View from Tokyo: Dumping rebounds on Japan

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EVEN the Japanese media were embarrassed last week when the government announced it was imposing anti-dumping duties on Chinese exports of ferro-alloys to Japan. 'Exporters living in greenhouses . . .' was the title of an editorial in the conservative Yomiuri Shimbun, Japan's largest- circulation daily newspaper.

The article suggested that Japan, 'which enjoys a huge trade surplus, is in no position to resist exports flooding in from other countries, and instead should place priority on containing its own exports'. Until recently such opinions would be largely confined to anti-establishment left-wing circles, but the signs are that even those Japanese most proud of their country's economic achievements are becoming more sensitive to criticism from abroad about its chronic trade surpluses.

The Yomiuri did not criticise the government's action against China as such - the Chinese firms were indeed selling the ferro- silicon manganese, an ingredient in making steel, at unfairly low prices. The paper even said that with China applying for membership of the General Agreement on Tariffs and Trade, it was right for Japan to blow the whistle on unfair trade practices that contravened Gatt principles.

The problem is that Japan continues to leave itself open to similar charges of unfair trading - the most flagrant transgression at the moment is the government's continuing refusal to open the country's rice market to imports. The Yomiuri said some 200 dumping cases had been brought against Japan by the US and the EC in the past decade: 'It cannot be denied that some Japanese firms have tended to cut prices in a drive for market share. While assigning blame to other countries, Japan must also undertake some self-examination.'

The perennial problem of Japan's trade surplus is set to boil over this year. Figures just released put the country's surplus at dollars 107bn ( pounds 76bn) for the last calendar year, and economists estimate the total for the fiscal year to March will top dollars 130bn.

The new US administration has made it clear that it will adopt a tougher approach to Japan, and the EC is also stepping up its criticism of Tokyo. 'Japanese exports to the EC remain high, while European exports to Japan - often in sectors where EC firms have proven their excellence in other world markets - are both small and growing too slowly,' Sir Leon Brittan, the external economic affairs commissioner, said this week.

Bubble economy

Fearful of fully fledged trade wars breaking out, the Japanese government has tried to explain away its trade surplus as a function of falling domestic demand as the country struggles through a recession.

However, from 1987 to 1990, when the trade surplus actually fell due to increased imports, were also the crazy 'bubble economy' years, and many of the imports - European sports cars, designer clothes, artworks and other luxury goods - are not likely to reach their previous levels even when the economy resumes its normal growth rate. And dollars 107bn is a difficult sum to explain away, even in a recession.

In January alone the big three US car makers called for duties on Japanese cars, and the US Commerce Department announced that anti-dumping duties will be imposed on imports of steel from Japan (along with 18 other countries). The head of the international trade policy bureau at the Ministry of International Trade and Industry, Sozaburo Okamatsu, has said Japan 'would take retaliatory action' if protectionist measures increase. But Japanese trade officials are not looking forward to the rest of 1993.

Trade friction is not the only source of worry in Tokyo these days. The Ministry of Finance has its own particular headaches with the stock market, as fears increase of a 'March crisis' caused by companies liquidating shareholdings before closing their books for the end of the fiscal year on 31 March. The stock market seemed to be in a tailspin last summer, with the Nikkei 225 stock average falling as low as 14,309 in the middle of August, before an emergency economic package helped temporarily to restore some confidence in the market.

The critical level for the Nikkei is about 16,000 - below that banks that rely on stockholdings to boost capital adequacy run into difficulties. The Nikkei has kept above this level in recent months - but only because of market manipulation by the Ministry of Finance, and some fear that the ministry is merely storing up a problem that is bound to crash over them sooner or later.

The market-boosting operation is being referred to light-heartedly as the PKO, or price- keeping operation, by brokers and analysts - a play on the controversial peace-keeping operation being undertaken by Japanese troops in Cambodia. But just as the Cambodian peace plan is running into trouble, so too the Ministry of Finance's market manipulation is heading for rough times.

Lack of confidence

The ministry is keeping stock prices up by moving billions of pounds of public pension funds and insurance schemes into the market, while using its famed 'administrative guidance' to try to stop large private-sector fund managers from withdrawing any more money from the stock market.

The result is a complete lack of confidence in share price levels and a continuing exodus of foreign and other investors who do not fall under the ministry's guidance mantle. For brokers who rely for much of their income on transaction fees this means even less business, and many smaller securities houses are facing bankruptcy.

This puts the Ministry of Finance in a dilemma. If it continues its PKO, brokers will go bust or will have to be bailed out by banks that are already groaning under bad debts. If the PKO is stopped, the Nikkei will tumble, putting pressure on the banks from another direction. So, like their colleagues in the Ministry of International Trade and Industry, the bureaucrats in Finance are not looking forward to the coming year either.

Unemployment has become a big issue in Japan recently, with the rate for December reaching 2.4 per cent, and analysts predicting 3 per cent in the coming year as companies react to the slowing economy by cutting recruitment.

But the big lay-offs predicted by some have still to happen. As evidence of how difficult it is to lay off workers in Japan, Pioneer reversed a much-quoted plan to, in effect, fire 35 executives announced at the end of last year. In December, Pioneer had told 35 managers aged over 50 that they would be expected to resign by the end of January, or face dismissal. This was touted as the beginning of much larger lay-offs throughout Japanese industry. But this week the company, stung by the publicity, backed away from the plan, and said the men would leave in their own time, with no deadline, and not until they found other jobs.

(Photograph omitted)