Business: Furor over Japan

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Rising ire over a still soaring surplus

Ater so many years of talks, protests and promises on both sides, the squabbling between the U.S. and Japan over trade might be expected to subside. In fact, tempers seem to be getting worse, not better. Yankee businessmen complain that they are still all but shut out of the Japanese market, and more and more of the American consumers who buy the goods that the Japanese export with such zeal seem to agree. Pollster Louis Harris found that a strong (64%) majority are persuaded that the U.S. is getting shortchanged on trade, by Japan as well as by other countries. Today a good many Americans would applaud the exasperation confessed by John Nevin, chairman of Zenith Corp., in the latest Harvard Business Review. Says he: "The question is whether Japan is going to open up or the rest of the world is going to shut down Japan."

High up on the list of American complaints is the sluggishness with which Japan has moved to live up to the trade agreement that was concluded with the U.S. last January. That pact pledged Japan to cut tariff walls and quotas, with the aim of bringing U.S.-Japanese trade back into balance by 1980. But there have been few signs that the promises are being kept, and trade hassles with the Japanese are still regularly in the headlines (last week's concerned Japanese import quotas on American beef and oranges).

Now the dollar's tribulations are focusing further attention on the trade problem with Japan. A main cause of the dollar's weakness is the U.S. trade deficit, which may run to more than $30 billion this year; the deficit with Japan will account for almost half of that. Economist Otto Eckstein of Data Resources Inc. in Lexington, Mass., last week declared that what is really needed to restore the dollar's health is "quick and dramatic relief from Japanese imports." In trade, says Eckstein, the Japanese "have done nothing for us." The Japanese, for their part, argue vehemently that they have done much to open up their market and that it is now the fault of American exporters if they cannot crack it. Who is right?

The one fact on which there is no debate is that Japan's huge trade surplus with the U.S. is growing bigger all the time (see chart). The excess of what Japan sells in the U.S. over what it buys from America reached $9.3 billion in the first nine months of this year, and is expected to hit a record $12.4 billion for all of 1978.

These huge imbalances not only cost American workers jobs and help fan U.S. inflation but have also contributed mightily to the weakening of the dollar. In theory, the 40% fall of the greenback against the yen over the past two years should have helped correct the U.S.-Japanese trade imbalance. This would happen if Japanese exports became more expensive and therefore less attractive to American buyers, thus cutting the cost of U.S. exports to Japan. To some extent, this has happened. For instance, Toyota's U.S. sales fell almost 8% in the first nine months of 1978, partly because prices of new cars were lifted 13.9%. Yet, overall, sales of Japanese exports remain strong in the U.S., while sales of American products in Japan show little new strength.