Japan's Markets Slump as Trade Plan Is Panned

TOKYO -- Shrugging off the U.S. government's cool response to a market-opening package aimed at restarting stalled trade talks, Japanese officials said Wednesday they would turn their attention to the next step, planned for June.


But Japanese financial markets took the news a bit harder, as both the U.S. dollar and share prices slumped in disappointment.


U.S. Trade Representative Mickey Kantor rejected as a "half-finished work" Tokyo's set of plans for working to trim the $59.3 billion trade surplus with the United States, which put off many difficult decisions until June.


Japan's top government spokesman said Wednesday that Japan would concentrate on its next offer, expected in June, ahead of the July summit of the Group of Seven in Naples.


"Since the U.S. side would rather focus on the June package, the government believes it is important for us to put our utmost efforts into working on that," said Masayoshi Takemura, the chief government spokesman.


Japan has promised steps to slash government red tape in 11 key areas where foreign companies say they have trouble entering the Japanese market, such as insurance, retailing, pharmaceuticals and food.But the government said it would not decide until June on specifics of how to bring product regulations and standards more in line with world norms.


The administration of U.S. President Bill Clinton may not wait that long.


Looming over the trade talks is the threat of U.S. sanctions against Japanese products under the newly revived Super 301 provision of U.S. trade law. The first step toward that could come Thursday, when a U.S. report will detail foreign trade barriers.


U.S. Ambassador to Japan Walter Mondale said in Tokyo Wednesday that trade sanctions might be necessary if Japan does not do more to open its markets.


"We hope they won't be necessary," Mondale said, referring to sanctions, "but we can't live with the status quo." He was speaking at a meeting of the American Chamber of Commerce.


Washington could not accept the current situation, in which its markets were open and Japanese markets closed, he added.


Japan's government said it would spend the next three months working on steps to weed out import-inhibiting regulations -- a long-term struggle against bureaucratic inertia and vested interests.It also said plans should be ready by June to expand spending on public works and to extend a $56 billion tax cut past this year -- both steps that Washington demanded -- believing they would perk up Japan's economy and boost purchases of foreign goods.


The Japanese package did contain several new specific steps on making it easier for foreign firms to win government contracts. And Japanese automakers separately announced plans to buy more foreign autos and auto parts.


But Kantor said the proposal was not enough to renew talks that collapsed in February when the two nations were unable to agree on how to measure the success of plans to trim the trade imbalance.


Financial markets showed clear disappointment over the continued stalemate in trade talks.


The dollar closed at 103.30 yen, down 0.50 yen from its finish Tuesday in both Tokyo and New York. It now has lost 3.23 yen in four days.


On the Tokyo Stock Exchange, the Nikkei Stock Average of 225 selected issues fell 149.83 points, or 0.76 percent, to 19,559.91. On Tuesday, the Nikkei had closed at 19,709.74, down 232.05 points, or 1.16 percent.


(AP, Reuters)