Japan PM to decide on Trans-Pacific Partnership

By Kiyoshi Takenaka, Reuters

TOKYO — Japanese Prime Minister Yoshihiko Noda will decide today whether Japan will join talks on a U.S.-led free trade pact that could transform the Japanese economy and challenge its political status quo. The pact — called the Trans-Pacific Partnership (TPP) — would put some of Japan’s biggest exporters on a more equal footing with some of their main competitors. It would also radically change a hugely inefficient and heavily protected agriculture sector which is fiercely opposed to change and which has the political muscle to make any deal far from certain. Government and ruling party officials discussing the pact have yet to reach a conclusion and Noda, who is seen as leaning toward starting the talks and was expected to announce his decision on Thursday, will give them one more day, Chief Cabinet Secretary Osamu Fujimura told reporters. On Saturday, Noda heads to Honolulu for a summit of Asia-Pacific leaders, where the trade pact will be one of the top topics on the meeting’s agenda. Agriculture accounts for just 1 percent of economic output, but Japan’s voting structure gives disproportionate political clout to rural communities who have long blocked farm reforms. The average age of farmers is 66, most of them toiling on tiny patches of land where they grow the world’s costliest rice and other produce under the protection of prohibitive tariffs. The TPP pact would in principle eliminate all tariffs among its members, marking a death knell for that style of farming and leading the way to fewer but bigger and more efficient farms. “Export-related industries will benefit from the move, while an influx of cheaper farm products could put the agricultural sector in a tight spot unless some countermeasures are taken,” said Toshihiro Nagahama, senior economist at Dai-ichi Life Research Institute. “But, what would happen if Japan did not participate? It would go straight downhill.” Falling Behind

Manufacturers fear they are falling behind rivals from South Korea, where 35 percent of trade is covered by free trade deals compared with their 18 percent. The government argues that membership would lift economic growth but would sharply cut its 40 percent food self-sufficiency. Membership in the pact now discussed by nine nations — Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam — could have profound effects on the Japanese economy that would go beyond exports and agriculture. The agreement, likely to take years to reach, would not only eliminate tariffs and other trade barriers but also wrench open the domestic market to foreign competition in such industries as financial and medical services. For Noda, Japan’s sixth premier in five years, agreement to start negotiations is his first big test in the face of a divided ruling party and an opposition able to block laws. He also faces doubters in the United States. Four senior U.S. lawmakers earlier this week urged U.S. President Barack Obama’s administration not to make a hasty decision to begin the free trade talks with Japan. Economists say that beyond the pact’s potential long-term positive effects for the world’s third-biggest economy, Tokyo’s commitment to the talks would also serve as a signal to investors that it is serious about reforms to an economy plagued by red-tape that keeps out newcomers, domestic and foreign, and makes it hard to develop new businesses.