Japanese government representatives and their American counterparts are meeting from this Wednesday to discuss trade matters. The meeting is taking place right before a possible meeting between President Donald Trump and the Japanese prime minister Shinzo Abe during the G7 summit in France.
“It will be a very tough negotiation,” a Japanese official told to Reuters.
U.S. President Donalt Trump threatened to impose tariffs on Japanese automobile exports to the United States, claiming that it was a national security matter. However, he decided to delay the tariff imposition by six months. Meanwhile, the United States government is demanding from Japan to open its markets for American agricultural goods and to do whatever they consider necessary to fix the trade imbalance between both countries. Japan is demanding from Washington to cut tariffs on Japanese car imports and industrial goods.
Both countries have been reluctant to comply with the other side’s requests, hence the talks have not progressed a lot.
“If there is to be an ‘agreement’ we need to have something we can formally announce, which is tough,” told another Japanese official to Reuters, adding that it will be hard to reach an agreement if the United States doesn't want to compromise more on its position.
Japan May Be Facing a Dire Economic Situation
Japanese exports to the United States have been rising for eight consecutive months, going up 8.4% in July, while imports from the United States grew up by 3.5%, putting Japan's trade surplus (with the United States) growth at 15.6%. According to Trump, this lack of balance is unacceptable and is what pushes him to use tariffs to press countries like Japan (and China) to comply with Washington’s demands.
Japan is already suffering the effects of the trade wars, as its exports slipped for the eighth consecutive month in July, mostly due to the situation between the United States and China, as the latter is one of its main trade partners.
The Japanese are also facing a sales tax increase from 8% to 10% in October, which is feeding concerns regarding the future of the economy. The main reason behind this is Japan’s aging population, which has boosted social security expenses, fueling the Japanese public debt, which now is more than double of the GDP.
To counter the possibly devastating effects on consumption, the Japanese are planning to implement some temporary fiscal measures, among them, introducing free early-childhood education, shopping vouchers for low-income families, and reducing the sales tax rate on food, beverages, and newspapers.