U.S. and Japan Are Trading Misreadings of Each Other : News analysis: Japanese taken aback at Clinton’s firmness, observers say, while U.S. overlooks political shift abroad.

With their two countries on a collision course, U.S. and Japanese officials are deeply concerned that a series of dangerous miscalculations lie at the root of a seemingly intractable dispute that threatens to poison one of the world’s most important economic relationships.

When Japanese Prime Minister Tomiichi Murayama heard President Clinton insist, in their meeting Thursday, that the United States would not back off its deadline for resolving their dispute over automobiles, he was so taken aback that a White House official was prompted to say later, “The Japanese have misheard us and misunderstood us all along.”

But there are signs, too, that the United States miscalculated Tokyo’s position, ignoring changes that have occurred politically and economically in Japan since the end of the Cold War.

As a result, both sides are scrambling to find an amicable solution as they near the eleventh hour in a dispute that has defined their relationship for nearly two years. Failure could produce an unprecedented rupture if the United States follows through on its threat to impose 100% tariffs on the import value of 13 top-of-the-line Japanese automobiles.

Although no one is willing to predict that the sanctions will be headed off before the June 28 deadline, some officials are privately expressing cautious optimism that the message of U.S. commitment to the deadline is finally getting through to the Japanese.

“We had been hearing, through the embassy [in Tokyo] and elsewhere, that there was some uncertainty in the Japanese mind about whether we would go forward,” a senior Clinton Administration official said Friday.

Clinton apparently drove home the message when he met with Murayama for an hour and a half just before the start of the Group of Seven summit of the world’s largest industrial democracies, the event that brought them both to this Canadian seaside provincial capital.

If the United States has miscalculated, said a Japanese official, speaking on the condition of anonymity, it has been in thinking that a period of weakness in the Japanese auto industry, Japan’s lag in emerging from the global recession and the strong yen that makes Japanese products more expensive when bought with dollars, would all lead Japan to cave in to U.S. pressure.

The United States, he said, may also be pinning too much hope on signs that the Japanese auto industry may pressure the Ministry of International Trade and Industry to yield to the Americans, in order to bring the already disrupted flow of luxury vehicles back to normal.

If Japan has miscalculated, he said, it may have done so by misreading the political benefits the Administration believes it could collect from a decision to stand up to what are widely seen in the United States as unfair trade practices.

The current situation fits a pattern that has prevailed over the long history of U.S. efforts to open Japanese markets to American products.

“The pattern is they go down to the wire, and we’re a long way from the wire,” said Clyde Prestowitz, a trade hawk in the Ronald Reagan Administration who is now executive director of the Economic Strategy Institute in Washington.

But Prestowitz said in a telephone interview Friday that what strikes him is this question: “Are we in a new era of negotiations with the Japanese?”

Throughout the Cold War period, the reliance the United States placed on Japan as a strategic anchor for U.S.-led military policy in the Pacific overcame any economic differences.

Now, Prestowitz said, “this Administration has given top priority to the trade relationship. I don’t think the Japanese clearly understood that when the talks started.”

But there were changes taking place in Japan that the Clinton team also misread. “We haven’t fully recognized the psychological changes in Japan,” Prestowitz said, referring to the recent ouster from power of the Liberal Democratic Party after 38 years and the maturing of a new generation of politicians.

“In Japan’s mind, they’ve painted a picture of themselves constantly giving in to American pressure, constantly bowing down to us,” he said.

These shifts in Japan have also led to a shift in the balance of power within the key ministries there. The Ministry of International Trade and Industry has assumed a preeminent position, in the U.S. view.

In MITI, as it is known, a coterie of young officials is seen as having hijacked Japanese policy toward the United States and molded it to fit the political ambitions of its minister, Ryutaro Hashimoto.

Hashimoto, in turn, is seen by some in Washington as trying to ride a wave of “America bashing” into the prime ministry.

* ECONOMIC SUMMIT

Leaders of the world’s richest nations promised to defend the U.S. dollar and ward off global recession. A1