TOKYO, JUNE 2 -- Japan's trade with the Soviet Union is plummeting as a result of delays by the Soviets in paying their bills and Japanese concern over Soviet political instability, even as President Mikhail Gorbachev looks to this technology-rich region to help rescue his beleaguered economy.
Trade contracts between Japan and the Soviets fell by more than 26 percent in April, according to the Japan Trade Council, and May's figures are likely to be even more dismal.
Soviet firms are behind in payments by at least $250 million and probably more, according to officials here. Japan's Trade Ministry has instructed some companies to halt shipments to the Soviet Union, according to the chairman of the Japan-Soviet Trade Organization, and Japan's steel companies have said they will stop supplying steel pipe until they get paid for past deliveries.
The delays in payment, which have troubled Soviet trading partners around the world, are viewed as likely to be temporary and have been attributed to confusion stemming from recent Soviet moves to decentralize its economy. But the late payments have heightened a deep-seated pessimism here about long-term prospects for trade, despite Soviet hopes to tap into Japan's wealth and superior technology.
"The trade situation is going to get worse and worse," said Nobuo Sugahara, who handles the Soviet account for the giant trading house C. Itoh & Co., Ltd. "The Soviet Union doesn't have anything to export, any excess products. And for importing, they don't have any hard currency. We are very pessimistic."
A senior Foreign Ministry official added: "Our businessmen are trying very hard to honor existing contracts, but they are not prepared to enter into any new contracts."
Japanese officials are expected to weigh the outcome of Gorbachev's meeting with South Korean President Roh Tae Woo Monday in San Francisco, the first summit between leaders of those two nations. For Roh, the summit has been viewed as a backdoor approach to improving relations with North Korea. For such reasons, South Korea is considered ready to help the Soviet Union economically, even if it does not make sound business sense.
The Soviets, while eager for Korean loans and trade, are believed to be playing their "Korean card" in part to goad the Japanese, with an economy far larger and more technologically sophisticated than South Korea's, into expanding business ties. But while some Japanese worry that the South Koreans could get a competitive edge in Soviet trade, most are not rising to the bait.
Adrian Tschoegel, chief economist here for Swiss Bank Corp. International, said that although the Soviets' recent inability to pay their bills may result partly from bureaucratic snafus, the delayed payments have focused Japanese attention on long-term risks.
"The more serious problem is that the cash flow problem could be permanent," Tschoegel said. "If the Soviet Union collapses into its separate republics, who's liable? Who do you collect from? The Byelorussians? The Russians? The Ukrainians? It's sort of the ultimate in political instability. . . . Sure, the Japanese want to sell, but they want to get paid too."
The pessimism about trade comes against a backdrop of chilly political relations that have been singularly untouched by the Gorbymania that swept much of the Western world. Japan and the Soviet Union never signed a peace treaty after World War II because the Soviets occupy four northern Pacific islands that Japan claims as its own.
Under Gorbachev, the Soviet Union has pressed Japan to improve economic ties before resolving the territorial dispute. The Soviets envy the dynamism of the Pacific rim countries and want Japanese help in developing the vast natural resources of their Pacific region.
But Japan has linked economic ties to recovery of what it calls its "northern territories." That position continues to put a damper on economic cooperation, according to Tetsuo Sato, chairman of the Japan-Soviet Trade Organization.
Last year, Japan-Soviet trade exceeded $6 billion, close to an all-time high, and Japanese firms promised chemical plants, factories and other investments. But even that figure -- minuscule compared to Japan's global trade of $486 billion -- is unlikely to be matched this year or in the near future, Sugahara said.
Sugahara said that C. Itoh and other Japanese trading firms plan to maintain their presence in Moscow, even though it may be unprofitable now, because of their long-term perspective. "Maybe in 10 years, the Soviet Union will become a capitalist country," he said. "Who knows?"
In the meantime, he added, C. Itoh will seek to take advantage of confusion in the Soviet economy to persuade U.S. firms to use the Japanese trading house as brokers and risk absorbers.
But for now, he added, his "biggest and most serious assignment" is trying to collect on past-due bills. Asked how he would fulfill this assignment, Sugahara smiled and said, "Just wait."
Both Sato and the head of the trade insurance division of Japan's Trade Ministry recently visited Moscow to try to sort out the bill-paying mess. Soviet officials said the problem resulted from recent decentralizing reforms that have left officials confused about their responsibilities -- and not from a lack of money.
"I think it will take some time, but I think it will be solved," Sato said.
Even so, most experts here said the experience of the past several months will affect Japan's future business dealings with the Soviets, with Japan insisting on insurance or payment up front.
"You'll see people doing things like barter deals, where you take the product out first, and very tightly written contracts," Tschoegel said. "They'll be very clumsy, take a long time to negotiate, to establish and get going. But that's what will emerge if the situation becomes endemic."