Bush, Kaifu Exchange Praise; Issues Unsolved : Summit: Differences center on trade, Gulf War costs. The President says each side opposes bashing the other.

NEWPORT BEACH —  President Bush met with Japanese Prime Minister Toshiki Kaifu on Thursday in a session laden with warm words about the U.S.-Japanese relationship but no signals of progress on the numerous issues that continue to divide the two nations.

Indeed, the two made clear that on at least two issues--Japan’s contribution to help defray the costs of the Persian Gulf War and U.S. efforts to sell rice in Japan--the gap remains wide. And the emotional issue of Japanese automobile sales in the United States was not even discussed, White House Press Secretary Marlin Fitzwater said.

Officials from both sides designed Thursday’s meeting as a public relations effort aimed at smoothing feelings on both sides of the Pacific that have been bruised by disputes over trade and Japan’s contribution to the war effort.

A second, and related, aim was to bolster Kaifu, an Administration ally who is in serious political trouble at home, by showing that he is held in high esteem abroad.

Kaifu went out of his way during the joint press conference after the meeting to emphasize his closeness to Bush, drawing a few gasps from Japanese reporters when he opened his prepared statement with the President’s first name: “George, thank you.”

Kaifu went on to elaborately praise both Bush and the United States for leadership in the Gulf War, saying the United States is “the only superpower” that can help build a “a new international order.”

Bush’s statement followed a similar tack, saying that “many Americans would be surprised to learn that Japan buys more goods from the United States per capita than we buy from Japan.” The U.S. trade deficit with Japan “fell for the third straight year” in 1990, Bush noted, adding that U.S. exports to Japan are now 75% higher than in 1987.

Despite the mutual praise, neither leader cited any specific progress on the agenda of nagging issues between the two nations.

Asked if Japan would increase its contribution to the war effort to make up for the decline in the dollar’s buying power against the yen, Kaifu demurred, saying the Japanese government’s budget is calculated in yen, not dollars. Bush, for his part, tried to downplay the issue, calling it a “detail” not important enough to disturb the relationship between the globe’s two largest economic powers.

The emphasis on areas of agreement has become a familiar one for Bush in relation to Japan.

In sharp contrast with some Democrats, Bush’s top advisers argue that the importance of the U.S. strategic partnership with Japan outweighs any temporary setbacks on economic issues. They have been deeply disturbed by signs of rising “Japan bashing” in the United States and corresponding anti-Americanism in Japan.

“To the degree that there’s bashing on one side of the Pacific or the other, Toshiki Kaifu and I are committed to see that that bashing doesn’t go forward,” Bush said.

By contrast, on Capitol Hill--and increasingly in some circles in Japan, as well--economic issues and irritants have come increasingly to the fore.

A major question has been Tokyo’s contribution to Gulf War costs. Japan originally had pledged the equivalent, in yen, of $9 billion, and promised other aid to countries in the region. Because of exchange-rate changes, however, the amount of its war-cost pledge now is equivalent to $8.6 billion.

On Capitol Hill, the issue of whether Japan will make up the difference has become a major symbol for other grievances over trade and the overall economic relationship between the two countries. In Japan, meanwhile, the U.S. push for more money has come to be seen as an irritant, an indication that Americans see the Japanese as nothing more than “an automatic teller machine.”

The two did not resolve the issue, but Kaifu indicated that Japan would try to make up the gap by increased aid on other fronts, such as assistance to Mideast refugees, Fitzwater said.

Similarly, rice--although a relatively minor agricultural commodity overall--has taken on highly symbolic importance, particularly since Japanese officials threatened to arrest Americans displaying rice at a recent trade fair in Japan.

Asked about the issue, Bush responded that the two “had a full discussion of the matter.” He repeated that the United States will continue to seek access to Japan’s rice market. Kaifu, he said, “explained the complications” that domestic political sentiment causes on the issue.

Kaifu offered a slightly different version of his talks with Bush. In contrast with the President’s assertion of a “full discussion,” Kaifu said the rice issue “was mentioned” and that it was raised in the context of overall international trade talks, rather than as a specific bilateral issue. Kaifu indicated no shift in Japan’s steady refusal to allow any imports of rice.

The lack of specific progress came as no surprise. U.S. officials have spent the last several weeks downplaying the talks, noting repeatedly that they were scheduled at the request of the Japanese and that they were not likely to lead to new agreements.

Bush has a warm personal relationship with Kaifu. But many of his advisers believe that the prime minister could lose his job within months, with some predicting the end could come as early as this spring. Given Kaifu’s domestic political weakness, U.S. officials do not believe the Japanese leader is now able to persuade his country’s legendary bureaucracy to change its long-held positions on issues important to Washington.

A year ago, Bush and Kaifu met in Palm Springs, a two-day affair that White House officials later said had led to substantial warming of relations. By contrast, Thursday’s meeting was a bare two hours--”a tuna sandwich and a photo-op (opportunity),” in the words of one U.S. official.