The Japanese expect a difficult meeting with U.S. President Donald Trump coming up in New York on the sidelines of the United Nations General Assembly. That's quite possible because the U.S. is not making any progress on trade with Japan.
America's $40 billion deficit on goods trade with Japan in the first seven months of this year is slightly above its year-earlier level, and $82.1 billion of Japanese exports to the U.S. are 5 percent higher than during the same period of 2017. On that evidence, it is very likely that last year's $69 billion trade deficit with Japan will be exceeded as U.S. imports pick up to restock the shelves for the main retailing season in the months ahead.
Japan is facing a number of problems in its trade with the U.S. Most of its exports to the U.S. consist of automobiles, and any bilateral trade deals that Trump wants — and Tokyo resists — would force the opening up of Japan's politically sensitive sectors, such as agriculture.
The key issue for Japan may be how much the automobile production can be stepped up in its U.S. factories to compensate for falling exports from Japan, and how fast Japanese businesses can redirect their exports to other markets.
Improbably, the EU could be a good candidate to take more Japanese exports after a free-trade agreement Tokyo recently struck with Brussels. The Europeans and the Japanese apparently found acceptable solutions for trading agricultural products, while settling for a seven-year transition period before customs duties are eliminated in the automotive sector.
At the moment, Japanese goods exports to the EU are growing briskly. In the first half of this year, they rose 9 percent, maintaining the same pace of advance observed in 2017.
Asia, however, offers Japan the best export alternatives to U.S. markets. That's primarily the case of China and the 10 rapidly developing countries of the Association of Southeast Asian Nations.
Japan's sales to China and ASEAN last year soared at annual rates of 20.5 percent and 14.4 percent, respectively. In the first half of this year, Japan's export business in those markets has slowed, but it still grew at healthy 9 to 11 percent rates.
Trade with China remains a delicate issue, though. Abe will have a difficult task of rebuilding confidence with China's leadership during his meeting in Beijing next month. That has been a stage Abe coveted over the last six years because he knows that China is a crucially important market for Japanese trade and investments.