JAPAN IN LAST DITCH EFFORT TO SAVE CHIP PACT
Japan has launched a last-ditch effort to
salvage its computer micro-chip pact with the United States -
sending a letter to top American policy makers setting out its
case and instructing its producers to cut output further.
    "We must make our utmost effort to ward off any catastrophe,"
Ministry of International Trade and Industry (MITI) Deputy
Director General Masaji Yamamoto told reporters.
    "If hasty action is taken in the United States, it will
create very serious problems."
    The Reagan Administration's Economic Policy is expected to
meet Thursday to review Japanese compliance with the bilateral
agreement hammered out last year. Under the pact, Tokyo agreed
to stop selling cut-price chips in world markets and to
increase its imports of American semiconductors.
    Washington has accused Japan of reneging on the deal by
selling low priced chips in Asia and by failing to boost
American imports, and has threatened to take retaliatory
action.
    In an effort to save the agreement, MITI is asking Japanese
chip makers to limit production in the hope that will boost
domestic demand and reduce the incentive to export.
    Yamamoto said that Japan will slash output of 256 kilobit
dynamic random access and erasable programmable read only
memory chips by 11 pct in the second quarter. This follows a
cutback of more than 20 pct in the first three months of the
year.
    He said the cutbacks were already drying up the supply of
chips available for export through unregulated distributors in
the so-called grey market.
    "We have almost no grey market," he said. "Supply is
diminishing."
    To help ensure that the cutbacks are implemented, MITI
called in the president of Japan's largest semiconductor maker,
NEC Corp <NIPN.T> last week, he said. It is also issuing
specific instructions on production to the Japanese subsidiary
of <Texas Instruments Inc>.
    Trade and Industry Minister Hajime Tamura spelled out the
steps Japan was taking to salvage the pact and appealed for
U.S. Understanding in a letter to top American policy makers.
    The letter was sent today to U.S. Secretary of State George
Schultz, Treasury Secretary James Baker, Commerce Secretary
Malcolm Baldrige and U.S. Trade Representative Clayton Yeutter.
    The four, who make up the Economic Policy Council, are
expected to consider evidence presented by U.S. Chip maker
Micron Technology Inc <DRAM.O> of cut-price Japanese sales in
Hong Kong.
    Yamamoto admitted that <Oki Electric Industry Co>'s Hong
Kong subsidiary had sold chips at an inappropriate level but
denied that it was dumping chips at rock-bottom prices.
    "If the United States uses this as proof of dumping...We
will present our rebuttal," he said.
    The sales though were inappropriate in the light of MITI's
advice to semiconductor makers to sell chips at well above
production costs to avoid any hint of dumping, he said.
    He also called the case "strange," but he stopped short of
endorsing Japanese newspaper accusations that Oki had been
trapped into making the sales. He did say though that Micron
publicized the invoice documenting the sales on the same day
they were made and that Oki was unable to locate the person who
had bought the chips when it tried to buy them back last week.
 Reuter
