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Japan’s Embrace of Bilateral Trade Talks With U.S. Spares It From Tariffs

When Japan agreed to enter into bilateral trade talks with the United States during meetings at the United Nations General Assembly on Wednesday, the country’s prime minister, Shinzo Abe, appeared to have finally said “yes” after two years of saying “no.”

Japan has consistently insisted it was not interested in entering into bilateral trade negotiations with the United States. Instead, it has repeatedly invited the United States to re-enter a broad trade pact among 11 countries from which President Trump withdrew during his first week in office.

Japan appeared at first blush to have acquiesced to American pressure and the threat of tariffs on imported cars by agreeing to start two-way negotiations to “promote Japan-U.S. trade.”

Japan was “chased into a corner,” wrote Taketsugu Sato, national security correspondent for The Asahi Shimbun, a left-leaning Japanese newspaper. The Nikkan Gendai, a daily tabloid, went further, calling Mr. Abe a “traitor.”

Yet by agreeing to open the talks, Japan received a reprieve from the looming auto tariffs as long as the talks continue. And American officials also accepted Japan’s insistence that it would not go any further than its previous commitments in the multilateral trade deal — known as the Trans-Pacific Partnership — to open up its markets for agricultural and forestry imports from the United States.

Some analysts suggested Japan had effectively performed a bit of diplomatic jiu-jitsu, giving the appearance of compromising while wrangling concessions from the U.S.

For Mr. Trump, “these are good optics but bad content,” said Jeffrey Wilson, a research fellow at the Perth USAsia Center at the University of Western Australia.

With Wednesday’s announcement, Japan has also engaged in the age-old negotiating tactic of delay.

“I think the Japanese government’s attitude is not to be confrontational and appear to get along, but just basically bide its time,” said Takuji Okubo, managing director and chief economist at Japan Macro Advisors. “Just by agreeing to negotiate, I don’t think the Japanese government conceded anything.”

The United States is already entangled in a trade war with China and difficult negotiations with Canada, while Mr. Trump faces numerous domestic challenges as well as the upcoming midterm elections.

Analysts said that American officials might wish to use the talks with Japan to score a small but quick win.

“This seems more about, ‘Let’s get some sort of deal and see what we can get out of Japan in a pretty quick turnaround and then move onto other stuff,’” said Tobias Harris, an expert on Japanese politics at Teneo Intelligence in Washington. “Whatever you want to call it, this is something much more limited than what Japan had feared.”

Certainly, deferring auto tariffs gives Japan some immediate breathing room.

Industry analysts had said that if the Trump administration imposed a 20 percent tariff on Japanese auto exports, manufacturers’ costs could go up by $8.6 billion. SMBC Nikko Securities estimated that if automakers passed on such costs to customers, Japan’s car exports would decline by 200,000 units, cutting manufacturers’ profits by about 2.2 percent.

In remarks to the news media in New York on Wednesday evening, Mr. Abe, who recently won a leadership election that could set him up to become the longest-serving prime minister in the country’s history, emphasized that American officials would accept Japan’s previously established parameters for opening up its markets for beef, vegetables and other agricultural products. That means the Trump administration would not get any further concessions from Japan than it has already given in the Trans-Pacific Partnership agreement originally rejected by Mr. Trump.

But analysts said that Mr. Trump could present any deal that results from the talks with Japan as a new victory in efforts to get other nations to buckle on trade. The president can “play it up and say that this is a deal that Japan would open up their markets,” said Yorizumi Watanabe, a professor of policy management at Keio University in Tokyo.

In a rambling news conference on the sidelines of the United Nations General Assembly on Wednesday, Mr. Trump suggested he had figured out other ways to reduce the United States trade deficit with Japan, boasting that Japan would buy “massive amounts of military equipment” and was “doubling the amount” of liquid natural gas it would buy from the United States.

The announcement of trade talks gives Mr. Trump something else to boast about, said Ichiro Fujisaki, a former Japanese ambassador to the United States. “Now he can say even Japan has agreed” to bilateral talks, Mr. Fujisaki said.

Given Mr. Trump’s unpredictability, analysts warned that in Japan any sense of reprieve could be short-lived.

“I don’t think anybody is willing to say the coast is clear,” said Kathy Matsui, chief Japan equity strategist at Goldman Sachs in Tokyo. Still, she said, “coming to the table and having a conversation is not ideal from Abe’s perspective, but it also avoids the worst case scenario for now.”

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