(2 of 2)
But the ambitious plan is likely to do little to narrow the U.S. trade gap with Japan anytime soon. Most of the proposals, if enacted, are to be phased in over a period of years. And while U.S. exports to Japan nearly doubled from $23 billion to $45 billion between 1985 and 1989, the trade deficit showed little improvement. Reason: the growing demand of American consumers for Japanese products all but canceled out the rise in U.S. exports.
The accord comes at a time when the high-flying Japanese economy has hit a downdraft. Shares traded on the Tokyo Stock Exchange have lost some 25% of their value this year, and the yen has fallen more than 8% against the dollar. Japanese policymakers denied that the financial turbulence had made them any more willing to reach last week's agreement. "We would have done this if the yen were strong and stocks were going up," said one senior Tokyo official.
At a news conference, Prime Minister Kaifu said the accords, though "painful" in the short run, would ultimately "improve the quality of life of the Japanese people, promote consumer benefits and bring our economy into better harmony with the world economy." Among other advantages, the agreements would create lower prices for Japanese shoppers by encouraging increased competition from foreign goods. Moreover, consumers and businesses would gain from proposed changes in property-tax laws that would rein in the cost of real estate (one square meter in Tokyo can now cost $250,000). Far from being bitter, that medicine would be quite palatable.