In their first meeting since the end of the Persian Gulf War, President Bush will host a visit by Japanese Prime Minister Toshiki Kaifu in Newport Beach on Thursday. The talks come at a difficult time. : FOCUS : Gulf, GATT, Trade Gap on U.S.-Japan Agenda

President Bush and Prime Minister Kaifu have much to discuss. Many U.S. political leaders remain upset over Japan’s closed rice market, persistent trade surplus and what they view as inadequate support in the Persian Gulf crisis and the multilateral trade negotiations. For their part, many Japanese feel under-appreciated for their $9-billion war contribution, one of the largest among U.S. allies.

For a preview of what’s in store, staff writer Teresa Watanabe interviewed experts at Stanford University and the Japan Economic Institute, a research group funded by the Japanese Ministry of Foreign Affairs.

Douglas Ostrom, economic analyst, Japan Economic Institute: Rice is the issue that always comes up. But what Bush and Kaifu could talk most productively about is not necessarily rice per se, but the general belief on the part of the U.S. that Japan has to do something to get the GATT (General Agreement on Tariffs and Trade) negotiations back on track. These talks have dragged on for many years. There’s a real perception that the ball is in Japan’s court.

But Kaifu will ask Bush, “What about fast track?” That’s a procedure under which Congress votes yes or no on the GATT package without considering a lot of amendments. Without fast-track authority, Congress would have the ability to scuttle any agreement. So they (the United States and Japan) need it, and without it, they’re wasting their time talking. It’s a counter to the rice issue.

I’m sure they’re going to talk about the Gulf. What will Japan’s role be in Kuwait, Iraq, down the road? There’s going to be a need to rebuild, and clearly Japan will have a major role to play. Potentially there is the issue of lending even to countries considered very wealthy, such as Saudi Arabia, and front-line states, such as Egypt and Jordan.

They may talk about the value of the yen and its recent weakness. There is some indication that industrialized nations would like the yen to be stronger. A stronger yen means that Japanese exports are more expensive as priced in dollars and U.S. exports to Japan as priced in yen for Japanese consumers should be cheaper. Over time this would lead to a reduction in the trade imbalance.

And there are a lot of sector-specific negotiations: expanded access to Japan’s construction market, government procurement of computers in Japan, paper products, semiconductors.

The Japanese sense there is a lack of gratitude for the $9 billion they committed to the Gulf. And Japan feels a sense of being left out in the cold (because of) the failure of Washington to consult with Tokyo at the same time it consulted with other countries after the Gulf conflict. So there’s going to be an effort to do some serious fence-mending.

Daniel Okimoto, political science professor and Japan expert, Stanford University: My hunch is that on the immediate horizon is Japan’s relations with the Soviet Union. (Soviet President Mikhail S. Gorbachev is scheduled to visit Japan April 16-19.) Some kind of progress (may) be made toward the resolution of the Northern Territories (a dispute involving islands north of Japan that Japan claims as its territory but that the Soviets have occupied since the end of World War II). If it is worked out, what will happen? Will Japan make heavy investments in Siberia? Will Japan-Soviet trade expand? What is the future of Japan-Soviet economic and political relations?

I’m sure this whole issue of Japan’s Gulf contribution and whether or not the exchange-rate fluctuations have to be taken into account will be very high on the agenda. Japan has said they were making the contribution in yen, and the Americans are coming back and saying, “No, you made the pledge in dollars.” The difference is probably significant. (The yen has depreciated 7% since February, making the $9 billion pledged then worth $8.37 billion today.)

On top of that, the actual cost of the war was below what was anticipated. There was something like a $10-billion or $15-billion overshoot. If you proportion that out in terms of contribution, Japan would get a fairly substantial amount. My hunch is that these issues are going to be very contentious.

I’m sure that GATT is going to be high on the agenda. The U.S. was not happy with the way Japan stood on the sidelines and allowed the U.S. and Europe to fight it out on agricultural issues. The U.S. wanted Japan’s support in confronting Europe, which was a big stumbling block in the Uruguay Round. Where Japan comes out on the issue will be important not only to U.S.-Japan relations but the whole future of the GATT.

There are a lot of trade-related issues. You still have the trade imbalance, you still have the Structural Impediments Initiative. This was a series of negotiations in which the U.S. made as an objective the so-called streamlining of structural barriers in Japan to penetrate the market.

There are also a lot of other issues, like the free-trade agreement with Mexico and the impact on U.S.-Japan relations, or the possible trade region forming in Asia and how the U.S. and Japan ought to deal with that. But the trade imbalance issue, the GATT issue and the Persian Gulf issue are of the gravest and most immediate concerns.