Japan’s Ruling Party Balks on Trade Proposal

Prime Minister Toshiki Kaifu’s Cabinet on Friday completed an initial draft of reforms that President Bush has called crucial to maintaining U.S.-Japan trade relations, but leaders of the ruling Liberal Democratic Party rejected it as inadequate to meet American demands.

Full details of the proposal were not revealed. But even before his party leaders turned it down, Kaifu told reporters that the draft should not be considered Japan’s final position on the increasingly controversial trade issue.

“There are still some points on which we are trying to make further progress,” he said.

Chief Cabinet Secretary Misoji Sakamoto handed the draft to officials of the ruling party, including Secretary-General Ichiro Ozawa. But after hearing an 80-minute explanation of it, the officials declared that the draft did not go far enough and asked the government to resubmit a beefed-up plan.

The draft appeared to fall far short of meeting many reforms of structural impediments to trade that Bush, in a summit meeting with Kaifu in Palm Springs early this month, said were crucial to forestalling an outbreak of protectionism against Japan by Congress.

For example, Kaifu’s home affairs minister, Keiwa Okuda, complained both in a Cabinet meeting that approved the draft and later at a news conference that a law protecting the nation’s 2.6 million mom-and-pop stores should be abolished or amended, as the United States has demanded.

Instead, the draft called only for speeding up procedures to approve the establishment of supermarkets and department stores to “within two years” of the date of applications. At present, consultations that are required with local shopkeepers can consume as long as 10 years.

During an election campaign in February, Kaifu himself promised voters that he would not revise the Large-Scale Retail Store Law. On Friday, however, the prime minister said work on “adjusting opinions” concerning the law was still in progress. U.S. trade experts believe that the larger stores would be more likely to carry imported goods.

Shopkeepers’ associations scheduled a mass demonstration Monday to oppose revision of the law, while Sueaki Takaoka, chairman of the Japan Chain Store Assn., demanded that it be abolished.

Kaifu’s draft, however, did meet--at least partially--a U.S. demand for revision of the Anti-Monopoly Law that would increase fines on firms that join illegal cartels, a move that the Fair Trade Commission itself had opposed. But the draft rejected an American demand that private citizens be guaranteed the right to file suits and recover damages against collusive business practices.

To an American request that Japan spend as much as 10% of its gross national product on public works to reduce the gap between investment and savings, Kaifu’s draft called only for an unspecified increase in spending on sewage facilities, parks and other public projects.

Former Prime Minister Noboru Takeshita, meanwhile, told reporters traveling with him in Brazil that he had agreed with Treasury Secretary Nicholas F. Brady to suggest that Finance Minister Ryutaro Hashimoto meet Brady next weekend to work out differences over Japan’s public works spending.