Obama reassures ally Japan, no breakthrough on trade

Obama already delivered what Japan wanted: Pro

President Barack Obama offered ally Japan reassuring words on Thursday, saying that disputed islands in the East China Sea claimed by both Tokyo and Beijing are covered by a U.S.-Japan security treaty.

Speaking at a joint news conference, Obama and Japan's Prime Minister Shinzo Abe meanwhile offered no signs of a breakthrough in key trade talks, saying that negotiations would continue at a ministerial level.

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Obama is on the first official state visit to Japan by a U.S. President in 18 years. The trip is part of four-nation Asia tour that includes South Korea, Malaysia and the Philippines.

Asia is the "pivot" to Obama's foreign policy and his trip comes at a time of growing concern about the rise of Chinese power in the region. China and Japan, Asia's two biggest economies, have conflicting claims over islands in the East China Sea known as Senkaku in Japan and Diaoyu in China.

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"Let me reiterate that our treaty commitments to Japan's security are absolute and article five covers all territories under Japan's administration including the Senkaku islands," Obama said.

President Obama inspects an honor guard as Japan's Emperor Akihito and Empress Michiko, bottom, look on during a welcoming ceremony at the Imperial Palace in Tokyo.
Tomohiro Ohsumi | Bloomberg | Getty Images

While the comments suggest the U.S. could step in militarily if there is a clash over the territory, Obama stressed the need for maritime disputes to be resolved peacefully.

"There's no shift in position. There's no red-line," Obama said, referring to U.S. policy. "At the same time I have said to the prime minister [Shinzo Abe] that it would be a profound mistake to continue to see an escalation around this issue," he added.

Analysts say Obama's trip to Asia is being watched closely in Beijing.

"I suspect that in China, there is great deal of attention being paid not just to the visits, but to exactly what Obama says when he's in these capitals," Sheila Smith, a senior fellow for Japan studies at the Council of Foreign Relations told CNBC Thursday.

"The President is well aware that the Chinese are listening and that he wants to put forward a more constructive image for the bilateral relationship with Japan," she added.

Trade talks

The U.S. and Japan have agreed that negotiations on the Trans-Pacific Partnership (TPP) will continue at a ministerial level, Abe said at the joint news conference.

There had been some expectations that a two-way trade deal would be reached during Obama's Japan visit, paving the way for a broader trans-Pacific trade agreement.

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The trade agreement talks have stalled with Japan seen reluctant to open up farm sectors such as beef. Abe, who has pledged to revive Japan's economy, has said the TPP is key for the revival of Japan's economy.

Obama told the news conference that agreement was close on issues such as autos and agriculture.

Still in a sign of disappointment that a trade pact has yet to be finalized, Japan's blue-chip stock index fell to a one-week low.

"The fact that we haven't got a TPP deal ultimately does impact economic data and new sources of economic growth," said Manpreet Gill, senior investment strategist at Standard Chartered Bank.

"It's tough to draw conclusions for shorter-term investment decisions, but the fact is that investment portfolios are long-term decisions and longer term issues like trade deals do play an impact in that," he said.

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Politics and trade pacts aside, it was Obama's trip to a sushi restaurant with Abe that appeared to be attracting the most attention on social media.

Obama joined Abe on Wednesday at well-known sushi restaurant in Tokyo called Sukiyabashi Jiro, which was profiled in the 2011 documentary film Jiro Dreams of Sushi.