A reporter should never pretend to be an expert on a country after a one-week visit, especially when the country is Japan.
Nonetheless, having offered the reader that warning, I'm going to proceed with some impressions based mainly on interviews and informal conversations with Japanese government officials, shipping executives and U.S. residents here.I think U.S.-Japan trade may finally be turning the corner, even though the U.S. deficit with Japan probably will reach $60 billion this year, up from $50 billion in 1985.
One reason for the increase this year is the lag effect of the so-called J curve. While the sharp appreciation of the yen is certainly making a big dent in the profit margins of Japanese exporters, there hasn't yet been a dramatic change in the trade as measured by value. Japanese goods being sold in the United States cost more in dollars than they used to, even though the sales measured in yen were down 16 percent in the first nine months of this year.
The appreciation of the yen should have more effect as time goes on, with Japanese exporters realizing they simply can't afford to sell their products at a loss for long. U.S. importers will also switch increasingly to suppliers in South Korea, Taiwan, Hong Kong and Southeast Asia.
Another factor is the constant barrage of announcements from the Japanese government about new packages to stimulate the domestic economy and statements urging consumers to buy more imports. Although some Americans here tend to dismiss such statements as rhetoric , I tend to believe that mere repetition alone should have some impact on the Japanese mind.
One Japanese official here cites the example of import bazaars at a department store in Toyama prefecture. When they began, the consumers tended to be skeptical about buying foreign products. But now, he says, people are buying more and more foreign goods.
Another positive sign is the increasing investment by Japanese in overseas manufacturing facilities, most notably automobile assembly plants in the United States. That trend should continue as the Japanese strive to combat protectionist sentiments.
On the other hand, there are negative signs. The Japanese are erecting tough non-tariff barriers to the import of European skis and related equipment, going so far as to declare that the snow in Japan is special and that there should be different standards for skis used here.
The same official who cited the example of the import bazaars in Toyama conceded that the Japanese handling of this case is ridiculous.
Another obstacle is the fact that Japan's ruling Liberal Democratic Party has its power base in the countryside. Not wishing to antagonize its rural constituents, the LDP is reluctant to liberalize its policy on agricultural imports, an area where the United States could achieve significant gains.
Because of protectionism here, the price of beef is so high that it's actually possible to import live cattle and pay the price of quarantining and slaughtering them and still make a profit. On the other hand, one American notes that only about 50 or 60 head of cattle have been imported and suggests that the Japanese would probably establish import quotas if the business grew to any significant volume.
Still another obstacle to reducing the trade deficit is the fact that imports here simply aren't fashionable the way they are in the United States.
The Japanese have a strong cultural preference for products made in Japan. That may be changing somewhat in Tokyo and Osaka, where large numbers of Japanese have lived abroad and tend to be more sophisticated. But the preference to buy Japanese is still very strong in the countryside.
Some of the biggest barriers to reducing the trade imbalance, however, may lie across the ocean.
The United States remains firmly opposed to the export of Alaskan oil, largely because of opposition from U.S. maritime unions that are concerned about the loss of jobs if the ocean transportation of oil were opened to competitive bidding. One possible solution, however, might be to reserve 50 percent of those shipments for U.S.-flag tankers.
Another problem on the U.S. side is that U.S. companies still have relatively little experience competing in overseas markets.
For that matter, many of them also seem to have relatively little interest in exporting. Hopefully, that will change, especially as people realize that the drop in the value of the dollar has created new possibilities for U.S. products overseas.
It won't be easy, but I hope the next few years will see more efforts on both sides of the Pacific to reduce trade frictions. The U.S.-Japan relationship is too important for it to be disrupted by continuing and growing tension over trade issues.