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 &lt;NIPN.T> last week, he said. It is also issuing
  specific instructions on production to the Japanese subsidiary
  of &lt;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 &lt;DRAM.O> of cut-price Japanese sales in
  Hong Kong.
      Yamamoto admitted that &lt;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.
  

