Opening Japan's door to foreign farm goods. Market liberalization presents key test for new prime minister

Japan's new prime minister, Noboru Takeshita, faces his first big challenge in foreign affairs, one that will test his well-known skills in domestic politics. The United States has been pressing Japan to open up its agricultural markets. Mr. Takeshita has pledged to make the market ``widely open,'' but he cannot disregard influential farm lobbies which are pushing the government to reject such external demands. Many members of the ruling Liberal Democratic Party (LDP) depend heavily on the farm vote.

``This is a good test for Takeshita to determine how serious he is about promoting liberalization of Japan's market,'' Josen Takahashi, chief analyst at Mitsubishi Research Institute, said. ``Though farm lobbies are very rich and influential, the prime minister knows the market has to be liberalized sooner or later. We have to wait and see if he can step in ... and adjust the interests of Diet [parliament] members who are supported by those lobbies.''

As the first step, Takeshita must deal with the recent ruling by the General Agreement on Tariffs and Trade (GATT), which upheld the US claim that Japan's quota on certain agricultural items violates GATT rules.

At the GATT general meeting in Geneva last week, Japan refused to agree to the ruling, since the government and LDP lawmakers failed to reach a consensus on the issue. But once Japan approves the ruling, as experts believe certain before Takeshita's visit to the US early next year, it has no choice but to free its market to 10 agricultural products, such as processed meats, pineapples, starches, and processed dairy products.

So far, the Japanese government's only official response has been that it will continue requesting that the US withdraw the case from GATT and go into bilateral talks outside GATT.

In dollar terms, the products affected constitute only a fraction of Japan's $18 billion agricultural imports. Nevertheless, experts await Takeshita's response to the GATT ruling with great interest because ``it sets the tone of where the administration is heading,'' Mr. Takahashi said.

Farmers perceive the US demand on those 10 items as a first of a series of threats to the survival of Japan's agriculture. ``If we bow to these kinds of demands, they will obviously come up with the next demands,'' said Mitsugu Horiuchi, president of the Central Union of Agricultural Cooperatives. These demands will be ``beef, citrus, and eventually they will touch upon rice, which is Japan's last life line. If we go on like this, Japanese agriculture will be destroyed.''

While the GATT meeting was going on in Geneva, more than 1,000 representatives of Japan's most powerful lobby, Agricultural Cooperatives, or Nokyo, held a tumultuous rally in Tokyo denouncing US demands to liberalize the Japanese agricultural market.

Farmers claimed that the US demands to open the Japanese market further is unjustifiable because the country is already the largest importer of agricultural products in the world.

``Why should the Japanese market be regarded as closed while we are marking a huge deficit on agricultural trade?'' said Tokuo Matsumoto, executive director of Nokyo. ``The agricultural imports account for more than 14 percent of Japan's whole import. Our import restriction is nothing more than which most other countries have, like the US.''

``Reducing farms and liberalizing market hurts many people,'' said Garret Scalera, president of the Tokyo Institute of Policy Studies. ``But it has to be done sooner or later and needs to be done rather quickly before trading partners get irritated.''

Mr. Scalera said the rest is a political matter of how to squeeze the compensation for those farmers who lost their job during market liberalization. But at the same time, he added, the political reality is more than two-thirds of the LDP and nearly one half of the leading opposition party rely on support from the farm lobby.

``There are two pending issues for the new administration to tackle: the opening of public construction projects to foreign construction firms and the agricultural market,'' Takahashi said.``But Takeshita himself is known to have his financial bases in the construction industry. So, if he has to choose one to tackle first, he is very likely to start with the agriculture and protect the construction.''

Meanwhile, US demands on Japan to free beef and citrus markets is intensifying as the expiration of the current agreements in March 1988 nears. In the current agreement, Japan has promised to remove quotas on beef and citrus in April 1988.