Victories are best savored slowly, but Prime Minister Toshiki Kaifu barely found time for the customary postelection rituals last week. No sooner had he hammered open a keg of sake to celebrate his Liberal Democratic Party's renewed majority in the lower house of the Diet than he confronted a formidable problem: Japan's strained relations with the U.S.
Not only the perennial bane of the U.S.-Japan trade imbalance but also a widening array of other economic conflicts threaten to poison the relationship over the coming months. During the election campaign that ended with balloting on Feb. 18, Washington muted its complaints about Japanese economic practices. Within hours after the scandal-shaken L.D.P. won a healthy victory, taking 275 out of 512 lower-house seats, the steady tattoo began again. "Kaifu is determined to deal with these problems," says a Tokyo bureaucrat. "They are on the top of his agenda."
And of Washington's. Four days after the vote, a mission headed by Deputy ; U.S. Trade Representative S. Linn Williams began a third round of talks known opaquely as the Structural Impediments Initiative (SII). The complex negotiations, which began last September, are aimed at resolving the trade issue by reshaping fundamental structural aspects of the Japanese and American economies.
On the U.S. side, diplomats are urging the Japanese to increase public spending, streamline the country's local distribution system for goods, and strengthen antimonopoly laws to give foreign products easier access to Japanese markets. The Japanese want the U.S. to promise to trim its budget deficit and significantly hike the national savings rate, thus reducing the demand for Japanese imports and bolstering American corporate competitiveness. An interim report on the talks is due by April.
An equally prickly issue is the so-called Super 301 dispute between the two countries. Within the next few months U.S. Trade Representative Carla Hills must decide whether to impose sanctions against Japan under Section 301 of the U.S. trade law, adopted in 1988 to give Washington more leverage in prying concessions out of countries with allegedly unfair trade practices. Last May Japan was specifically cited for restricting sales of forest products, satellites and supercomputers. Tokyo claims that Super 301 sanctions violate international rules governing fair trade, and declines to negotiate the substance of the disputes under the threat of such penalties.
Even if the SII talks are a success, there is growing concern on both sides of the Pacific that strains run deeper than the trade deficit. In the past two years the deficit has narrowed by 13%, shrinking from $52 billion in 1987 to $45 billion in 1989. American exports to Japan jumped from $31.4 billion in 1987 to $48.1 billion in 1989, a 53% increase. Timberland shoes and Procter & Gamble soaps are becoming popular consumer items across the Pacific.