Japan Seen Ending Protectionism, Avoid ‘Second-Rate’ Role

Japan sees an urgency in overhauling policies that favor domestic industries as it seeks to revive the economy and join talks on a Pacific-region trade deal, the government’s ambassador to the U.S. said.

“For the first time, people are seriously thinking that we need to change some things,” Ambassador Kenichiro Sasae said today during a Bloomberg Government breakfast in Washington. “Otherwise we will become second-rate citizens of the world.”

Japanese Prime Minister Shinzo Abe is seeking to end 15 years of deflation in the world’s third-largest economy through regulatory reform and fiscal and monetary stimulus policies that are known as Abenomics. Japan next month will join 11 nations negotiating the Trans-Pacific Partnership, a free-trade agreement that will create a region with annual economic output of $26 trillion.

The American Automotive Policy Council, representing Ford Motor Co., General Motors Co. and Chrysler Group LLC, which is majority-owned by Fiat SpA, has opposed Japan’s inclusion in the talks, saying the government in Tokyo manipulates its currency to favor exports and shuts out foreign competitors. The yen has depreciated 23 percent against the dollar since September.

“The government can’t really manipulate these exchange rates, to be frank,” Sasae said. “We haven’t really intervened for some time to the market because it’s impossible to control.” Perceptions of Japan as an inward-looking society favoring domestic industries are “out of date,” he said.

Rice Hurdles

While the 11 nations in the Pacific talks seek to reach an agreement by the end of the year, adding an economy with $5.9 trillion in annual output may complicate the process. The U.S. Trade Representative’s office also has cited some of Japan’s agricultural policies, including protections for rice farmers, as barriers.

Sasae said he doesn’t expect Japan’s participation to slow down negotiations. “There are some concerns expressed that Japan is coming late, so there might be some delay of the process,” he said. “I don’t think we are going to do it because I think basically our market is open.”

Sasae said reaching an agreement this year with Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam is achievable.

“That is a very ambitious target, probably, but I don’t think that that is an impossible task,” he said.

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