The U.K. Government hopes for abreakthrough on the deadlock with Japan over trade policies
during next week's visit to Tokyo by Corporate Affairs Minister
Michael Howard, political sources said.
    Howard, who leaves for Japan tomorrow, told Reuters he will
try to promote understanding on trade issues during his visit.
    Meanwhile, Britain will re-examine a letter from Japanese
Prime Minister Yasuhiro Nakasone promising personal help in
solving the row over a U.K. Firm's bid to win a significant
role in Japan's telecommunications market, government sources
said.
    Tensions have risen following Britain's decision to arm
itself early with new statutory powers which it says could be
used against certain Japanese financial institutions.
    Britain reacted optimistically at first to the letter from
Nakasone to Prime Minister Margaret Thatcher, seeing it as a
signal that he would work towards ensuring a satisfactory
outcome to the bid launched by Cable and Wireless Plc &lt;CAWL.L>,
government officials said.
    But this view has since been clouded by reports from Tokyo
that Nakasone's assurances really constituted little more than
politeness in the face of British anger, they added.
    Howard said he would use his trip to push for a bigger role
in Japan's telecommunications industry for Cable and Wireless
Plc. The U.K. Government has made the issue a test case for
Japan's willingness to open its markets adequately to outside
competition.
    Asked whether the letter from Nakasone was a rejection of
attempts by Britain to achieve that, Howard said "I am not sure
it is correct to regard Mr Nakasone's letter as a rejection of
Mrs Thatcher's request of him - and it says he is taking a
personal interest in this problem.
    "I don't understand it to be closed at all."
    Howard added that during his Tokyo visit he would be
"talking to them about it (the letter), finding out exactly what
they do mean about it, and making it plain that we take a very
serious view of the fact that access to Japanese markets is not
as free as we allow access to our markets to be."
    He noted that under the new Financial Services Act, Britain
could revoke or deny licences to Japanese banking and insurance
institutions in London if U.K. Firms fail to receive similar
treatment in financial markets in Japan soon.
    "I hope it won't come to that, and I don't think it will,"
Howard added.
    During the trip Howard will meet officials in the Tokyo
Stock Exchange, the Ministry of Finance, the Trade Ministry,
and Posts and Telecommunications Minister Shunjiro Karasawa.
    Karasawa is regarded as behind opposition to any
significant role for Cable and Wireless in the Japanese
telecommunications industry.
    Share prices on the London Stock Exchange were undermined
again today by fears of a possible U.K./Japanese trade war.
This was despite denials by Trade and Industry Secretary Paul
Channon that Britain was on the verge of a trade war.
    He told a meeting of insurance brokers today that Britain
believed a "sensible solution" could be found which would open
Japanese markets to British goods.
    Government officials were at pains today to deny that
Britain had set a deadline of three weeks for Japan to promise
similar access to its financial markets to U.K.-based financial
firms as that enjoyed in London by equivalent Japanese firms.
    They said that Department of Trade and Industry officials
had said yesterday that the measures against Japanese financial
institutions could be imposed from then but that this did not
necessarily constitute a deadline.
    Experts believe Britain would lose out by acting against
Japanese banks, insurance and investment institutions. But
despite the danger of Japanese firms taking their trade
elsewhere in Europe, Howard said he did not expect the move to
backfire.
    He said in a radio interview today  "it is true that we
benefit from their presence - but they would not want to lose
those advantages. And I am sure they are making their views
plain to the Japanese government on this matter."
    Howard, who will also be visiting South Korea before
returning to London on April 11, said his trip to Tokyo was
planned well before the current trade row.
    Howard said his talks with Japanese officials would also
include ways of jointly combating financial fraud in global
markets with Japanese officials. This would be done through a
cooperation between national regulatory bodies.
    He said a memorandum of understanding for exchanging
information to combat financial fraud would be sought with
Japan on terms similar to one signed last autumn between
Britain and the United States.
 REUTER
