Japan and Summit

In recent years, Japan has followed the consensus path of all the Summit countries on the main economic agenda items. Like Canada, Japan's foreign policy remains foursquare behind multilateral initiatives and institutions, in part because of Japan's history and relative isolation, and in part because its economic strength entitles Japan to a bigger voice in world institutions (Japan has about 55 professional personnel on the staff of 6,400 at the World Bank). Japan's leaders have promoted measures on trade protectionism (against), a new GATT round (for), industrial restructuring (their own Maekawa Report as a model), more aid to the Third World (for), more technology transfer (for) and improved currency alignments (for, within limits).

Three years ago, Japan's delegation knew that the Americans desperately wanted a new GATT round, and that France would be the main hold-out. The French position was undoubtedly awkward for Britain, Germany and Italy: Britain and Germany because they were paying the bill for the EC's agricultural subsidies and they felt Japan was the bete noir of trade protectionism. Italy, of course, has its own agriculture to protect, while its industrial north benefits from trade liberalization. Japan's delegation, as host to the 1986 summit in Tokyo, supported in Bonn the mainstream position in public; it watched the Canadians and British act as go-between for the Americans and the French. In private, the Japanese did the courageous thing, lest they get caught in the crossfire: the Japanese ducked!

At Tokyo the Japanese had different interests first as host, and second as providing a strong signal in advance of the Summit that Japan's adjustment process was well in hand. In fact, under Prime Minister Nakasone, there emerged a new Japanese pattern: major announcements properly publicized and leaked in advance of new Japanese initiatives to forego confrontation at the actual meetings. Prior to the Tokyo Summit, for instance Prime Minister Nakasone released the Maekawa Report, a dramatic initiative calling for domestic reform. Yet there can be little doubt that the Japanese focus was and remains, the United States, its most important market and political ally.

Today the US-Japan bilateral relationship remains the pivotal variable determining how well the major industrialized countries cope with the necessary policy mix for the global economy into the 1990 s. Two issues stand out: exchange rates and trade imbalances. They will dominate the Toronto Summit, regardless of the formal agenda.