Technically the two sides are engaged in what is politely termed 'a period of reflection', after the breakdown of talks last week on ways of opening Japan's market to American exports, and reducing its dollars 60bn ( pounds 40bn) surplus with the United States. In fact neither looks willing to give an inch, and Washington is expected to fire the first shot today, by imposing higher tariffs on Japanese cellular phones.
That would be in retaliation for Japan's failure to let the US company Motorola into its richest cellular market, the Tokyo-Osaka corridor. The Motorola case is not directly connected to the dispute which overshadowed Friday's summit between Mr Clinton and Prime Minister Morihiro Hosokawa. But, the President said, it was 'a good illustration' of the problems faced by US manufacturers.
Thereafter the US can choose from a range of moves under the little-used 'Super 301' trade provision permitting reprisals against 'unfair' trading practices, which Mr Clinton is likely to re-activate soon. 'There will be a series of actions,' threatened Laura D'Andrea Tyson, the head of the President's Council of Economic Advisers.
Mr Clinton insisted he was keeping his options open. But his language showed that Washington's patience with Tokyo is running out: 'They have reached a point now in their growth and wealth and strength when it is unacceptable for . . . their own consumers, as well as for the rest of us, to follow a policy radically different from every other advanced economy.' Convinced that the White House at last means business, foreign exchange markets sent the dollar plunging against the yen.
The Japanese had argued during the trade talks that the government's hands were tied over market-opening measures, since the country's economy could no longer be influenced by 'administrative guidance'. But the Ministry of International Trade and Industry (Miti) was deeply embarrassed yesterday by the exposure of a blatant attempt at just such 'guidance': the manipulation of media opinion on the effectiveness of the government's pounds 92bn economic stimulus package announced last Tuesday.
Last week Miti bureaucrats drew up a crib sheet of recommended answers to possible questions from reporters about the economic stimulus package, according to the Tokyo daily newspaper. The crib sheet was distributed to supposedly independent economic organisations, including the influential Keidanren, the Federation of Economic Organisations made up of executives from Japan's leading corporations.
It is perhaps a sign of the times that Miti's crib sheet was leaked to the press - in the past such 'administrative guidance' would have been followed without question. Hideaki Kumano, a vice-minister at Miti, was forced to apologise, saying that parts of the document were 'inappropriate' and were not meant for outside distribution.
Leading article, page 17
Yen soars, page 27