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For Nakasone, a more important question is how many Japanese are still friendly toward him. The answer may be not many. The Prime Minister will know better after nationwide local elections on April 12, when he and the ruling Liberal Democratic Party are now expected to take a drubbing. The main reason for that is not the U.S. trade dispute but Nakasone's announced decision to impose an unpopular 5% national sales tax. Nakasone has not made a single appearance on behalf of local candidates -- because no invitations were extended to him. Jokes one Tokyo academic: "If President Reagan is a lame duck, our Prime Minister is a dying duck." Nakasone probably did not feel any better after U.S. Trade Representative Yeutter told a Senate Finance Committee hearing that he could not understand why Japan was planning to introduce the value-added tax. Replied Japanese Government Spokesman Masaharu Gotoda: "The tax system is our country's internal affair."
U.S.-Japanese trade difficulties, not to mention relations between the two countries in general, may become slightly frostier after the Prime Minister leaves the scene. Observes Larry Niksch, an Asian affairs specialist at the Congressional Research Service: "Nakasone and Reagan have been the glue that has kept the relation close. Below them there is a good deal of animosity on both sides. That could cause serious damage later."
The harsh fact is that the effort to manage relations between the close friends and allies cannot improve while the U.S. trade balance remains so badly out of kilter. This year many economists foresee no more than a $30 billion improvement in the trade deficit, and quite a few see less. Even worse, the U.S. trade balance will have to improve more than the current deficit indicates because the country is now an international debtor. In the current issue of the quarterly Foreign Affairs, Harvard Economist Martin Feldstein, a former chairman of President Reagan's Council of Economic Advisers, estimates that during the 1990s the U.S. will need to generate $60 billion annually just to repay the interest and principle on its burgeoning foreign debt. According to Washington Economist Bergsten, the pressure will thus be on to create a $200 billion improvement in the American trade balance. That is liable to add to the considerable trade ferment on Capitol Hill. As Senate Majority Leader Robert Byrd puts it, "It is time to make more pragmatic use of our leverage."
That pressure will be borne not just by Japan but by all of America's trading partners. Fear of U.S. protectionism is a considerable motivation, for example, behind Canada's desire to conclude a historic free-trade agreement with Washington that would remove tariffs and most other trade barriers between the two countries during the next 15 years or so. President Reagan was to endorse that effort once again in a meeting with Canadian Prime Minister Brian Mulroney on a one-day state visit to Ottawa this week. But other close U.S. allies fear they may eventually be left out in the cold. Says a top European Community trade official in Brussels: "What worries us is that the U.S.-Japanese trade deficit will be balanced on the backs of the Europeans."