Can A Strongman Muscle Tokyo Into A Trade Deal?

It's a stunning power play, aimed at achieving a trade settlement with the U.S. by the end of March. Political strongman Ichiro Ozawa is now proposing to do what the Japanese bureaucracy has flatly rejected: accept some form of targets to reduce Japan's current-account surplus with the U.S. At a briefing on Feb. 22, Ozawa said Japan should adopt doryoku mokuhyo, or "targets to strive for." He stressed, though, that Japan shouldn't accept such targets unless Washington forswears later redefining the goals as promises and imposing sanctions if they're not met.

If anyone in Japan can pull off such a trade agreement, it's Ozawa. Architect of the coalition government that's headed by Prime Minister Morihiro Hosokawa, Ozawa seemingly is gaining influence daily over Hosokawa. But there's no guarantee Ozawa can muscle bureaucrats, executives, and Hosokawa into a deal. "He's not the ultimate power in Japan at this moment," notes one Japanese official.

"SHOCKED." Still, some U.S. officials are taking heart. "It's probably an important signal," says one. And the import of Ozawa's remarks is clear in the way they've sent Japan's hard-line trade bureaucrats reeling. One veteran political insider says that Ozawa's approach, if it flies, would be "total surrender" to U.S. demands. For the past six months or so, he notes, the U.S. has proposed targets in return for assurances of "no promises, no sanctions." That's just what Ozawa now seems to be suggesting. "We are really shocked."

But Ozawa is not without allies in Japan's business community. "Numerical targets would be acceptable as long as the U.S. guarantees that results will be judged on the basis of best effort rather than on actual achievement," says Hiroshi Tanaka, executive vice-president at Canon Inc. At Citizen Watch Co., President Michio Nakajima says: "We have to avoid Japan's becoming isolated. Our continuing trade imbalance is something we must solve."

Yet many top executives still detest the notion of targets, especially in industries Washington is shooting at, such as autos and auto parts. And Japan's bureaucrats have rejected targeting more vociferously than any other U.S. demand in recent memory. But Ozawa suggests that the bureaucrats no longer can run the show: "Our next negotiations must be run by a politician who can clearly say yes or no. We can't leave it to the various ministries."

While Ozawa tries it his way, the Japanese government is busy preparing other measures it hopes will help mollify Washington. About half of the Cabinet was scheduled to convene on Feb. 25 to consider ways to cut Japan's surplus with the U.S. Possible measures include liberalizing procurement procedures, more aggressive promotion of imports and foreign investment, deregulation, and stricter antimonopoly policing. Tokyo is also considering a 23% expansion of public-works spending for this decade, to $5 trillion, to stimulate the economy and pull in imports.

None of these steps is likely to sway targets-happy Washington, however. The irony is that Ozawa, who has made his name as an exponent of a more assertive, independent Japan, is now proposing to accede to U.S. wishes. The only question that the U.S. should ask is whether he can persuade the government to follow his lead.

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