NEWS ANALYSIS : Concessions Show Japan Yielding to U.S. Pressure : Trade: In latest move, auto makers are asked to plan more purchases of American parts. Experts say more disputes loom.
Under immense pressure from the United States over its huge trade surpluses, Japan has begun making concessions to American demands. But whether Tokyo will offer enough to head off a worsening of the trade dispute remains highly doubtful.
An argument over access to Japan’s cellular telephone market is very close to settlement, and Japanese auto makers have begun announcing steps to boost the purchase of American auto parts.
But even if the high-profile conflicts in these two areas are resolved, other disputes are waiting, on topics ranging from semiconductors to insurance to intellectual property rights. Also, some analysts believe that by waiting so long to yield in these areas, Japan has lost much of the benefit it could have gained by taking similar actions months ago.
“The Japanese stall and stall and stall and there’s no movement, and then the other side screams . . . and they try to do something,” said Paul Summerville, an analyst at Lehman Bros. Japan Inc. “I think that now the screaming got so loud, and (the threat of U.S. sanctions) is so scary for the Japanese, they’re caving in.”
The latest Japanese concession came Friday, when Hiroshi Kumagai, minister of international trade and industry, told a news conference that the Japanese government expects auto makers to map out, by the end of March, their plans to boost purchases of U.S. auto parts. His statement provides an official boost to a process that has already begun.
“If nothing is done, U.S. sanctions will come one day,” Kumagai declared. “I believe private companies understand this well.”
Mitsubishi Motors Corp. announced Wednesday that it plans to import about $2 billion worth of U.S. auto parts in the 1995 fiscal year. Last Saturday, Mazda Motor Corp. said it plans to purchase $2.4 billion worth of U.S. components in fiscal 1997. Japanese media have reported that Toyota Motor Corp. will unveil a plan to purchase $6 billion of U.S. parts in fiscal 1996.
Stung by Japan’s longest postwar recession, auto firms may actually be quite willing to dramatically increase imports of foreign parts, now that the strong yen has made imports even more of a bargain.
Japanese automobile makers “are not profitable as they’re currently structured,” Summerville said. “They have to take advantage of the strong yen to import parts. . . . They can use this pressure from the state as an excuse to jettison their smaller suppliers.”
In the cellular telephone dispute involving Motorola Inc. and the Japanese telecommunications firm Nippon Idou Tsushin Corp. (IDO), further progress was made Friday toward finalizing the details of a deal that would provide the U.S. firm with greater access to Japan’s market.
“It is in the final stage to finish up the negotiations, but there is still a possibility to change some parts,” said Miyuki Ochi, a spokesperson for Nippon Motorola Ltd.
An agreement between Motorola and IDO would head off the threat of U.S. sanctions on this issue. But a string of other conflicts loom on the horizon.
The next focus of attention may be semiconductors. Japanese and U.S. officials will meet in Hawaii March 22-23 to discuss calculations of the foreign share in Japan’s semiconductor market for the final quarter of last year. In the third quarter, this figure stood at 18.1%. If the final-quarter share is less than 20%--a goal mentioned in a 1991 trade pact--the U.S. side might initiate steps leading toward sanctions on the issue.
Many analysts believe that only a strong economic recovery in Japan would provide the domestic demand needed to pull in enough imports to significantly cut the nation’s huge trade surplus with the United States, which ran at $59.3 billion last year. But no end to the recession is in sight.
The long-festering trade imbalance has left the Japanese and American sides caught up in “posturing and confusion,” said T.W. Kang, a management consultant at Global Synergy Associates.
The threat of U.S. sanctions may bring positive results in opening up Japanese markets, but the risk remains that the conflict could get out of hand, Kang said. Mutual dependency exerts a dampening effect on extreme actions by either side, but it provides no absolute guarantee against a mutually destructive pattern of retaliation and counter-retaliation, he said.
“If America says, ‘Hey, we’re willing to shoot ourselves in the foot and go through a certain degree of pain to rectify this basic situation,’ I think that’s where things get kind of dangerous,” Kang said. “You cannot predict all the fallout of such an action.”
