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A photo of U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe, tweeted by Trump on Friday.
International relations

Japan's strategizing scores big win in Trump-Abe summit

By focusing on economic dialogue, Japan sidesteps disagreements -- for now

TOKYO -- As far as Japan is concerned, Prime Minister Shinzo Abe's first summit with President Donald Trump was an unalloyed success. Thanks to Tokyo's meticulous planning, Abe managed to avoid tricky trade and currency talks during the two days he spent with the president.

The centerpiece of Japan's strategy was to preempt the U.S. by proposing a new economic dialogue between the two countries.

Before the Friday summit, Taro Aso, deputy prime minster who doubles as finance minister, met with Vice President Mike Pence at the White House. Aso's aim was to lay the groundwork for initiating the new economics talks between the two. Pence seemed taken aback by the unexpected offer, according to a source present at the meeting. He initially declined by citing limited experience with international economic policy, but said he would do it if Trump wants him to.

Abe did not waste anytime. He started the summit by proposing a new economic framework. When he said his second-in-command would represent the Japanese side, Trump quickly offered Pence in return.

Tokyo is eager to establish a communication channel that is shielded from Trump's unpredictable outbursts on trade and the yen-dollar rate. It hopes to maintain market stability by ensuring that Aso and Pence can keep things moving, regardless of what the president may say.

"We will have the two produce concrete results on specific issues regarding our economic relationship," Abe said to Trump, who nodded in agreement.

Postponing a detailed policy discussion was Japan's strategy for steering clear of disagreements. The two countries were initially planning a meeting between Hiroshige Seko, Japan's minister of economy, trade and industry, and Peter Navarro, head of the newly formed White House National Trade Council. A critic of the Trans-Pacific Partnership trade pact, Navarro is a key influence behind Trump's protectionist stance.

Tokyo thought the two sides would clash on auto trade and exchange rates if Navarro were involved. To avoid starting off on the wrong foot with the new U.S. administration, it decided to not to let Seko accompany Abe on the trip and focus first on creating a new framework for economic talks.

Battle of the wits

Prior to the summit, Japan's Ministry of Economy, Trade and Industry had been leading efforts to draft the "U.S.-Japan Growth and Employment Initiative" -- an attempt to appease Trump by promising infrastructure investment and job creation in the U.S.

But the plan did not make it to the summit's agenda. "It seems too early to roll out specific numbers," a top Japanese official said. "We cannot make hasty deals." Japanese foreign ministry officials were also skeptical over whether Japan should voluntarily offer numerical targets, and worried this could erode its leverage with the U.S.

There had been concerns within the Japanese government that Trump would bundle security and trade issues during negotiations. For example, he could tell Japan to buy more American cars in exchange for him not demanding more money to keep American troops in the country.

If this indeed is Trump's approach, it would not be prudent to set numerical targets on bilateral economic cooperation. The government therefore chose to initially focus on hearing Trump's views of Japan.

Japan is an important ally for the U.S. and should not be considered a party to score deals from, a Japanese foreign ministry representative had told a U.S. official before the summit.

Abe relied on two key topics in his meeting with Trump: China and Japanese technology. He discussed violations of intellectual property and other issues in China, while emphasizing the benefits of cooperating with Japan on high-speed rail and defense technologies.

Tough topics on hold

Because staffing for the U.S. Treasury Department, including Trump's pick for secretary, Steven Mnuchin, had yet to be confirmed, the Japanese government told the White House before the summit that exchange rates would not be part of the new economic dialogue.

"I said that exchange rates should be left to our finance chiefs, who are the experts on the subject, and the president readily agreed," Abe said in a TV appearance on Monday.

The two leaders "reaffirmed their commitments to using the three-pronged approach of mutually reinforcing fiscal, monetary and structural policies to strengthen domestic and global economic demand," they said Friday in a joint statement. This language, which Japan insisted on, is standard among members of the Group of 20 major economies. The Bank of Japan was relieved that in addition to avoiding a pointed discussion on exchange rates, Abe managed to get Trump to echo a global consensus regarding the currency market.

But this does not necessarily mean Trump no longer believes that Japan uses the weak yen to sell many cars to the U.S. Mnuchin's position on the matter is unclear as well. If the dollar strengthens again on expectations of a U.S. interest-rate hike, Trump could once again attack the yen's weakness as an affront to his "America first" policies.

Japan's Seko is eager to meet Trump's commerce secretary pick ,Wilbur Ross, who has unparalleled knowledge on Japan within the Trump administration. "Mr. Ross has extensive business experience in Japan and has a deep understanding of the economy and industries," Seko said.

Also during the summit, Abe and Trump agreed to promote fair trade. But to Trump, fair trade means buying American products and creating more jobs at home. He could try to negotiate a bilateral free-trade agreement in hopes of delivering clear-cut victories in the auto sector or agricultural exports.

Japan's agricultural ministry fears Trump will demand Japan's market for rice, beef and other agricultural products be opened up. "The economic dialogue is just to buy us some time," said a ministry official.

Some in the government are expecting the new framework to be set up as early as the spring. "We're good for now, but Trump will likely to make more strange demands," an official said.

(Nikkei)

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