Japan Offers Loans to U.S. Firms in Bid to Ease Tensions : Trade: American auto makers are the focus of a government-controlled bank’s interest.
It really isn’t necessary, but the Export-Import Bank of Japan has beefed up a seldom-used program of low-interest loans for foreign firms--targeting U.S. auto makers in another bid to ease U.S.-Japan trade tensions.
The government-controlled bank’s negotiations with Ford Motor Co. came to light this week as friction intensified in the bilateral U.S.-Japan trade talks. Washington has set Sunday as a deadline to begin steps toward sanctions against Japan unless progress is made toward an agreement on Japanese government procurement of foreign telecommunications and medical equipment.
Ford confirmed Thursday that it is negotiating for such a loan. But Kenneth S. Brown, Ford’s manager of international public affairs, called the talks preliminary and low-level. Japanese press reports have placed the value of the proposed loan to Ford at about $300 million, although Brown said any loan would not necessarily be for that amount.
Chrysler and General Motors said they also have discussed the possibility of such loans with the bank. A Chrysler spokesman in Tokyo said an offer was initiated by the bank but that Chrysler turned it down because it already has the money it needs for a program to expand sales in Japan.
Indeed, Detroit’s auto makers might have been more excited about the loan offers a few years ago, when they were experiencing a severe downturn and facing powerful competition from Japan. Today, Ford and Chrysler are flush with cash and GM has more recently returned to profitability.
The Export-Import Bank views the proposed Ford loan as being tied to expanded production of right-hand-drive cars for export to Japan, Brown said. But Ford already has a program in place to expand such exports. This program is not dependent on any additional funding, he said, noting that Ford currently holds $13.7 billion in cash and marketable securities.
“Money available to us at a lower rate might be worth pursuing,” Brown said. “That’s the only basis on which we’re discussing it.” At today’s interest rates, such a loan could cost as little as 3.7%, a bank official said.
Still, U.S. auto firms have been among the strongest advocates of a tough trade policy toward Japan, as autos accounted for more than half last year’s $60-billion U.S. trade deficit with Japan. Thus the proposed loans can be seen as an effort to quiet some of Japan’s most vocal critics, said Peter Boardman, an auto industry analyst with UBS Securities Ltd. in Tokyo.
An Export-Import Bank official, who spoke on condition of anonymity, said there is no “political reason” behind the loan discussions, but that “the Japanese government is eager to import more” and that steps in this direction could help ease trade tensions.
Nihon Keizai Shimbun, a leading Japanese business newspaper, said the bank is discussing a loan of more than $300 million to Ford,and it predicted that an agreement would be signed in September. Comments by bank officials and Ford, however, portrayed any deal as far less certain in timing and amount.
“I think it’s reasonable to say that one of the things driving the bank’s interest in pursuing this is to show a response about continuing pressure on trade issues,” Brown said. “And in that regard, I suppose I’d have to say it’s potentially good.”
The bank official said that since 1990, the Export-Import Bank has offered foreign firms exporting to Japan the opportunity to take loans in yen or dollars at interest rates less than Japan’s prime rate. But only three such loans have been made.
