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Japan’s Abe, Automakers Scramble to Draft Response to Trump

Japan is scrambling to respond to intensifying trade pressure from U.S. President Donald Trump, with Prime Minister Shinzo Abe planning to meet the head of Toyota Motor Corp (TOYOF) this week, while the business lobby Keidanren puts together a ‘Trump task force.’

Abe will visit Washington on Feb. 10 for talks with Trump at which the U.S. leader is expected to seek quick progress toward a two-way trade deal with Japan and discuss the automotive sector.

Ahead of those talks, Abe will meet with Toyota Chief Executive Akio Toyoda, two sources told Reuters. One of them said the meeting would take place on Friday. Chief Cabinet Secretary Yoshihide Suga denied a meeting had been set for Friday, while Toyota Motor Corp declined to comment.

 

In a phone call with Abe on Saturday, Trump reiterated his pledge to create jobs in the U.S. and asked that the Japanese auto industry contribute, the Nikkei business daily reported, quoting unidentified Japanese government officials.

A White House statement said the two “committed to deepen the bilateral trade and investment relationship.”

Japan needs to craft a plan to show that its firms, carmakers especially, will contribute to creating U.S. jobs, a former Japanese diplomat said. “I think that is the only way forward to make the bilateral summit a success,” the diplomat said.

“Trump only cares about numbers. Everything has to be linked to jobs creation,” he added. “Symbolically, autos is a very big player.”

Abe has left the door open to discussing a free trade agreement (FTA) with the United States, but some officials worry Japan would have little to gain while coming under intense pressure from Washington. Bilateral talks on specific sectors such as autos, however, are an option, officials have said.

Trump, who last week dropped out of the 12-nation Trans-Pacific Partnership pushed by his predecessor Barack Obama and favored by Abe, has repeatedly attacked Japan’s auto market as closed, in an echo of criticisms heard two decades ago.

Japan has rejected that accusation, saying it does not impose tariffs on U.S. auto imports nor put up discriminatory non-tariff barriers.

Over the decades, Japanese automakers have developed SUVs, mini-vans and pick-up trucks specifically targeting American consumers’ taste for bigger cars, while U.S. brands have struggled to make inroads in Japan, where drivers overwhelmingly prefer domestic brands.

Foreign-branded cars accounted for only 7 percent of the Japanese passenger car market, led by German marques. American brands collectively made up less than a third of 1 percent of passenger cars sold in Japan last year.

Toyota in particular has come under fire from Trump for plans, announced in 2015, to shift production of its Corolla sedan to Mexico from Canada. Earlier this month, Japan’s top automaker said it would invest $10 billion in the U.S. over the next five years, the same as the previous five years.

Toyota says it directly employed about 40,000 American workers as of December 2015, and indirectly more than 200,000 if dealers and suppliers are included.

Meanwhile, Japan’s biggest business lobby Keidanren wants to beef up its information gathering and analysis of the Trump administration’s policies, while also conveying data on Japan Inc’s importance to the U.S. economy, a Keidanren official said.

“We will create a task force, the main purpose of which is to convey correct information about the contribution of Japanese firms in the United States,” said another Keidanren official.

Japan’s government is already trying to give Trump’s administration a crash course on its companies’ contribution to U.S. jobs and growth, with fact sheets showing, among other things, that Japanese companies have created 839,000 jobs in America (a figure only British companies can top).

Tokyo came under harsh U.S. criticism in the late 1980s and early 1990s, when Japan accounted for up to 60 percent of the U.S. trade deficit. A last-minute deal in June 1995 averted U.S. tariffs on Japanese luxury cars when Japan’s automakers crafted “voluntary plans” to boost purchases of American auto parts and expand production in the U.S.. Automobiles and car parts account for about three-quarters of the overall Japan-U.S. trade gap, making it an easy target.

But these days, Japan accounts for less than 10% of the deficit. while China accounts for nearly half of it – something Japanese officials are stressing to U.S. counterparts.