 1990 fiscal year in order to confirm that exports are indeed on a declining trend,” Trade and Industry Minister Hikaru Matsunaga said at a news conference.

Japanese auto makers had pressed for the curbs to be abolished, arguing that they are no longer necessary as the exports look set to fall in 1989-90 for the third straight year.

Matsunaga said he expects car exports to the United States to fall to 2.05 million in the year to March 31, 1990, from 2.18 million in the previous year.

“The decision was a disappointment but it was inevitable,” said Shoichiro Toyoda, president of Japan’s biggest car maker, Toyota, and chairman of the Japan Automobile Manufacturers Assn. Last month he had said the quotas are no longer needed.

Exports to the United States are declining because Japanese auto makers are increasingly supplying American customers with cars made at their U.S. factories.

Some Bush Administration officials had called on Tokyo to remove the quotas. But Japan was more worried about upsetting an increasingly protectionist Congress ahead of mid-term elections later this year in the United States.

“This is a political gesture by Japan to show that it is trying to reduce its trade surplus with the United States,” said Richard Ko, an analyst with broker Barclay de Zoette Wedd Securities (Japan) Ltd.

Japan has restrained car exports to the United States since 1981-82, and trade officials decided that this is not the time to abolish the curbs, given forecasts of a weak vehicle market in the United States.

Matsunaga said he expects American demand for autos to fall to about 9.5 million or 9.6 million cars in 1990, from 9.9 million last year.

Although Japanese car exports to the United States may be falling, Japanese auto makers’ share of that market is rising because of their increased U.S. output. Ko estimates Japanese makers will sell close to 3 million cars in the United States this year, up from 2.85 million last year.