With the war of words between Washington and Tokyo growing louder daily, the US is poised to impose its most visible trade sanctions ever against Japan. These are almost certainly to be led by swingeing tariff increases on imported luxury cars.
Only the precise timing of the announcement remained unclear yesterday. The escalation follows last week's breakdown of talks between the two countries aimed at opening up the Japanese market to American-made cars and car components. The final decision rests with President Clinton, currently visiting Russia and the Ukraine, but the comments of senior US officials leaves little doubt that stiff sanctions are on the way.
In Tokyo, Ryutaro Hashimoto, Minister for International Trade and Industry, vowed Japan would never accept numerical targets for imports of American cars and car parts. Jeffrey Garten, US Commerce Department under-secretary, insisted that Japan's closed markets distorted the global economy. "We have a very serious problem of market access we need to solve," he said.
Nothing symbolises the growth of the feud as much as the target. In previous trade rows, Washington has aimed reprisals at relatively obscure goods which consumers have been mostly unaware were Japanese. This is not so, however, with cars like the Toyota Lexus, Honda's Acura Legend and the Nissan Infiniti, prestige vehicles backed by heavy advertising.
According to reports, import tariffs on these and other luxury models could be increased from 2.5 per cent to as much as 20 per cent, with the measure taking effect 60 days after the announcement. Japan has already served notice it will appeal against any such move to the World Trade Organisation in Geneva.
Tariffs of that size, the Japanese car industry fears, would simply wipe out its US market.Japanese manufacturers exported 200,000 luxury vehicles - defined as costing $35,000 (£22,000) or more - in 1994 out of total vehicle exports to the US of 1.64 million.
In a speech to the European Institute yesterday, Mr Garten said the two sides were far apart on every issue in the car negotiations, and appeared to criticise Europe for not giving Washington strong support for its efforts to open Japanese markets while preparing to take advantage of concessions achieved by US pressure.
Japan's trade surplus rose to a record $145bn in the year to 31 March, up from $143bn in 1993/94, Finance Ministry statistics showed. Japan's surplus with the US alone accounts for more than $60bn a year.