By Yoshifumi Takemoto and Leika Kihara
TOKYO (Reuters) – Japan will push to leave agriculture out of its first economic talks with the Trump administration next month, sources said, hoping to prevent thorny topics such as its heavily protected farm industry from blocking other negotiations.
Tokyo will propose an agenda for the dialogue in coming days, which will include a wide range of issues, such as how Japan can provide technical assistance for U.S. railway projects and increase imports of U.S. shale gas, government sources with knowledge of the matter said.
Policymakers aim to focus the debate on ways to assist U.S. efforts to boost infrastructure investment, an area where an agreement may be more easily reached than other more contentious issues like trade, the sources said.
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“We’ll go with areas where a deal may be easier, such as infrastructure projects,” a government official said on condition of anonymity. “Other issues may take more time.”
U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe agreed last month to launch a bilateral economic dialogue to discuss issues such as macroeconomic policies, trade and infrastructure investment.
Taro Aso, Japan’s finance minister and deputy prime minister, and U.S. Vice President Mike Pence, who is expected to visit Japan next month, will lead the bilateral talks.
Many Japanese policymakers say the Bank of Japan and the Federal Reserve will not directly participate, to avoid any impression that governments are seeking to guide independent central bank monetary policy.
Shunsuke Takei, parliament vice minister at Japan’s foreign ministry, did not comment on specific areas of negotiations, but said it was important “to create a win-win situation for both sides.”
“This is not something where one side wins and the other loses,” he told Reuters.
Trump administration trade adviser Peter Navarro on Monday called out Japan for its non-tariff trade barriers and said negotiations to use U.S. leverage as the world’s largest market were needed to boost U.S. exports.
In a subsequent interview with the Wall Street Journal, Navarro said the administration would press Japan, Germany and other nations with which the United States has large deficits to buy more U.S.-made commercial and military products. (https://www.wsj.com/articles/to-reduce-trade-deficit-white-house-wants-partners-to-buy-american-1489020691)
“Any country we have a significant trade deficit with needs to work with us on a product-by-product and sector-by-sector level to reduce that deficit over a specified period of time,” Navarro was quoted as saying.
“That can be achieved, if they buy more of our products … whether it’s chemicals or corn or whether, from a national security perspective, it’s submarines or aircraft.”
FOCUS ON INFRASTRUCTURE
Trump has complained about the U.S. trade deficit with Japan and accused Tokyo of using its “money supply” to weaken the yen and give exporters an unfair advantage.
Japan hopes to use the talks to avoid trade friction and ensure Washington remains engaged in Asia-Pacific.
Japan’s agriculture ministry will not join the first round of talks, the sources said, a sign Tokyo wants to avoid facing pressure from Washington to open up its agriculture sector.
Japan’s finance, foreign affairs and trade ministries will mainly guide the dialogue, but the transport ministry will also take part to help draft plans on infrastructure investment co-operation, the sources said.
Some market participants have said Trump’s comments on money supply could be directed at the BOJ’s ultra-loose monetary policy that keeps the long-term interest rate pegged at zero percent, widening the interest-rate gap with rising U.S. rates, which in turn weakens the yen. They said the comments may discourage the central bank from expanding stimulus further.
The sources said that while the BOJ might have informal discussions with the government on the subject, it was unlikely to take direct part in the bilateral dialogue.
“Central banks traditionally prefer not to join government dialogues like these, unless there’s strong pressure to join,” said one of the sources.
(Additional reporting by Tetsushi Kajimoto, Kaori Kaneko, Minami Funakoshi and Linda Sieg in Tokyo and David Brunnstrom in Washington; Editing by Sam Holmes and Richard Chang)
