Cellular Pact May Not Trigger Buy-U.S. Spree : Trade: Japanese are unlikely to rally around American products even if they are significantly cheaper.

The United States and Japan may have forged an agreement that will intensify competition in cellular communications along the crowded Tokyo-Nagoya corridor. But Americans shouldn’t expect a big “thank you” from Japanese consumers.

In the latest trade dust-up between the two nations, it is Motorola and America that are the targets of Japanese wrath, not the companies that have been charging consumers rates four to five times those in the United States.

“Re-Emergence of Prewar Economic Blockade,” and “Down With Coercive U.S. Diplomacy” were among the anti-American graffiti sprayed on the walls of Motorola’s headquarters in downtown Tokyo earlier this month after America threatened to impose trade sanctions on Japan.

Since the White House threatened sanctions, “all of us have come to hate America,” said journalist Toshiaki Ohno of other Japanese reporters covering telecommunications. “The role of Japanese consumers isn’t to boost profits at American companies.”

The intensity of Japan’s response to American pressure is a symptom of the economic nationalism that bubbles up a little more fiercely here each time there is a trade dispute between the two economic powers. It also underscores the depth of the gulf that divides Japan from the West on just what constitutes free trade and what Japan must do to open its economy. The agreement reached between the United States and Japan Saturday allows Motorola Inc. to compete on equal footing with Japanese companies in providing cellular phone service in the heavily populated region stretching from Tokyo to Nagoya. Motorola had maintained that its local partner, Nippon Idou Tsushin Corp. (IDO), had thwarted sales in the coveted, 155-mile corridor.

Even so, an outbreak of American-style competition among cellular companies in Japan seems unlikely.

Delays already have provided Japanese suppliers with the crucial lead time necessary to bring their costs in line with Motorola’s. And by the time IDO’s Motorola network covers most of Tokyo 18 months from now, it will face additional competition from new companies offering digital services--some of them beneficiaries of a new Japanese government low-interest loan program.

In the meantime, the Japanese government is taking steps to prevent cellular phone prices from falling too rapidly.

And Japanese consumers are not ready to fight for lower prices if it means that increased competition will damage Japanese firms that employ family members and friends.

The attitude of Tokyo businessman Asahio Goto is typical. “We Japanese are sympathetic to NTT (the national telephone monopoly) because they have so many employees they have to support,” he said.

Though he would use a cellular phone if prices fell, Goto is stoic about doing without the luxury: “I make do with a pager.”

Given the unchanging nature of Japanese institutions and attitudes through Japan’s long effort to catch up with the West, some experts doubt the cellular phone pact will change the Japanese marketplace very much. Japan expert Chalmers Johnson sees such concessions by the Japanese less as progress toward an open market than as a “smoke screen to buy time,” doing little to change the ways of the Japanese economy.

America’s hopes for genuine change in Japanese trade practices arose from the fall last July of the Liberal Democratic Party, one of the three sides of the iron triangle that has ruled the country for three decades.

But the two other powers--industry and bureaucracy--have remained as an even more powerful iron axis that continues to favor industry interests over those of consumers and local producers over foreign producers.

It is the bureaucrats who were up late trying to find ways to appease Motorola’s demands. And it is the bureaucrats who will move the levers of the economy to try and lower Japan’s attention-getting trade surpluses. That won’t necessarily mean more American imports. One likely solution: shift the surpluses to Asia, countries by assembling more products in Southeast Asia and China for re-export to America and the rest of the world.

When Japan began offering cellular phone service 14 years ago, it was bureaucrats in the Ministry of Post and Telecommunications (MPT) who required that all phones be leased, enabling service providers to set high prices for phone rentals. Today, while American cellular providers subsidize the sale of phones to encourage their use--allowing stores to sell them for as little as $50--Japanese companies rent the phones for $80 a month and more. Until recently, NTT even required consumers to pay a $952 deposit for each phone rented.

During Japan’s economic bubble in the late 1980s, cellular sales grew in spite of the high cost. Image was everything, and there was nothing quite as striking as being seen using a cellular phone.

When the economy dipped in 1991, however, so too did growth.

Under pressure from America and from reformers within Japan, the MPT agreed two years ago to allow cellular phones to be purchased as of April 1, 1994. At the same time, two new cellular phone carriers will be allowed to enter each market with new, digital technology that makes more efficient use of radio waves than the Motorola-IDO analog system.

In anticipation of the new competition, NTT dropped its deposit requirement in October, and cellular phone carriers began cutting their prices. Lower prices immediately drove cellular phone subscriptions up 200%, triggering a wave of anxiety among Japan’s cellular firms about “prosperity without profit.”

Already, the Japanese government has taken steps to stabilize prices. When a company part owned by Pacific Telesis recently discounted some rates, MPT scolded the firm for acting in a way that might “demoralize” other dealers. Taihei Kurose, an official in MPT’s Mobile Telecommunications division, said the agency acted to avoid “market confusion.”

Explains Phua Lee Kerk, senior analyst at Baring Securities (Japan) Ltd.: “Since they have been a protected market, cellular phones are one of the few areas that have been generating cash. At U.S. price levels, the Japanese companies can’t survive.”

Even with the agreement between Tokyo and Washington, Motorola has cause to be suspicious of its Japanese partner.

IDO is a consortium of such establishment-style companies as Toyota, Tokyo Electric and NEC. When it first began competing with NTT more than a decade ago in providing cellular service, IDO chose to use NTT technology rather than Motorola’s, a decision attributed to the influence of Japan’s old boy network.

“Toyota is the largest shareholder of IDO. They can’t go against NTT or it will start buying more of their cars from Nissan,” said analyst Kerk.

IDO later agreed to introduce Motorola technology, under pressure from the United States. Less aggressive and less successful than its counterpart in eastern Japan, the IDO system covers less than half of the Tokyo-Nagoya market. Consequently, Motorola has sold only 12,000 phones in the region. The new trade pact allows low-cost Motorola to more than triple its capacity in Japan to 450,000 subscribers from about 150,000.

As Motorola moves to achieve that goal, it undoubtedly will encounter competition from upstart Japanese equipment-makers funded with special low-interest loans designed to encourage domestic production of cellular phones.

Last month, for example, the MPT initiated a program that would allow any company investing in cellular phone production facilities to borrow up to 40% of the investment costs from the Japan Development Bank, a quasi-government institution, at interest rates as low as 3.5%.

Although government officials are periodically introducing new measures they say will stimulate the economy and boost imports, measures such as these could have the effect of discouraging imports.

Currently, many of the cellular phones Japanese companies sell overseas are made in America using American components. The MPT said it wants to encourage Japanese manufacturers to take advantage of recent market liberalization to boost production. An official said Japanese subsidiaries of American companies would have access to the loans if they were willing to set up manufacturing facilities in Japan.