US Concerns Shape Japanese Economic Plan

JAPANESE leaders unveiled an economic rescue plan yesterday that attempts to dig the country out of two holes at once. The plan aims to appease Washington's stiff demands on trade just before crucial bilateral talks. It also tries to answer the cries of Japanese business leaders over a dormant economy.

``Something must be done or the [United States-Japan] relationship will go awry,'' Prime Minister Morihiro Hosokawa said last month on national television. Japan's economy, he warned in a speech last week, is in danger of ``going backward.'' The economy shrank from April to June at an annualized rate of 2 percent.

With new leaders who promise change, the United States and Japan will open bilateral trade talks next week in Hawaii. For the first time, Japan's leadership agrees with many US complaints, such as over-regulated Japanese industries and a lopsided trade surplus. Japan is ``focusing more on consumers so they can enjoy the fruits of economic development,'' says Masami Kogayu, chairman of Japan's Fair Trade Commission.

In addition to the Hawaii talks, which will be about setting up a ``framework'' for future trade talks, Mr. Hosokawa will meet with President Clinton sometime around Sept. 27, when both men plan to speak at the United Nations in New York.

Hosokawa's new economic measures will add some $57 billion in government spending, and may boost the economic growth rate by 1.3 percent. But the main thrust of the package are plans to deregulate industries in 94 areas and to pass the benefits of the recent 18 percent yen appreciation to consumers. The government will force airlines to offer deeper discounts on family fares to help pass on the reduced costs of imported jet fuel. For electricity bills, the average family will pay about $7.80 less a month next year.

Many of the measures are intended to open up Japan's economy and boost sluggish domestic demand - a key US request to help raise imports of American products. In addition, several leaders of Hosokawa's coalition government now support the US view that Japan should set a target for reducing its huge trade surplus, although others disagree.

``Japan has tended to dislike setting macroeconomic targets out of fear they might be linked to managed trade and [because] a failure to meet the targets might trigger sanctions,'' a spokesman quoted Foreign Minister Tsutomo Hata as saying.

The US wants Japan to cut its trade surplus as a percentage of gross national product from 3.3 percent to under 2 percent. ``If we do not set a target for the surplus as a whole, it is difficult to gain understanding,'' says Mr. Hata, leader of Japan Renewal Party. Other officials say a target should be only for ``internal'' use. Japan's trade surplus with the US was up 10 percent in August from a year earlier.

Another key politician, Ichiro Ozawa, co-leader of the Renewal Party, warns that Japan should find some common ground with the US in the trade talks or else Washington's frustration might result in it making no demands at all. That would indicate to the rest of the world that the bilateral relationship had ended, Mr. Ozawa said.

US trade negotiators hope Japan will agree by January to ``objective criteria'' for market access of foreign supercomputers, autoparts, and insurance services. Japan has indicated that objective criteria can be used only to measure past progress, not to set future trade targets.