Japan Joins 11 in TPP Trade Talk Support Monetary Easing and Fiscal Stimulus Actions

In a highly-anticipated announcement made last Friday, Japanese Prime Minister Shinzo Abe confirmed that his country will seek to join the eleven others that are negotiating the so-called Trans-Pacific Partnership (TPP) Agreement. If successful, Japan would be one of the largest economies involved in the talks, second only to the US.

“Japan must remain at the centre of the Asian-Pacific century,” Abe said in announcing the move, in a speech that was broadcast on Japanese television on Friday.

Aiming to join the TPP is one of several trade-related initiatives that Japan has announced in the past year, including planned negotiations for a deal with the EU, a possible trilateral pact with South Korea and China, and talks for a 16-country deal with the ten ASEAN countries and five others.

Participation in the TPP, if Japan is accepted by other members, would mark the third “arrow” in Abe’s plan to revitalise his country’s economy.

The other two arrows have involved monetary easing by the Bank of Japan in order to resolve over a decade of deflation - a move that has evoked fears of a currency war by some of Tokyo’s trading partners - and aggressive fiscal stimulus.

Japan has spent the last couple of years reeling from the after-effects of a 2011 earthquake and related tsunami that devastated the country’s economy and cost thousands of lives.

Long build-up

Japan’s farmers have long been wary of the proposed trade deal, out of concern that the country’s famously high agricultural import tariffs - particularly for rice - will be the casualties of joining the negotiations. The Asian economy’s manufacturing sector - particularly its automobile industry - has, however, largely backed the idea of joining the talks, given its potential to benefit from the pact.

Since the Obama meeting, Abe has been working to build up political momentum in Tokyo with both his party and its coalition partner, stressing that Japan must move quickly if it still wants to have a say in the final TPP outcome.

“The United States welcomes Prime Minister Abe’s important announcement formally expressing Japan’s interest in joining the Trans-Pacific Partnership negotiations,” said Acting US Trade Representative Demetrios Marantis, who is temporarily heading the US agency after Ron Kirk’s departure last week.

Tokyo and Washington have already been holding consultations on areas such as automotive and insurance sectors, along with other areas where non-tariff measures are a source of concern; however, Marantis noted, “important work remains to be done.”