REPEAT: MNI EXCLUSIVE: Japan Calm on US Trade Row -2

By Max Sato

     TOKYO (MNI) - In the new ministerial-level trade talks, U.S. Trade

Representative Robert Lighthizer is expected to ask his counterpart, Economic

and Fiscal Policy Minister Toshimitsu Motegi, to come up with an idea to either

reduce Japan's trade surplus or expand U.S. exports to Japan.

     "If Japan urges the U.S. to withdraw the high import tariffs in bilateral

talks, the U.S. will ask for something in return. Japan should then tell the

U.S. to return to the TPP and benefit from freer trade in a multilateral

framework," University of Tokyo's Nakagawa said.

     Finance Minister Taro Aso said on Saturday that Japan is "considering"

filing a complaint on the U.S. tariffs with the World Trade Organization,

following the moves by Canada and the European Union.

     "There are pros and cons to taking the case to the WTO. If we decide to do

so, we will pick the most effective timing," a Japanese government official who

is familiar with trade issues told MNI.

     Nakagawa said Japan should file a complaint with the TWO but warned against

making a trade deal with the U.S., such as making a government-led reduction in

Japanese car exports to the U.S., which goes against WTO rules.

     "I suspect the reason Japan has not filed a complaint is that it is not a

good diplomatic timing before the U.S.-North Korean summit on June 12," he said.

Prime Minister Shinzo Abe has been asking President Trump to help resolve the

long-standing issue of Japanese nationals kidnapped by North Korean agents.

     --WINNING ARGUMENT

     Japanese officials appear confident in winning an argument over the U.S.

allegation that the Japanese auto market is closed.

     Japan imposes no tariffs on imported cars. While foreign-made cars only

have a 7% sales share in the Japanese market, they remain popular, with German

models Mercedes-Benz, Volkswagen and BMW topping the list.

     European brands offer various styles and functions to meet a diverse taste

of the Japanese consumers while the variety of American-made cars available in

Japan is limited.

     Shunsuke Kobayashi, economist at Daiwa Institute of Research, said he

thinks the U.S.-Japan trade dispute is a political show with an obvious happy

ending prepared by both sides.

     "The U.S. has already made inroads into the Japanese beef and orange

markets. But the U.S. can expect from Japan plans to invest in the U.S.

infrastructure in resolving the dispute over automobiles," Kobayashi said.

     "Japanese carmakers produce about Y10 trillion worth of automobiles in the

U.S. annually but they also export the same value of autos to the U.S. from

Japan and other locations including Mexico," he said.

     "If the U.S. imposes a 25% tariff on imported cars, it will amount to a

Y2.5 trillion tax hike for U.S. consumers. Importers will ask for a discount

from Japanese makers and there will be lost sales due to higher end-user

prices."

     "But if Japan offers to invest Y2.5 trillion in the U.S. infrastructure,

the U.S. will have a good reason to withdraw high tariffs," Kobayashi said.

     --WEIGH ON GDPs

     Daiwa Institute of Research economists estimate that if the U.S. and China

were engaged in a trade war, each imposing 25% duties totalling an additional

$150 billion levy, Chinese GDP would be pushed down by 0.3 percentage point

while U.S. GDP would be lowered by 0.19 point and Japanese growth by a mere 0.02

point, all in real terms.

     But if the U.S. and Chinese governments spent the additional revenues from

the higher duties, the impact of the trade war would be even more negligible,

+0.02 point for China, -0.01 point for the U.S. and zero for Japan, according to

DIR's estimate.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com