Japan reviews china trade status

Japan is reviewing its trade preference policy for developing countries in a move that could revoke preferences for about 450 items imported from China, an official at the Finance Ministry said on Tuesday.

The review of the trade regime aimed to promote economic development, known as Generalised System of Preferences (GSP), comes as China, Japan’s biggest trading partner since 2009, readies to surpass Japan as the world’s second biggest economy.

It also comes as the European Union plans to start reform of its trade preference regime for developing countries, of which China is also a beneficiary, next year.

Japan plans to remove goods from certain countries from its GSP list for three years if they have accounted for more than 50 per cent of total imports of the item on average for the past three years, a report on tax guidelines for the next fiscal year showed.

As a result, about 450 items imported from China, which in the year to March 2010 were worth ¥1.3 trillion ($15.7 billion), would face tariff rises, among them plastic goods and clothing, said a Finance Ministry official dealing with tariff issues.

Japan imported $97.8 billion worth of goods from China in 2009, data from the Japan External Trade Organization showed.

"We are not doing things with any specific countries in mind. We have started taking these measures...so that by removing competitive goods, other developing countries can benefit more," said the official, who declined to be identified as he is not directly responsible for the decision.

Japan’s GSP gave trade benefits for goods produced in 140 developing countries and 14 regions worth ¥1.6 trillion in the year to March 2010. Imports from China accounted for 86 per cent of that, data from the Finance Ministry showed.

A Bill to change tariff-related laws must be passed in parliament for the review to take effect.

The government is set to submit a bill in the next session of parliament expected to start in January, the official said, although its passage is not guaranteed as the Democratic Party-led government needs support of opposition members for it to pass in a divided parliament.

Japan finmin warns on yen
Japan’s economy is expected to contract slightly in the final quarter of this year. Analysts expect growth to pick up early next year but only modestly due to weak consumer spending.

Adding the economy’s woes, the yen rose to a three-week high against the dollar on Tuesday, approaching levels seen before Japanese authorities intervened in the currency market in September for the first time in six and a half years. Noda blamed the recent yen gains mainly on thin trading volume but warned that he would closely watch market moves toward the year-end and into the new year. "Our stance remains unchanged that we will take decisive steps when rapid moves occur," he told a news conference.

Economics Minister Banri Kaieda also told reporters on Tuesday that the government wants to tackle sharp yen rises by cooperating closely with the Bank of Japan (BoJ), although he did not elaborate on what sort of measures he had in mind.

Underscoring the fragile state of the economy, household spending fell 0.4 per cent in November from a year earlier and the jobless rate was steady at 5.1 per cent.

Core consumer prices marked their 21st straight month of annual declines, a sign the country remains mired in deflation due to weak domestic demand and keeping pressure on the BoJ to maintain its ultra-easy monetary policy.

The BoJ eased policy in October by pledging to keep interest rates effectively at zero until the end of deflation was in sight and by crafting a ¥5 trillion ($60 billion) pool of funds to buy assets ranging from government bonds to corporate debt, including trust funds investing in stocks and property.

BoJ policymakers have repeatedly said that increasing the size of the fund would be a clear option if the looming economic slowdown proves worse than expected.

Japanese factory output rose for the first time in six months in November and manufacturers expect to boost production in coming months, suggesting that firm demand in Asia will help the economy resume a recovery early next year.

But creeping rises in the yen kept policymakers on alert for risks to the export-reliant economy, with the finance minister repeating his warning that the government would take decisive action to stem any sharp yen rises that could hurt growth.

Industrial output rose 1.0 per cent in November, matching a median market forecast and marking the first rise in six months, the Ministry of Economy, Trade and Industry said.