WASHINGTON — President Reagan expressed optimism Friday that the "politically unsustainable" U.S. trade deficit with Japan will soon improve but warned that Japan must open its markets to American agricultural products.
At a White House ceremony, Reagan assured Prime Minister Yasuhiro Nakasone that "we will remain each other's close friends and trading partners. Of that, there is no doubt."
For the first time, Nakasone conceded that the global trade imbalances of both Japan and the United States are "politically unsustainable." Reducing them, the two leaders said in a joint statement after two days of meetings, will be a "key objective" of the policies of both nations.
Surplus at Record Level
In Tokyo on Friday, authorities announced that Japan's trade surplus in the fiscal year ending March 31 reached a record $101.4 billion, compared to $61.4 billion in the previous fiscal year.
Reagan said that his hopes for an improvement in the U.S. trade deficit with Japan--$58.6 billion in 1986--rest on measures Nakasone promised him that Japan would adopt. Foremost among them is a new program of government spending designed to stimulate the economy and increase demand for U.S. goods.
White House Chief of Staff Howard H. Baker Jr. praised Nakasone for "an honest and genuine effort" to reduce Japan's trade surplus with the United States. But in a television interview recorded for broadcast Sunday, Baker criticized Nakasone's presentation to Reagan as "pretty short on specific proposals."
Hits Order on Rates
Baker also criticized Nakasone for declaring Thursday that he had ordered the Bank of Japan to drive down Japan's short-term interest rates, a step that would stimulate Japanese economic growth.
Bank Disputes Order
"That didn't quite work out, either," he said. "Today there was a release from Tokyo saying that the bank doesn't take instructions from the prime minister."
Other U.S. officials were more charitable. White House spokesman Marlin Fitzwater told reporters that Administration officials were "very pleased and feel that these meetings have been quite productive in a number of ways." A "full understanding," he said, was reached in "some of the issues involved in the trade debate."
Nakasone offered no new concessions on the purchase of U.S. farm products. Reagan's statement on agricultural trade threatened to add to frictions that peaked Wednesday with passage by the House of a proposal to require that Japan slash its trade surplus with the United States by 10% a year or face retaliation.
The President said that he and Nakasone had agreed to make discussion of "market-distorting (agricultural) subsidies . . . including our own," a major topic both at the June 8 to 10 Venice summit and in the current round of multinational trade negotiations in Uruguay.
"Early improvements in access for U.S. agricultural products to Japan's markets are vital--economically and politically," Reagan declared.
At the National Press Club, Nakasone defended his country's agricultural policies by declaring that Japan already is "the world's biggest agricultural importer."
"We import about $18-billion worth of farm products, of which $6.2 billion comes from the United States," he said. "We also buy 70% of all the beef the United States exports around the globe and 40% of its total orange exports."
Study on Chip Sales
In his remarks in the Rose Garden, Reagan said that the two governments had agreed to review in mid-May data on Japan's purchases of American semiconductors and sales of Japanese chips in third-country markets in the hope of determining Japanese compliance with an agreement on semiconductor trade.
"With the Venice summit coming up, it is our firm hope that the data will justify rapid progress" toward lifting sanctions imposed for Japan's alleged failure to carry out the agreement, he said.
A senior U.S. official who asked not to be identified insisted that the President's remarks did not constitute a promise to lift punitive 100% tariffs imposed April 17 on three categories of Japanese electronic goods before the seven-nation summit.
Nakasone, at the National Press Club, said he is confident that the mid-May review will provide a basis for lifting the sanctions. Sales of American chips in Japan, he said, had recently risen to 12% of the market from 8%.
At a news conference for reporters traveling with him from Tokyo, Nakasone said that the fear of fanning protectionist sentiment in Congress forced Reagan to be vague in declaring his intent to withdraw the sanctions. Reagan's wording, "with the Venice summit coming up, represents a rather clear step forward," he insisted.
Nakasone also said that he believes he succeeded in changing the American government's attitude on the dollar's value in relation to the yen. Until recently, he said, U.S. officials had welcomed the dollar's decline because it made foreign goods more expensive in the United States and American goods cheaper abroad.
Ties Dollar to Imbalance
"Now," he said, "the feeling is that a further decline in the value of the dollar will not be good for the American economy and will be an impediment to reducing the trade imbalance."
In their joint economic statement, Nakasone and Reagan declared that "a further decline of the dollar could be counterproductive to their mutual efforts for stronger growth in their economies and for reduced imbalances."
In his National Press Club speech, the 68-year-old prime minister stressed the importance of the U.S.-Japan relationship.
"In surveys of Japanese public opinion, the United States always ranks first as the foreign country we Japanese like most," he said.
" . . . That is why I am distressed and disappointed when I hear some Americans these days regard Japan as an unfair competitor threatening the United States."