United States President Donald Trump pressed Japanese Prime Minister Shinzo Abe to even out the trade imbalance between two countries. Photo: Privacy.

JAKARTA (TheInsiderStories) – Japan and the United States (US) will hold working-level talks on trade in the United States on June 10-11, Japan’s economy minister, Toshimitsu Motegi, said on Tuesday (06/4).

During the talks, the two countries will discuss technical aspects of industrial and agricultural goods trade, Motegi told a news conference after a regular cabinet meeting as reported by Reuters.

US President Donald Trump, on a four-day state visit to Japan a few days ago, pressed Japanese Prime Minister Shinzo Abe to even out the trade imbalance between two countries. He said that the US has an unbelievably big trade imbalance with Japan.

Trump abhors trade deficits and is determined to reduce the one the US has with Japan, particularly by gaining more access for exports by American farmers and automakers. American growers accounted for about a quarter of Japan’s agricultural imports in 2017.

Japan, under Abe, wants to head off Trump’s threatened penalties on autos and auto parts, which could tip it into recession, as well as any “currency clause” directed at the Japanese yen. Previously, Trump has threatened to target Japanese automakers with high tariffs in his effort to cut the US trade surplus and get a two-way trade pact with Tokyo.

Both sides have said they want to move quickly but as with most trade talks, the end date is murky. US Trade Representative Robert Lighthizer and Japan’s Economy Minister Motegi were said to have agreed on the broad scope, but Motegi has repeatedly said that any deal will have to be comprehensive, signaling that Japan won’t agree to anything piecemeal.

Previously, US Treasury Secretary Steven Mnuchin has said the US wants any trade deal with Japan to include language that would prevent competitive devaluations – currency moves designed specifically to boost exports. The US made sure similar language was included in its revised trade deal with Mexico and Canada, and that prohibition is expected to be part of any US-China deal.

Japan, though, wants to avoid any clause that might tie the Bank of Japan’s hands. It has argued that currency moves and export volumes no longer correlate. Motegi has said that any discussion on currency is between Japan’s Finance Ministry and the US Treasury Department, under an agreement reached in February 2017.

In goods trade, the US trade deficit with Japan was 6.5 trillion yen (US$59 billion) in 2018. That was down 8.1 percent compared with 2017, the result of weaker car exports from Japan and more imports of aircraft and oil, according to Japan’s Finance Ministry.

Autos and auto parts make up the biggest portion of that deficit, and Trump’s trade policy is particularly focused on that sector. The US actually has a trade surplus for services, which has slowly been increasing over the past decade.

A deal with Japan became more urgent for the US after its talks with China broke down in May and the tariff war escalated. Trump put off imposing tariffs on imported cars for six months, seeking to use that as leverage in talks with Japan.

Already in March, Lighthizer told US lawmakers that he’s aware of the precarious situation American farmers are in and that winning greater market access for agriculture products in Japan is a high priority.

Farm states were an important bloc of support for Trump in 2016, and with a presidential election in 2020, Trump will face questions on his achievements in rebalancing America’s trade relationships, a major campaign pledge.

For now, the report card is full of incompletes: There’s resistance in the US Congress to ratifying the United States-Mexico-Canada agreement. Talks with the European Union haven’t gotten far. The trade war in China, meantime, has hurt both sides.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com