Toshiba Corp &lt;TSBA.T>, the Japaneseelectronics group which plans to enter Britain's liberalised
telecommunications equipment market, risks becoming the first
casualty in the current war of words over trade between Japan
and the U.K., Government and industry sources said.
    U.K. Authorities have lost patience with Japanese trading
practices and said they are seeking ways to retaliate without
unleashing a damaging trade war. "Toshiba's timing seems most
unfortunate for the company, as it comes exactly when we are
looking for someone to punch," one official told Reuters.
    Earlier, &lt;Toshiba Information Systems (U.K.) Ltd> said it
wanted to enter the British business facsimile and key
telephone market. A facsimile machine sends printed data over
telephone lines, while a key telephone system is used for
switching calls within a business, industry sources said.
    The move by Toshiba comes in the middle of a dispute over
Japan's refusal to open up its telecommunications market to
foreign companies. "Toshiba's timing is most extraordinary," one
official at the Department of Trade and Industry (DTI) said.
    Tomorrow, the U.K. Government will consider what legal
action it can possible take to press for Japanese reform.
    Prime Minister Margaret Thatcher has given notice that the
U.K. Would fight the Japanese government's attempt to prevent
Cable and Wireless Plc &lt;CAWL.L> from taking a significant
position in a new Japanese international telecommunications
venture. "We regard this as a test case," she told Parliament.
    But while the U.K. Is keen to see some movement on the
issue by Japan, it is also worried that recent anti-Japanese
rhetoric may cause developments to get out of hand, officials
said.
    Japanese officials in Tokyo today reiterated that Japan had
no plans to bow to U.K. And U.S. Pressure to give foreign
telecommunications firms a bigger role there.
    The government, for which competition and the deregulation
of markets are major political themes, is unlikely to make
final decisions tomorrow on how to act against Japan, officials
said.
    Detailed consideration of the issue has been shelved during
Thatcher's official visit to the Soviet Union, which ends
today.
    "We are waiting for the Prime Minister to decide what to do.
The DTI will pass the ball to her as soon as she returns
tonight," a DTI official said.
    He said Toshiba's application would be considered by the
Office of Telecommunications (OFTEL). An OFTEL spokeswoman said
"a decision on this application will take weeks, maybe months."
    Asked whether Toshiba's bid would fall victim to British
retaliation, the OFTEL spokeswoman said: "Who knows what's going
to happen given the current situation!"
    A Toshiba executive, who asked not to be named, told
Reuters: "We do not anticipate any special problems."
    Some analysts queried by Reuters questioned the basis of
Britain's strong stand on the Cable and Wireless bid. One said
that the company's proposal was equivalent to a Japanese
company wanting to take a stake in Mercury International, the
subsidiary of Cable and Wireless that is the only real
competitor of British Telecommunications Plc &lt;BTY.L>.
    British Corporate Affairs minister Michael Howard leaves
for Japan on Saturday.
    The minister will seek a clear timetable from Japan for
easier access for British institutions to Japanese financial
markets, reciprocating the easy access Japanese securities
houses and banks have to the City of London.
    Britain has threatened to use its new Financial Services
Act to revoke or deny licences to Japanese brokerage houses if
it does not get satisfaction.
    But British authorities would be far from happy if forced
to use that weapon, government sources said.
    Sir Nicholas Goodison, Chairman of the London Stock
Exchange, said in New York yesterday that sanctions against
Japanese financial institutions operating in the U.K. Would set
back London's ambition to become a leading centre for corporate
financing and securities trading.
    Chancellor of the Exchequer Nigel Lawson also warned
yesterday of the negative effects that a trade war could have
on the British economy. Such a development could hit U.K.
Exports and sharply alter the outlook for the next general
election in which economic recovery will be one of the
government's main themes, political analysts said.
 REUTER
