On a quiet Wednesday morning last month, a lone American aircraft left Dulles International Airport here on the first leg of a 6,791-mile journey that ultimately led to Tokyo. The plane, a Northwest Orient 747, carried among others Richard R. Rivers, a special U.S. trade envoy. It was the beginning of what officials hoped would be a quiet, low-key initiative to Japan.
Within 96 hours, the Rivers mission had exploded into abona fide diplomatic shock wave, the Japanese public was up in arms, and Tokyo and Washington hurriedly were exchanging notes to try to calm the situation down. Last week, directly in response to the U.S. move, Prime Minister Fukuda reshuffled his cabinet. The issue now was, what would come next?
The blowup involving Rivers was inadvertent - another lesson to Washington that nudging Japan toward new economic measures requires more subtety than the administration thought. (Ironically, Rivers was chosen for the trip because policymakers figured he'd be able to keep a lower profile than better-known officials. His effort was sandbagged by a leak in the Tokyo press.)
What is far more important is what the new U.S. initiative ultimately will accomplish to resolve the growing conflict over the looming Japanese trade presence. The U.S. insists Japan ease its trade policies voluntarily to head off more protectionist remedies from Congress. The question is, what will Japan be willing to give? Most analysts predict it won't be very much.
The dispute over the trade issue has been a long-intensifying one, with roots that go back to the end of the 1974-75 recession. Still hurting from the slump, Japan launched an export campaign early in 1976 that it hoped would set off an economy-rescuing surge in investment. The investment pickup never came, but the export boom has continued - hurting U.S. industry in the process.
The Carter administration began trying to deal with the problem almost as soon as the President took office. In a 'round-the-world tour last winter, Vice President Mondale bluntly urged the Japanese summit last May, all six of Japan's major trading partners called for a cutback in its mounting surplus.
Caught on the spot during the summit, Fukuda promised the other six that Japan would do whatever was necessary to meet its 6.7 per cent economic growth target for this year, and wafted ministry estimates of a $700 million balance of payments deficit. At the same time, Tokyo began allowing the yen to float on the currency markets - sending it soaring to a more realistic level.
Embarrassingly for the Japanese, none of this worked very well. The predicted $700 million payments deficit now seems headed for a $10 billion surplus - leaving Japan conspicuously out of line with the rest of its Western trading partners. The yen has skyrocketed by 24 per cent against the U.S. dollar, hurting many Japanese exporters. And the country still is in a slump.
More dangerously, the trade issue has provoked a wave of protectionist feelings in the U.S. which could lead next year to congressionally mandated restrictions. Throughout the country, Japanese imports are being blamed for everything from trouble in the U.S. steel industry to cutbacks in textiles. The turning point came in September. The steel plant in Youngstown, Ohio, announced it was shutting down.
In early (October, top Carter administration policymakers decided to make another, more serious stab at convincing the Japanese that the U.S. situation was serious. If the Fukuda government was to take any effective action, it would have to draft its program before the Diet returned from recess in early January. "The time was then or never," one policymaker recalls.
A sub-cabinet task force worked throughout late October to draw up a series of demands. The proposals were to be presented as "suggestions." But while the tone was low key, officials tried to be firm as well. Policymakers noted pointedly this would be the administration's last such chance: If Japan didn't accede, the White House no longer could fend off Congress as easily.
The U.S. demands essentially fell into four categories.:
That Japan lay out a formal program for reducing - and ultimately eliminating - its balance of payments surplus, complete with a specific timetable and monitoring procedure to accomplish the job.
That the Fukuda government take new action to stimulate the slumping Japanese economy - complete with new tax-cut and spending programs designed to spur consumer spending at home and boost the Japanese growth rate to 7 per cent next year. The growth rate now is running below 6 per cent.
That Japan slow its exports to the U.S. - or at least stop encouraging them through special subsidies and tax breaks - in a number of specific industries where Japanese competition has hurt U.S. producers.
That Tokyo open the way for more sales in Japan of foreign goods, both by lowering quotas and tariffs and untangling some of its complex domestic trading association network that officials say stymies U.S. sales there.
Although the proposal calls generally for increased sales of imports from all countries, the list specifically includes Florida citrus fruits and some U.S. film and consumer products. Currently, the bulk of Japan's imports from the U.S. comprises raw materials, coal, cotton and some beef. Most other products have a hard time.
The U.S. initiative was designed to bring these points home forcefully. Despite previous American proddling, Washington still wasn't sure Tokyo understood the seriousness of the administration's domestic position. The Japanese were famous for misreading the mood of Congress. The White House wanted to make sure this time there was no mistake.
The Rivers mission was to convey these suggestions quietly - an assignment he carried out with aplomb until the bombshell hit: While Rivers still was in Tokyo, a delegation of opposition Komeito Party officials met here with Vice President Mondale. One of them quoted Mondale - erroneously - as charging Fukuda had "failed" to keep his summit promise on trade.
By the time the incident finally was straightened out, the Japanese press had had a field day with the Mondale and Rivers duo, Washington had called Rivers home for "a review" of the situation, and the Japanese had demanded that the talks be upgraded to cabinet-level negotiations before they would participate further. American officials were frantic over the backfire.
(Incredibly, to some observers, Mondale made no effort to correct the misquotation publicly when it came over the wires here - a move some critics say might have softened the insult some. The Japanese immediately spilled all to the Tokyo press. The resulting exposure seriously undercut Rivers, a thoughtful and quiet-spoken man who had just presented the U.S. case privately to Fukuda.)
Then, in an unexpected action, Fukuda announced he was reshuffling his cabinet to install liberals in three key existing ministries - a sure sign of a coming change in economic policies - and was creating a new external trade post. At its head he named Nobuhiko Ushiba, a former ambassador to the U.S. and a knowledgeable observer of the American political scene.
A few days later, Japan made known it was considering slashing tariffs on several critical imports even before the multilateral trade talks in Geneva. And Japanese officials promised full cooperation on worldwide steel talks. The gestures seemed to hint strongly that a major Japanese policy shift may be in the offing. But what can U.S. policymakers realistically expect to get?
Experts say by far the most likely action is a major new domestic economic stimulus program - if only to mollify hard-pressed Japanese voters, who have been squeezed by the worsening slump. The slowdown in consumer buying this year has sent Japanese industrial growth sliding visibly. With the yen's rise crimping exports further, new measures are needed to prevent a recession.
Japan-watchers say Fukuda most likely will have to break the long-held Japanese tradition that has limited that country's budget deficit to 30 per cent of its total outlays. Toshio Komoto, his newly appointed trade minister, has been urging such action vigorously. The impact is expected to come in higher spending for public works - and possibly a tax cut.
Likely, too, the U.S. will get some import concessions - probably a go-ahead for sales of Florida citrus and some other agricultural items, and a stepup in Japanese purchases of U.S.-made aircraft - a quick way to raise total import values. One Japanese insider raised another possibility: That Tokyo might offer to take over maintenance of U.S. naval vessels based in Japan.
Beyond that, however, the outlook becomes murky. Both Japanese and American sources concede it may be impossible to crack Japan's longstanding network of import brokers, or trading associations, which some say are blocking sales of U.S. exports there. And apart from the separate steel problem, it's unlikely Japan will do much to slow exports - beyond softening its export campaign some.
Indeed, mostly at American urging, Japan has built its entire economy to feed primarily on exports as its major source of nourishment. While some quick adjustments are possible, analysts say any major changes would mean revamping the fundamental structure of the whole Japanese economy - a move the U.S. cannot reasonably expect, at least in the near-term.
As for as the man U.S. "suggestion" - the demand for a plan to eliminate the massive Japanese payments surplus by 1979 - most observers are doubtful here, too. "Japan may give the U.S. some sort of general promise that it'll try to pare its surplus," says one Japanese expert, "but Fukuda isn't going to be tied to a pledge of specifics. There would be no way he could carry it out."
To some analysts, the stimulus package probably would seem enough. Says Phillip H. Trezise, the Brookings Institution Japan-watcher: "The heart of the situation is low capacity. Until industry gets moving again in Japan, I don't see how you're going to affect imports at all." But officials say Congress is likely to want further measures - specifically to shift the trade balance.
What Fukuda may try to do is grant the Americans some sort of promise that looks like a victory but really isn't. "There's an old tradition in Japan," a visitor from Tokyo mused here last week: "When you do battle, it doesn't matter whether you win, but only whether you can bring hom the head of the enemy general. There may be a solution like that."
Whether a general's head would be acceptable to hardpressed American officials - or to Congress - remains to be seen. Administration policymakers insist they plan to be tough-minded in the coming negotiations. "This'll be our last real chance before the worldwide trade talks in Geneva," one key official says. "We have to make it count."
And even if the U.S. does reach an accomodation with Japan, there still is the question of specific disputes with other major industrial nations, many of which have similar - and somewhat more parochial - problems. Although the U.S. insists it's negotiating for "the whole world system," there's some worry overseas that if Japan is forced to pare its exports here, it will try to compensate by selling more in Europe.
Officials here are optimistic, but cautious: Ushiba told Washington Post Tokyo correspondent William Chapman late last week the reshuffled cabinet would decide next Tuesday on a "big" package of concessions that would include major tariff reduction, higher import quotas and easier import procedures. Some officials also are expecting new offers of credit for imported products.
Ushiba will be retracing Rivers' route next week in a long flight to Washington for a second round of preliminaries - this time with Carter administration cabinet members.