Japan moves to widen trade with US while boosting economy
Japan's latest measures to stimulate the domestic economy are linked to steps to reduce frictions with its foreign trading partners, especially with the United States.Skip to next paragraph
Subscribe Today to the Monitor
These steps include the reduction or elimination of tariffs on a variety of Japanese imports, including food and industrial products. The tariff changes are to take effect on April 1, 1984.
On the domestic front, the package of economic reflationary measures is given a better chance of succeeding where earlier ones have failed.
Previous packages - the most recent announced last April - have tended to be heavy on good intentions but light on substantive economic stimulation. But this time there is a great deal of substance to get the domestic economy back on the track of steady growth and to take some of the heat out of international trade friction, say a number of leading economic analysts.
The measures are not expected to have much impact in the current financial year, which ends March 31. But there are predictions that Japan's embarrassingly large international payments surplus could be cut by as much as $3 billion in fiscal 1984. Whether that will be enough to placate the US remains a moot point.
The indications are that this year the Japanese will have a trade surplus of overall balance-of-payments profit of some $20 billion.
This was one of the factors that finally persuaded the government to take the plunge after long hesitation.
Other considerations were President Reagan's visit to Tokyo next week and strong pressure from the ruling Liberal Democratic Party to have something to offer the electorate, should Prime Minister Yasuhiro Nakasone decide on an early general election as expected.
Although the domestic economy has resisted all previous attempts at reflation , the Economic Planning Agency this time is confident the targeted GNP growth of 3.4 percent for this fiscal year can be achieved.
Key measures in the package are a cut in personal income and residential taxes totaling some $5.2 billion, additional public works outlays of more than $ 8 billion, a cut in the Bank of Japan's official discount rate from 5.5 to 5 percent, reduction three years ahead of international schedule of import duties on 1,200 products, and provisions for low interest loans from the Export-Import Bank to encourage purchases of imported manufactured goods.
The Finance Ministry plans to make it easier for foreigners to acquire stocks and invest in real estate here as part of its program for ''internationalization of the yen.'' And other specific measures to stimulate the inflow of foreign capital are under consideration, ministry sources said without elaborating.
But there are a number of question marks. In view of chronic budgetary deficits, there is the issue of how the government is going to finance the various measures. Another problem is how to shrink the trade surplus. This can occur if local manufacturers are able to divert a substantial portion of their output from the export to the domestic market, a very uncertain prospect. And even with import duty cuts there is still no guarantee local demand for foreign products will grow significantly.
There is also a question of translating the measures into positive action at a time when the government is increasingly preoccupied with political problems and a stalled Diet (parliament) due to clashes with the opposition over former prime minister Kakuei Tanaka's conviction in the Lockheed bribes trial.
Nevertheless, Western diplomats agree the Tokyo government has taken some important steps in the right direction for fully opening up the Japanese market.