We face a more immediate problem in Okinawa involving the renewal of about 3100 leases for land used by U.S. forces. We applaud the leadership and political courage that Prime Minister Hashimoto and his government have shown in introducing legislation in the Diet that will allow it to extend these leases when they expire on May 14. Economic and Trade Relations Japan is our largest trading partner after Canada. It is also the world's second largest economy. The government's plan to reduce spending and raise the consumption tax is expected to constrain economic growth in 1997.
Japan remains a massive net exporter of goods to the rest of the world.
The U.S. has had a bilateral merchandise trade deficit with Japan since the mid-1960s. We are encouraging Japan to promote strong domestic demand for its products, open its markets further to imports and deregulate its economy. Excessive regulation and non-transparent procedures continue to be a drag on Japanese growth and to impede American firms' and products' access to Japanese markets. Economists in Japan and abroad agree that regulatory reform is necessary. Prime minister Hashimoto said that deregulation is one of his administration's top priorities.