Following is a transcript of an interview on economic issues given by Japanese Prime Minister Yasuhiro Nakasone to Hobart Rowen of The Washington Post during the United Nations anniversary celebration in New York last week.
Q: What would be the impact on U.S.-Japan relations and on the world trading system itself if Congress should pass strong protectionist legislation aimed at Japan, say an import surcharge? Would Japan retaliate?
A: First of all, whether such trade bills or protectionist bills are directed at Japan or any other country, I am absolutely opposed to that. Trade protectionist legislation may only allow congressmen to let out their frustrations, but that will not solve the problem and will only cast dark clouds over the world economy.
Even if some sort of legislation should pass, we believe that our friendship and goodwill between Japan and the United States in such areas as politics, security, cultural areas, should not be affected. Rather, relations of friendship should only be further strengthened.
Now, coming to the question as to how the Japanese side will address the trade protectionist bills, in case some bills are passed and become law. We have not decided what attitude we'll take in that instance. What is clear is that it will result in a very unfortunate situation for both sides.
But what I can say for sure is that the action program that we undertook will be implemented; that our efforts to streamline standards and certification systems, reduce tariffs, further improve market access, expand domestic demand and increase imports -- all these efforts will continue to be implemented without change.
And I say this because, while right now, dark clouds may be blocking the sun, they will sooner or later pass and the sun will begin to shine very brightly again.
Q: Mr. Prime Minister, are the Japanese people resentful of American pressures on Japan to open its markets? To put the question a different way -- are you personally angry about what we have come to call 'Japan-bashing'?
A: I feel there is still a lot of misunderstanding about Japan among the American people and that there is a lack of awareness, vis-a-vis Japan, by the Americans, and I think the article written by Theodore White in The New York Times Magazine is an extreme example of that.
I feel that the Japanese market is a most open one, only second to the U.S. market, yet there is lack of publicity given to that fact by the Japanese side, and also lack of awareness on that point on the U.S. side.
In the areas of problems that existed, we now see the equivalent situation existing between the two countries in telecommunications and terminal equipment, computer peripherals, also medical equipment. In other words, with the exception of wood products, we now have a situation of equivalency with regard to most items of importance covered under the so-called 'market-oriented, sector-selective' MOSS talks.
There also seems to be a lack of understanding among the American people or lack of knowledge among the American people about the strenuous efforts that are being made by the Liberal Democratic Party and the Japanese government to implement the Action Program . . . . We have already decided on a $20 billion program to expand domestic demand, and private companies have also agreed to increase their imports and have come up with the figure of an additional $7.3 billion . . . . Japanese people in different parts of the country are now cooperating with the import promotion and I hope that the U.S. people will be aware of such efforts.
Q: But people considered more reasonable than Mr. White argue that these steps are rather modest or minimum. For example, many people here and in Japan say that the domestic expansion program isn't representative of the "sacrifices" -- which is your word -- that you often have said are necessary. And some argue that you have given control of the budget deficit a higher priority than stimulating economic growth.
A: Not to expand the government budget deficit is the government's policy and I will stand by that policy . . . .Many of the items that would be covered by the description "sacrifice" may be budget-related items that will be considered in the process of compiling the budget for the next fiscal year. Housing tax reduction is one such item. Also, we are planning to implement tax reduction, and we'd like to draw on the Reagan tax-cut policy. I have already asked the relevant council of the government to consider a drastic tax reduction and come up with its recommendations. These recommendations will be presented to me sometime in the fall of next year, and we intend to go ahead with drastic tax cuts in the fiscal year of 1987.
Q: Recently, there's been a shift in President Reagan's announced trade policy under some pressure from Congress. The president's press secretary, Mr. Speakes, has described it as a "get tough" policy. Are you disappointed by this shift in the Reagan administration's approach, which brings charges against you of unfair practices, as for example: in tobacco, leather and other such sectors?
A: I believe that the announcement of the new trade policy by President Reagan in order to counter trade protectionism in the Congress was a wise step to take, and we welcome such a trade policy much more than the Congress' trade protectionism. With regard to leather and leatherwear, we have already implemented various measures to improve market access. With regard to tobacco, the manufacturing of cigarettes and tobacco products is still monopolized. However, American cigarette manufacturers now have freedom in distribution and sales and marketing of their products. So that it is now left to the marketing efforts of American cigarette manufacturers, and we're seeing a substantial increase in sales of American-made cigarettes in major cities in Japan.
Q: In other words, if you were President Reagan and you had to meet this protectionist threat in Congress, you would have done pretty much what he did?
A: Well, the U.S. is a world-leading country, it is a superpower and therefore whatever it does it must be of global consideration. The textile bill that passed the House actually drew criticism from Asian countries, and U.S. popularity there has gone down. I believe that, before any measure is taken, it is far better for the United States to engage in consultations with the relevant countries; in other words, try and solve matters through dialogue.
One more comment about the expression "fair trade": The word "fair" as used by members of the U.S. Congress who act from pressures from businessmen or some sort of pressure groups, is not a word that we as foreigners can buy. If you play a game, you have an umpire or referee, and "fair" or "not fair" as defined by the umpire is much better.
Q: Not all Japanese people are responding to your personal example to buy imported goods. In fact, isn't it difficult to persuade Japanese people to buy imported goods when they prefer locally made products of proven quality?
A: There are still numerous good U.S. products, and Japanese people have still not lost their respect for American-made products. So what we would say is that there is lack of effort on the part of the American businesses to sell in Japan. If I may add some words (on this subject): About 41 percent of total Japanese agricultural commodity imports comes from the United States. We have not been decreasing this ratio. In other words, while the share of U.S. agricultural products in the world market has been declining, its share in the Japanese market has not been declining . . . .
Q: That leads logically to my next question: Why is Japan such a poor consumer of imported manufactured goods? People here tend to say that a low standard of living exists in Japan -- at least compared with Japan's industrial achievement. Isn't that a principal cause for some of the trade tensions with the United States, your large trading partners in Europe and Asia? There is an impression that Japan has an abnormally low ratio of imported manufactured goods.
A: There is good reason for that. Japan is a country that is not blessed with natural resources. We have to depend heavily on importation of raw materials, fuels and food stuffs . . . . For example, in 1984, out of the total imports of $136.5 billion, food, oil and coal, and other raw material imports accounted for $95 billion. So it is quite natural that Japan's ratio of manufactured imports should be lower than other countries. Japan is basically a processing country which does not have raw materials domestically. However, when it comes to the United States, our manufactured imports out of total importation from the United States was 44.1 percent in 1980, which has increased to 55.01 percent for the first nine months of this year.
Q: Are you concerned that the pressure for access to Japanese markets may be blinding us to the more important realities of a broader, mutual Japanese/American relationship and threaten the ability of President Reagan and yourself to maintain peace and prosperity for both peoples?
A: I believe that the majority of both American and Japanese people, in spite of such great friction, believe that the two countries want to further strengthen their friendship and trade relations.
Q: Is there any risk that, because of these frictions, a newer and younger generation of Japanese leaders sometime in the future might turn away from the alliance with the United States and move closer to other major powers, say with Russia or China or anyone else?
A: There is no such risk. In all the polls that we've seen, consistently we have seen that all the people from the 20-year old bracket up to the 70-year old bracket have indicated that the most important country for them is the United States. And this will not change in the future either. Japanese people feel a great attraction for freedom, democracy and a market economy and they are extremely critical of communism.
Q: No interview with a Japanese prime minister would be complete without at least one question about the yen-dollar relationship. Is there a target level for the yen in relation to the dollar as a result of the Group of Five meeting of industrialized nations held in New York Sept. 22? The yen is now 216 to the dollar. A few months ago it was about 250 to the dollar.
A: First of all, I would like to say that the G-5 meeting was a great success, and we would like to continue with our efforts to see to it that this trend of yen appreciation will continue, and we wish to make efforts to strengthen that trend. However, it is not appropriate for us to mention any numbers, nor have we established any numerical goal. I believe we will have continued discussions or consultations at the working level -- the experts' level as well as the politicians' level -- in order to make this trend a continued one.
Q: How long can your intervention to strengthen the yen keep up?
A: On the currency front, we would like to keep on with bilateral consultation so that our currencies will maintain an appropriate value, and so the exchange rate situation will proceed in a stable manner. We on the Japanese side will make efforts to such end, and we also hope that U.S. side will reciprocate with efforts.
I just want to make some last remarks in terms of Japan-U.S. relations. We view most importantly our relations with the United States -- political, economic, as well as security relations. Now, it is unfortunate that we have bilateral trade and economic friction. We are aware that such friction is caused partly by the Japanese side, and therefore we shall make our maximum efforts to bring about, as early as possible, a resolution to this problem. And in the medium and longer-term perspective, we shall make efforts to change the Japanese social and economic fabric or structure so that it will be a harmonious one with the world.