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What's Good For The Goose (aka The Japanese...)

Amazing story of the week: Japan’s automakers are seeking billions in loans from the Japanese government, and it looks like they are going to get them, and they’ll get them in dollar-denominated assets that they can use to help Americans get loans to buy their cars. Here’s the report courtesy of CNN:

Honda is considering borrowing billions of yen in dollar-denominated loans from the Japan Bank of International Cooperation for its U.S. financing unit, American Honda Finance Corp., the report said, without citing a source. The company, Japan's second-largest car maker has a strong financial position, but is aiming to hold more cash for auto loans and leases in anticipation of greater need for funds in summer, when auto sales typically increase.

Mitsubishi, meanwhile, has applied for a low-interest loan from the Development Bank of Japan, the report added. The DBJ is a government backed financial institution that has been entrusted with the responsibility of providing low-interest loans to non-financial companies.

The report comes a day after the same newspaper as well as other media reported that the auto-financing unit of Toyota - Toyota Financial Services Corp. - also put in a request with the JBIC for a $2 billion loan under a recently-launched program to help Japanese firms operating abroad.

Consider what is happening here. Japan has accumulated dollars from its trade surplus with the U.S, which has actually been shrinking. That’s a good thing for the world economy, because large imbalances are potentially destabilizing. But the Japanese are taking those dollar assets, and instead of using them to stimulate consumption at home, are using them to promote exports abroad (even the cars assembled here usually import their engines), which, if successful, will widen the trade deficit once again. That’s not good. But of course, it’s not illegal or immoral, although you can always make a case that something violates the WTO.

What’s also a little upsetting is something else. When Congress proposed helping out American automakers last fall, the opposition was led by Republican senators from states where the Japanese firms have plants. I don’t know if these firms lobbied the senators, but I strongly suspect so. This February, when Iowa Democrat Tom Harkin and Michigan Democrat Deborah Stabenow sponsored a provision in the stimulus bill that would have allowed American consumers to trade in cars that were more than ten years gold for fuel-efficient models assembled in the U.S. (which would also apply to many foreign hybrids), the auto import lobby led the oppositionMazda's lobbyist charged the provision violated NAFTA and the WTO. Harkin and Stabenow withdrew it.

There’s a certain unfairness here. The U.S. isn’t (and shouldn't be) lobbying Japan’s government to prevent loans to Toyota or Honda. I know that because you can’t lobby Japan’s government on an economic decision like this. The decisions are not made by the legislature or the executive, but by bureaucrats who are insulated from public pressure. Yet when the U.S. has tried to revive its auto industry, some of the fuss seems to be coming from Japanese car-makers.  Maybe we shouldn’t be bailing out our auto industry. Maybe we should let GM and Chrysler fail. But just as Japan should be able to decide without American interference whether to give a loan to its auto companies, the US should be able to make similar decisions without Japanese companies and their lobbyists in Washington crying foul.

--John B. Judis