Taxes May Dampen Japan’s Appetite For U.S. Goods But Consultant Says Reforms Could Create Opportunities For American Business

American companies hoping to increase sales in Japan will encounter consumers shouldering heavy new tax burdens, consultant Philip Jones said Tuesday.

The Shadle Park High School graduate said taxes imposed to reduce the central government’s deficit total about $1,200 per capita.

That lost purchasing power will dry up demand for domestic and imported goods alike, just as the Clinton administration renews calls for more open Japanese markets and a reduction of the U.S. trade deficit with that country, Jones said.

“Our officials have told them in no uncertain terms they cannot export their way to growth,” he said, adding that investment in new plant and equipment alone will not compensate for reductions in consumer spending.

The Japanese government’s deficit exceeds 4.5 percent of the country’s gross domestic product, twice the ratio in the U.S. now and higher even than the share during the Reagan administration.

Jones, who worked for former U.S. Sen. Dan Evans before opening his Seattle consulting business in 1989, said U.S. officials think the Japanese government should finance its deficit out of domestic savings.

The government and its powerful bureaucracy has balked at that suggestion, he said.

But Prime Minister Ryutaro Hashimoto has launched other reforms, some of which will create opportunities for American companies, Jones said.

Tacoma-based Frank Russell Co., for example, is finding new clients for its financial advisory services thanks to a reduction of controls in that niche, he said.

And Citicorp is benefitting from liberalization of foreign exchange trading.

Jones said the Minister of International Trade and Industry also shook up Japan’s huge electric utilities by suggesting he may propose dividing generation from distribution as a way of driving down high electricity costs.

A similar transformation is already under way in the United States.

Jones, who was in Spokane to speak at a Japan Week luncheon, said the rumored nomination of former Spokane representative and House Speaker Tom Foley as ambassador to Japan might be announced late this week when Hashimoto visits Washington, D.C.

The appointee, he said, will not only have to be a tough negotiator, but a diligent infighter who will make sure agreements are complied with once signed.

The American Chamber of Commerce in Japan, he noted, issued two reports recently that found U.S. government and business does a poor job following through on trade accords.

, DataTimes