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US blames Japan as trade deficit soars

America's trade deficit with Japan soared in March, damaging the already dire trade relations between the two countries. Mickey Kantor, the US Trade Representative, blamed the trade deterioration, revealed in figures published yesterday, on the fact that Japanese firms were selling goods at a lower price in the US than at home in order to maintain market share.

The overall deficit shrank by less than analysts had expected, to $9.12bn in March from $9.15bn. The bilateral US deficit with Japan jumped from $4.7bn to $6.1bn, partly because of higher imports of cars.

Mr Kantor said he was concerned that this gap had widened, given the dollar's fall against the yen this year. But he thought it would be unwise to conclude that Japan's sales of cars to America - up from $1.88bn to $2.33bn - had risen in anticipation of trade sanctions. Last week the US imposed punitive 100 per cent tariffs on some makes of Japanese car, following the breakdown of lengthy trade negotiations.

David Bloom, an analyst at James Capel, agreed, saying the bilateral figures were not adjusted for seasonal variations, and March was always an important month for car dealers to build stocks of vehicles and parts. But some analysts held to the theory that US dealers were trying to pre- empt the trade sanctions.

Economists also pointed out that the fall in the US currency would have increased the dollar price of Japanese goods before it led to a lower volume of import shipments and higher volume of exports. This effect alone would have increased the import bill.

There were some brighter spots in the trade figures, too. Although the American deficits with Taiwan and Mexico rose, its big shortfall in trade with China shrank. There were also gains in exports to western Europe and other Asian countries such as South Korea.

Robert Hormats of Goldman Sachs in New York said: "American products look cheaper to other Asian countries." He added that there had been an encouraging rise in exports of industrial and capital goods.

The trade figures hit Wall Street, with the Dow Jones average 34 points down at 4389 by late morning. The dollar slipped too, reaching DM1.4450 and 86.80 yen at noon, but its fall after the trade news was limited by the German mark's weakness.

Increasing the openness of Japanese markets to foreign goods has been a constant theme of US trade policy, and Mr Kantor repeated the call yesterday. He will have an opportunity to meet his Japanese counterpart, Ryutaro Hashimoto, at the annual meeting of the Organisation for Economic Co-operation and Development in Paris next week.