Last Friday, Japanese Prime Minister Shinzo Abe stated that the country intends to join talks on the Trans-Pacific Partnership, which could lead to Japan’s historically sheltered economy opening up on numerous fronts, including LNG imports from the U.S.
However, the larger reason behind Japan’s desire to participate in the talks is that it could lead to some much-needed reforms that would, in turn, get the nation’s stalled economy going.
The Spokesman-Review comments:
“Japan has run into a big wall — low birthrate, aging and lingering deflation — and we have turned inward looking,” he [PM Abe] said. “If Japan becomes the only one that turns inward, there is no chance for our growth. No businesses would want to invest in such a country and talented people would not be interested.”
What this means is that the high tariffs Japan presently imposes on farm products (nearly 800 percent on imported rice, and around 300 percent for butter and sugar) will unquestionably have to be lowered.
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| Shinzo Abe, Japanese Prime Minister |
Adding to Japan’s agricultural woes, many hundreds of thousands are expected to retire in the near future. Already, the average Japanese farmer’s age is 66. According to the Japanese government, should the Pacific trade agreement go through with Japan’s participation, it could lead to GDP gains of $31 billion per year.
If anything, Japan’s automobiles market is even more anxious for a freer Japanese economy. Historically, it’s international automakers who have criticized Japan’s economy, claiming the market is simply too closed and protectionist.
After PM Abe’s recent Washington visit and talks with U.S. President Obama, both nations declared that consultations are continuing regarding Japan’s entry to the Trans-Pacific Partnership.
However, Automotive News reports that Japan may be making a sort of good-faith initiative to demonstrate its commitment to opening up the nation’s economy by way of its automobiles market.
Typically, import cars get stalled in the safety-checks phase during their trip into Japan. However, low-volume imports, like U.S. nameplates, can experience faster processing via documents rather than actual inspections. Now that process could be made more inclusive, enabling a great volume of imports to speed through the process.
Simultaneously, it appears that the Japanese government is considering a long-term phaseout of U.S. tariffs on Japanese imports instead of a complete shutdown of such tariffs. That would mean more than 10 years of steadily declining tariffs.
Of course, this is just a start, and it’s completely uncertain how far these steps would go toward U.S. automakers changing their perception of the Japanese market. But it’s a significant gesture nevertheless.
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One much more immediate consequences of these free-trade developments could be the development of a strong U.S.-Japan LNG market. Under the terms of the free-trade arrangement in question, Japan would find it far easier to begin importing U.S. LNG in massive volumes.
Already, Japan is the world’s largest importer of LNG. And the U.S. Energy Department is inspecting as many as 16 applications for new export terminals that would service nations without existing free-trade agreements, Bloomberg reports.
Cheniere Energy Inc. (NYSE: LNG) has already received approval for one such facility; it will begin export operations in 2015. Environmental groups are not amused, of course.
From Bloomberg:
“Japan has been very clear that automatic access to LNG is one of the things they want,” Ilana Solomon, trade representative for the Sierra Club in Washington, an environmental group fighting those exports, said in an interview. Success for Japan would mean “we’ll be paying the price here, with more fracking in our backyards, near our schools, and next to our hospitals — only to help a handful of big gas companies profit by shipping natural gas overseas.”
Japan’s new reliance on LNG is a direct consequence of Fukushima, and Tokyo Electric Power Co., Chubu Electric Power Co., and Sumitomo Corp. all now have LNG purchase agreements with export facilities that haven’t yet received U.S. government approval.
The Trans-Pacific Agreement is President Obama’s initiative to reach arrangements with more than 11 nations in order to double the value of American exports by 2015. The agreement may, in fact, be wrapped up by the end of this year. It would be the biggest free-trade accord developed by the U.S.
Japan’s participation would allow it access to U.S. exports, but it would still need specific approval for natural gas purchases.
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