NEWS ANALYSIS : U.S. Suspends Bid for Japan Trade Deal : Trade: The Administration is waiting for a new government to take over, but analysts say it won’t make much difference.

The Clinton Administration has given up on obtaining any major trade agreements with Japan until elections later this month put a new government in place here. But analysts say a new regime will neither be more amenable to American interests nor more capable of responding to U.S. demands.

The not-so-young Turks preparing to overthrow the ruling party are proving surprisingly conservative. While they talk of new policies, few say they would favor tax cuts or new government spending if it means increasing Japan’s budget deficit. Yet, such measures may be the only way for Japan to boost growth and cut trade surpluses within the three-year time span that the Clinton Administration has insisted upon.

To make matters worse, the current political turmoil, triggered by a parliamentary vote of no confidence last month against Prime Minister Kiichi Miyazawa, could last as long as two years--strengthening the hand of bureaucrats who will continue to stubbornly resist any demands to boost Japan’s economy.

Most bureaucrats believe huge trade surpluses are good for Japan, while trade deficits are not necessarily bad for the rest of the world. Japan does not need faster growth, they argue. “We don’t have social problems like America or Europe,” said a senior Finance Ministry official. “Our unemployment is just 2.5%.”

In a comment that reveals the power of Japanese bureaucrats, Jiro Saito, the Finance Ministry’s new top official, recently told Japanese reporters that: “No matter who is in power, we will do what we think is right.”

Breaking such resistance will not be easy. The Clinton Administration’s high decibel haranguing of Japan on trade issues in recent months, for example, has done little more than galvanize Japanese opinion against the Administration’s “results-oriented” proposals.

Citing the power vacuum here, the President last week put off additional pressure on Japan on a variety of trade issues, including increasing imports of U.S. apples, and opted to postpone sanctions against Japan for maintaining a virtually rigged construction market. The Administration had hoped to at least have a framework in place for dealing with these issues in time for the opening here on Wednesday of the summit of the world’s leading industrial countries.

The United States has asked that new trade agreements include numerical indicators to measure progress toward specified goals to make sure results are achieved. One goal is that Japan cut its trade surplus by about half, to less than 2% of gross domestic product.

Japan has refused to accept such agreements because of what government officials regard as an implicit threat of retaliation if the goals are not reached. Where Japan once appeased the United States with huge packages of “market-opening measures” to indicate the sincerity of its efforts, Japanese officials are now suddenly insisting they are following free market principles. Targets to increase imports of the kind the U.S. demands, they say, would disturb the workings of the free market.

Critics say nonsense. “Japan talking about free trade is like prostitutes talking about love,” said Chalmers Johnson, an expert on Japan at UC San Diego. He points to extensive government management of virtually every facet of the Japanese economy.

Johnson’s solution? Shock therapy. Former President Richard Nixon tried it in 1971 with some success, when he temporarily slapped a 10% surcharge on imports and forced a reluctant Japan to revalue its yen.

“Japan tends to be reactive, so you have to give them something to react against,” Johnson said. He argues that pressures for change toward a more consumer-oriented society are already building within Japan and that such a shock from the United States could trigger a rapid move in that direction.

The Clinton Administration is unlikely to take such tough measures because it appears unready to face a possible heated response from Japan. Some Japanese officials are edgy, nonetheless. One Foreign Ministry official said his wife wondered nervously if the United State’s recent missile attack on Iraq’s intelligence agency was meant as a warning to Japan.

But it may take something more than verbal artillery to persuade Japan that it must take American demands seriously.

Ministry of International Trade and Industry officials say they have tried everything to open Japan’s markets and have run out of ideas. Naohiro Amaya, a former vice minister at MITI, suggests in a recent article in the monthly journal Voice that Japan may simply have to offer the United States a “tranquilizer” to keep it quiet.