No. 8 — March 1, 1996

Weekly Review

--- by Barbara Wanner

The rancor of trade debates and critical assessments of U.S. management of economic relations with Japan by some Republican presidential candidates apparently did not spill over into the one-hour meeting February 23 between President Clinton and Prime Minister Ryutaro Hashimoto in Santa Monica, California. The two leaders reportedly exchanged photographs and parted on a first-name basis. More important, they reaffirmed the importance of strong U.S.-Japan relations and pledged their efforts to realize progress on a broad array of pending security and trade-related issues in time for their April 16-18 summit in Tokyo. Although Mr. Hashimoto came bearing political omiyage (traditional gifts) — some $19 million to help pay for American-promised fuel oil bound for North Korea — the overall emphasis on generalities rather than substance was deliberate, government officials maintain. The principal goal of the get-together, which was sandwiched between Mr. Clinton's various West Coast campaign activities, was to enable the American president and his Japanese counterpart to establish a good rapport, these officials say. Details concerning the continued U.S. base presence on Okinawa and, in Mr. Clinton's words, "unfinished business" on disputes involving semiconductors, photographic film and paper, insurance and civil aviation evidently will be addressed at the working level in the next six weeks.

Some commentators have proposed that Mr. Hashimoto also may have hoped to use this one-on-one meeting with Mr. Clinton to bolster his domestic leadership stature, which has been hammered by the housing loan company (jusen) bailout controversy (see article in this issue). The Japanese leader, in fact, spent only hours on the ground in California before rushing home to attend to pressing Diet business related to the jusen mess. These same experts add, however, that Mr. Hashimoto, by pushing soon after his January 11 election to the prime ministership for a tete-a-tete with Mr. Clinton unrelated to bilateral negotiations, may have sought to improve his standing among the American policy audience as well. Cognizant of the hard-liner reputation he established last year as then Prime Minister Tomiichi Murayama's minister of international trade and industry, Mr. Hashimoto through his quick, timely visit may have hoped to reassure U.S. critics of his overall commitment to healthy bilateral ties, particularly in the security area. Mr. Murayama's attitude toward the U.S.-Japan defense relationship always had been in some doubt among American defense officials because the former premier is a longtime pacifist who for decades opposed the bilateral security treaty but quickly reversed this position upon assuming the tripartite coalition's leadership mantle (see JEI Report No. 28B, July 22, 1994).

In sharp contrast to his predecessor's tentative endorsement of the U.S.-Japan Mutual Security Treaty, government observers say, Mr. Hashimoto made very clear in his chat with Mr. Clinton that the American military presence in the Asian Pacific contributes significantly to regional peace. The unequivocal nature of his remark is significant in view of Japanese public criticism that has been heaped on the U.S.-Japan security alliance and the American military base presence, particularly on Okinawa. These protests increased greatly last September in the aftermath of the rape of a Japanese schoolgirl in the southernmost prefecture by three U.S. servicemen who currently are awaiting a court's verdict on charges that they committed this crime. The Okinawa prefectural government has pushed aggressively for the complete removal of all locally stationed U.S. troops over the next 20 years. Prefectural residents have grown angry, frustrated and weary with having to bear over the past 50 years the burden of hosting three-fourths of the 47,000 U.S. troops currently based in Japan. Mr. Hashimoto, who always has been a strong proponent of U.S.-Japan defense relations, has strived to tread a careful line between his conservative, pro-American Liberal Democratic Party and the Okinawans, who have been backed by the other two parties in the ruling triumvirate, the pacifist Social Democratic Party of Japan and the New Sakigake Party (see JEI Report No. 4B, February 2, 1996).

Perhaps anticipating a new, stronger wave of anti-U.S. military sentiment with the expected March 7 announcement of the verdicts for the accused rapists, Mr. Hashimoto apparently decided that it was politically expedient for him to place his constituents' concerns ahead of his own policy preferences. He asked Mr. Clinton to reduce the American military presence on Okinawa, specifically citing Futenma Air Station as one such facility that Japan would like the United States to consider handing over to Japanese control. Reflecting a sizable gap in positions that must be bridged in the weeks leading up to the mid-April summit, government officials present at the meeting say that Mr. Clinton did not respond specifically to the proposal concerning the Futenma base. He did reaffirm, however, that the United States intends to maintain roughly the current force levels in Japan and the Asian Pacific. The Pentagon has argued that the 47,000 U.S. troops stationed in Japan continue to play a critical role in ensuring regional stability during the uncertain transition of the post-Cold War system (see JEI Report No. 11A, March 24, 1995).

On the trade front it was Mr. Clinton's turn to lay concerns on the table. While welcoming last year's reduction in the transpacific trade gap (see JEI Report No. 5B, February 9, 1996), the American leader sought cooperation in resolving four outstanding issues. Concerning semiconductors, Washington has urged a renewal of a five-year trade pact scheduled to expire in July. Tokyo has countered that the controversial 1991 agreement has achieved all of the market access objectives and, consequently, there is no reason for the two governments to be involved any longer in the chip business (see JEI Report No. 47B, December 22, 1995). The dispute involving consumer photographic film and paper stems from Eastman Kodak Co.'s claim that rival Fuji Photo Film Co., Ltd. is engaged in anticompetitive behavior that has limited Kodak's access to these two big Japanese markets (see JEI Report No. 29A, August 4, 1995, and No. 40B, October 27, 1995).

In the insurance area Washington is worried that regulations now being drafted to implement the sweeping May 1995 changes to the insurance law could thwart what the Clinton administration thought it had achieved in the October 1994 framework agreement on insurance. According to reports circulating in Japan, the Ministry of Finance plans to allow Japanese life and nonlife insurance companies to compete in the so-called third sector — which covers such products as health insurance and is the only area where foreign competitors have had much success — before opening Japan's huge life and property/casualty markets to American and other offshore insurers (see JEI Report No. 21A, June 9, 1995). The two governments also are at loggerheads over the rights that each country's carriers have under the 1952 bilateral civil aviation treaty (see JEI Report No. 47B, December 22, 1995). Perhaps anticipating a yeoman's task of reaching an agreement on the Okinawa base reduction issue, Mr. Clinton reportedly did not ask for progress in the trade area by the time of the April summit.

Mr. Hashimoto acknowledged that "several [bilateral] economic issues" warrant further discussion, but he dodged specifics, saying only that Tokyo and Washington "must not hurt the bilateral relationship by aggravating specific trade issues." So as not to appear completely unforthcoming, the Japanese leader did respond to a previous U.S. request for financial contributions to help pay for fuel oil for North Korea under the Korea Peninsula Energy Development Organization. KEDO was established as part of a 1994 U.S.-North Korean agreement aimed at defanging Pyongyang's suspected nuclear weapons development capability (see JEI Report No. 41B, October 28, 1994). Under the terms of the accord Washington agreed to provide Pyongyang with fuel oil until two new light-water reactors, which do not yield sufficient plutonium for atomic weapons, are completed to replace North Korea's existing heavy plutonium-producing reactors. The United States recently prevailed on Japan to cover the costs of the fuel oil, arguing that ensuring steady supplies is critical to keeping Pyongyang in compliance with the nuclear agreement.

Concerning other regional hot spots, the two leaders reportedly expressed hope that tensions between the People's Republic of China and Taiwan will be resolved peacefully. Mr. Clinton also reportedly "expressed sympathy" for Mr. Hashimoto, who has been targeted for harsh criticism by the political opposition for the government's unpopular plan to use some ¥685 billion ($6.9 billion at ¥100=$1.00) in taxpayers' money to bail out seven failed jusen (see article in this issue). Senior American officials were quick to clarify, however, that the president showed empathy for his Japanese counterpart as one sometimes-beleaguered politician to another. Mr. Clinton did not endorse the bailout scheme, one unnamed official emphasized, because it would have been inappropriate for him to comment on a purely domestic Japanese issue.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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