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NO. 43 — November 14, 1997

 

Feature Article

U.S.-JAPAN TRADE RELATIONS: BILATERAL VERSUS MULTILATERAL OPTIONS by Douglas Ostrom

Since World War II, Japan has conducted much of its economic diplomacy bilaterally, cutting deals with the United States that then became the basis for relations with third countries. This process obviously has not always operated smoothly. Transpacific trade disputes throughout the postwar period are proof of that reality.

The United States and Japan participate in multilateral economic forums as well. The most recent major one was the Uruguay Round of multilateral trade negotiations, which resulted in the 1995 birth of the World Trade Organization. The WTO's influence is likely to grow in future years as international rules are extended to more areas of trade and resolution of trade disputes brought before the body builds up a structure of precedent on which future cases will be decided.

The growth of the multilateral mechanism may mean less leverage for Washington in negotiations with Tokyo. Nonetheless, the WTO, in which the United States has an enormous role, will be a significant means of exerting influence on Japan. In any case, the prospect that Japan's relative economic importance and perceived uniqueness will diminish in coming years may make transpacific trade relations a lower priority for White House economic policymakers.

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Weekly Review

Sanyo Securities Goes Bankrupt by Douglas Ostrom

A wider variety of big businesses in Japan are failing than at any time since the turbulent days immediately following World War II. The group now includes a well-known brokerage house listed on the first section of the Tokyo Stock Exchange. Sanyo Securities Co., Ltd., Japan's seventh-largest securities firm, asked the Tokyo District Court November 3 for protection from creditors under the Corporate Rehabilitation Law. Its reported debt of ¥373.6 billion ($3.7 billion at ¥100=$1.00) is said to be ¥76 billion ($760 million) in excess of assets. Earlier this year, a life insurance firm, Nissan Mutual Life Insurance Co., as well as a publicly traded supermarket chain, Yaohan Japan Corp., became the first relatively large firms in their industries to fail in the postwar period (see JEI Report No. 17B, May 2, 1997, and No. 37B, October 3, 1997).

 

Tokyo Juggles Fiscal Goas, While Tax Debate Continues by Jon Choy

Prime Minister Ryutaro Hashimoto, Finance Minister Hiroshi Mitsuzuka, the ruling Liberal Democratic Party and its legislative allies as well as its opponents all are struggling to balance opposing fiscal goals. As public concern over the slumping course of the economy has increased (see JEI Report No. 38B, October 10, 1997), so has pressure for Tokyo to adopt a more stimulative fiscal stance. Conservative politicians and Ministry of Finance bureaucrats, however, are equally insistent that the government keep a tight lid on spending now to shrink Japan's big budget deficit and prepare for the nation's future needs.

 

Miyagi Gubernatorial Race Shakes National Politics by Barbara Wanner

The stunning victory of incumbent Governor Shiro Asano, an independent, in the October 26 gubernatorial race in Miyagi prefecture jolted Tokyo's political establishment. Mr. Asano, who shunned formal party support, captured more than twice the number of votes (622,928) garnered by House of Councillors member Ichiro Ichikawa. The challenger was backed by both the ruling Liberal Democratic Party and the largest opposition party, Shinshinto. Gubernatorial elections generally are regarded as important indicators of party popularity in Japan.

 

Trade Liberalization Likely To Take Back Seat To Currency Crisis At APEC Summit by Eric Altbach

Discussions of how to respond to the recent turmoil in Southeast Asian financial markets are likely to dominate the agenda of the fifth summit of the leaders of the 18 Asia Pacific Economic Cooperation forum members at the expense of progress toward liberalization of trade and investment regimes in the Pacific Rim. Analysts had expected that the possible creation of an independent Asian monetary fund would be a major source of debate at both a two-day meeting of APEC economic ministers in Vancouver, British Columbia starting November 22 and at the November 24-25 summit there. In the early part of November, however, the Ministry of Finance, the driving force behind an Asian currency stabilization fund, apparently scaled back its proposal in the face of opposition from the International Monetary Fund and the United States.

 

Notes

Supercomputers
NEC Corp. has given formal notice that, until all legal options are exhausted, it will not bow to Washington's verdict that the firm planned to lease a number-crunching computer to a partly government-funded climate research laboratory at less than fair value (see JEI Report No. 33B, August 29, 1997). In a move anticipated since the International Trade Commission cleared the way for the imposition of prohibitive dumping penalties on made-in-Japan vector supercomputers, lawyers for NEC appealed the agency's injury finding to the New York City-based Court of International Trade. In its September 26 ruling, the ITC decided in essence that NEC's unfair pricing practices threatened to impact the operations of contract loser Cray Research, Inc.

 

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