Japanese businessmen, with the backing of their country's ruling establishment, including government leaders, have told the National Governors' Association they are preparing to create a $10 billion "recovery fund" to finance job-creating projects in the United States.
If set up as planned it would be the first such example of foreign aid for the U.S. economy in modern history; for most of this century the United States has been the one giving aid, not receiving it.
The contemplated assistance is openly aimed at softening some of the pressure on Japan to reduce its current $18 billion trade surplus with the United States. Affected industries and labor unions have complained that Japanese imports are cutting unfairly into U.S. sales and jobs, thereby exacerbating the recession; the fund would be partial compensation for this.
The money, according to Florida Gov. Bob Graham, chairman of the association's committee on international trade and foreign relations, would be advanced wholly by the Japanese private sector at a concessional interest rate, probably 6 percent.
The companies and banks that would contribute the money have not been identified. The funds would be available, Graham has said, for public works and economic development projects of almost any kind imaginable.
He cited as examples expansion of ports and coal-exporting capability, and development of rapid rail transport systems like the famous Japanese bullet trains. Another source familiar with the plan suggested that there could be useful projects in Sun Belt states to create new water supplies.
In a letter to his fellow governors on Feb. 5, Graham said that the U.S. trade deficit with Japan "threatens to undermine the future of U.S.-Japanese trade unless it is addressed." Graham said that "a consensus" had developed in Japan to set up "a $10 billion Partnership for Prosperity fund" as the best answer to the problem.
Details will be outlined Monday by Kay Sugahara, a Japanese-American businessman who heads Fairfield-Maxwell, Ltd., a conglomerate of 40 U.S. corporations; he will speak during the three-day meeting of the governors' association scheduled to start here Sunday.
Sugahara is also chairman of the U.S.-Asia Institute, a nonprofit organization based here that would act as the initial clearinghouse for specific development projects to be proposed by individual states for funding by the Japanese. He hopes to have the first list of proposals from the governors in hand by March 15.
In a telephone interview, Sugahara said he had told the Japanese that "there never had been an effort by an ally of the United States to offer help, because the United States was too big for that. But I said to them: 'Do something to help--and do something different, to have the maximum impact here.' "
U.S. Trade Representative William E. Brock, who has predicted that the trade deficit with Japan will approach $25 billion this year, has been pressuring Japan to open its markets more to American and other foreign goods.
But trade experts on both sides agree that even if Japan drops all of its nontariff barriers, it will continue to enjoy a large trade surplus for some time to come in autos and other areas, stimulating mounting demands from hard-pressed American companies and unions for protection from imports.
The innovative Japanese loan proposal is a frank effort to counter the adverse reaction in this country to Japanese economic inroads and at the same time to stimulate the weak U.S. economy on which Japan depends as a major market. "I told the Japanese," Sugahara said, "you can improve your image with this."
Sugahara was born in Seattle 72 years ago to immigrant Japanese parents. Detained with other Nisei after Pearl Harbor, he later made a fortune in the shipping business. He cautioned that the plan "is not set in concrete," and that precise details, including the total amount, remain to be decided.
"But it will be a massive infusion," he said. "What we start out with is that we know that there are a lot of projects in every state that need to be financed."
He also stressed that he was hoping for a general endorsement by the Reagan administration "because it's obvious that we have to work in harmony with them."
Spokesmen for the governors' group said that the proposal would probably be greeted enthusiastically, coming, as it does, at a time when the states are pinched for funds, a problem that may intensify if President Reagan's New Federalism results in a reduction of the federal role.
Said one official familiar with the Japanese proposal: "I've heard it referred to as 'the Japanese Marshall Plan for the U.S.' They seem anxious to help the U.S. regain its prosperity."
Sugahara, who has been in Washington actively promoting the idea, plans to tell the governors that the Japanese establishment opted for the $10 billion loan fund idea after rejecting ideas such as a $10 billion arms purchase or a drastic cutback in exports.
Sources said that the Japanese decided on making the approach to the governors because the various states individually have been interested in improving their own economic relations with Japan. "And frankly, they see it as a way of creating goodwill," one official added.
According to governors' association officials, specific proposals coming from the 50 states would be examined first by Sugahara's U.S.-Asia Institute, founded in 1979 by a group of Americans of Asian background to improve relations between the United States and Pacific countries. One specific goal of the institute is better integration of Asian-Americans into the mainstream of American life.
Although Graham in his letter to fellow governors said that the idea of a fund had been well received by various Reagan administration officials, it was not precisely clear yesterday that all trade officials in the government had great enthusiasm for the plan or that they had been fully briefed.
A high State Department official told The Washington Post that "we need investment capital in this country, and if they come up with good capital projects they can finance, that's fine.
"But the project should not be a way of detracting attention from the basic structural problems we have with Japan on trade." One concern is that with the "Partnership for Prosperity" fund in place, the Japanese will do less to open up their markets to foreign goods.