Nakasone Acts to Help U.S. Exports : Reagan Praises Japanese Steps to Spur Economy

WASHINGTON —  Japanese Prime Minister Yasuhiro Nakasone, in a move U.S. officials said could reduce the U.S. trade deficit, told President Reagan on Thursday that his government will boost economic growth at home.

More vigorous Japanese economic growth has long been a goal of U.S. policy makers, who want Japanese consumers to be able to buy more U.S. goods.

Nakasone said Japan has already taken steps to reduce short-term interest rates, a measure that should stimulate the domestic economy.

Reagan, before hearing the specifics of Nakasone’s plans, said during welcoming remarks that he was “most encouraged by what appears to be a commitment to policies of domestic growth.”

Mounting Anger

The exchange, during the first of two days of meetings, came at a time when anger is mounting in the United States over its trade deficit with Japan, and on a day when the House passed a bill mandating tough sanctions against nations with large trade surpluses with the United States.

The United States imported $58.6 billion more from Japan than it exported last year, about one-third of its global trade imbalance.

“Even the closest of friends have differences,” Reagan said during the sun-drenched welcoming ceremony on the White House South Lawn. “Ours is the challenge of keeping trade and commerce, the lifeblood of prosperity, flowing equitably between our peoples.

“To do that, we must address the current unsustainable trade balance. It has spawned calls for protectionism that would undo the shining economic accomplishments we’ve achieved together.

“Progress will not happen on its own. Tangible actions must be taken by us both,” the President said. “We would like to see Japan, for example, open its markets more fully to trade and commerce.”

Replying to Reagan, Nakasone likened rising economic frictions with the United States to “high waves” and said trade troubles must not “undermine the friendship and mutual trust between our two countries.” Later, Nakasone held nearly 2 1/2 hours of talks with 15 senators.

Nakasone came fearing an avalanche of criticism over trade issues. Despite the vote in the House, Nakasone found reaction both at the White House and in the Senate was surprisingly positive.

Although American officials had warned him in advance that “actions, not words,” were needed to ease trade tensions, Nakasone’s presentations consisted mainly of promises of future action, often short on specifics.

Nakasone told Reagan in a 10-minute private meeting, and repeated in a lengthier session attended by Vice President George Bush and other senior U.S. officials, that withdrawal of sanctions Reagan imposed April 17 upon Japanese electronics products and stabilization of the yen-dollar exchange rates were his top priorities.

May End Sanctions

He won no specific response to either appeal. But U.S. Trade Representative Clayton K. Yeutter and Commerce Secretary Malcolm Baldrige indicated that the United States would consider lifting the sanctions--imposed for alleged Japanese failure to uphold a semiconductor trade agreement--as early as mid-May.

The Japanese measures to reduce interest rates particularly captured the attention of U.S. officials. White House spokesman Marlin Fitzwater said the lower interest rates would promote greater overall Japanese buying power and improve the health of the economy, which last year grew at a sluggish rate of 2.5%.

“I have instructed the Bank of Japan and the Finance Ministry to carry out operations to lower short-term interest rates and they have started,” Nakasone told U.S. officials.

Nakasone told Reagan that reduced Japanese interest rates would also help brake the fall of the dollar on international currency markets. Lower domestic interest rates would encourage Japanese investors to turn to the United States, where their purchase of dollar-denominated securities would prop up the dollar’s value.

‘Will Do Our Part’

Nakasone declared that the United States, Japan and European countries must cooperate to stabilize currency exchange rates, “whatever the obstacle. We will do our part but we want the United States to make efforts, too,” Nakasone said.

Federal Reserve Chairman Paul A. Volcker confirmed Thursday that the Fed had stepped in to slow the dollar’s fall on world markets by tightening the nation’s money supply.

Volcker, testifying before a House Banking subcommittee, called the action “a slight snugging” of monetary policy.

A senior Administration official, speaking on the condition of anonymity, said the lower interest rates would improve stabilization of the yen and dollar.

“We think it’s a good idea, and that it will have a positive effect on trade, on the whole domestic stimulus package in Japan,” he said.

But Treasury Secretary James A. Baker III did not offer Nakasone any new assurance that the United States would take additional action to stabilize exchange rates. The Federal Reserve has been buying dollars on exchange markets to support the currency’s value.

Meets With Officials

The Americans who met with Nakasone also included Secretary of State George P. Shultz, Defense Secretary Caspar W. Weinberger and Agriculture Secretary Richard E. Lyng.

In discussing Japan’s pledge, announced Wednesday, to make more than $20 billion worth of loans to heavily indebted developing countries, Nakasone said recipients could use the money to buy products from any country.

He said the money would be disbursed not only through the World Bank, as a Japanese official had initially disclosed, but also through the Asian Development Bank, a developmental agency of the International Monetary Fund and Japan’s own Export-Import Bank.

Although Reagan stressed the importance of a Japanese economic expansion to pull in more imports, he made only one specific request of Nakasone: that Japan step up purchases of American coal and natural gas.

Nakasone said nothing about natural gas but insisted that U.S. coal producers must lower their prices to maintain their share of market among recession-plagued steel mills in Japan.

Shultz Questions Action

Shultz, in a luncheon for Nakasone, praised a new version of an official Japanese report that spelled out measures to restructure Japan’s economy to make it less dependent upon exports for growth. But he asked pointedly: “Can we expect to see them put into effect?”