US fears further setback in breaking trade deadlock: Hosokawa resignation an unwelcome shock for Clinton

THE resignation of the Japanese Prime Minister, Morihiro Hosokawa, came as an unwelcome shock for the Clinton administration, which fears it will set back further the already slim prospects of breaking the trade deadlock between the world's two largest economies.

The White House insisted yesterday that continued negotiations to reduce Japan's dollars 60bn surplus with the US were a 'high priority'.

Earlier, Mr Clinton personally expressed his regrets in a phone conversation with Mr Hosokawa, generally regarded here as the Japanese politician most likely to deliver on decades of promises that Tokyo would open up its markets to US and foreign goods.

With his departure, trade officials believe that a breakthrough will be more difficult. The leaders of the two countries are due to meet at the G7 summit in Naples in July. But lower level discussions had been scheduled for next week's signing of the new Gatt accords in Marrakesh.

Even before Mr Hosokawa's downfall, US-Japanese trade talks had been foundering. February's summit here was a failure, as Mr Hosokawa refused to accept Washington's demands for numerical targets for US exports to Japan. These, he said, would be tantamount to managed trade.

A subsequent agreement allowing Motorola greater access to Japan's cellular phone market was only a temporary palliative. Japan was prominent in a list of offending countries singled out by the Commerce Department as liable for retaliatory trade tariffs.

Most recently, Mickey Kantor, the US Trade Representative, dismissed a new set of market-opening promises by the Hosokawa government as little more than window-dressing.

Thus far, the administration's deeds have not matched its tough talk, and both countries have shied away from provoking an all- out trade war. And until there is once more a fully empowered government in Tokyo, US leverage will be even smaller.