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Higher Oil Prices Cause Headaches in Japan

Manufacturers and transportation companies in Japan say higher crude oil prices will cause changes for their operations. And Japan and Thailand are coming closer to ending tariffs on much of their trade.

Surging crude oil prices are beginning to put the squeeze on a variety of Japanese industries - especially those that use plastics or petroleum. Many are saying they will have to cut costs elsewhere because, faced with intense competition, they cannot raise prices if they want to keep their customers.

Transportation companies also are contemplating what to do. Japan Airlines President Toshiyuki Shinmachi says he expects to see costs rise for the next six months by nearly $500 million, even if fuel costs stabilize.

Mr. Shinmachi says JAL is considering fare increases of a few dollars as well as more drastic measures, such as eliminating some routes.

Nippon Oil and Showa Shell Sekiyu have announced they will raise wholesale gasoline prices for September by more than one cent a liter.

Economists say they are surprised by the latest data for Japanese industrial production. The country's trade minister says production fell 1.1 percent in July from the previous month, when it rose 1.6 percent.

Many economists had predicted a half-percent drop for July. They say the lower numbers are a sign growth may slow in Japan, the world's number two economy.

Japan and Thailand are a step closer toward a limited free trade agreement. During a visit to Tokyo this week, Thai Prime Minister Thaksin Shinawatra and his Japanese counterpart, Junichiro Koizumi, endorsed a basic agreement on eliminating nearly all tariffs between the two countries in a decade.

During sometimes-contentious negotiations lasting nearly 20 months, both Tokyo and Bangkok made concessions and the two leaders say they hope to sign a deal next year. But Thailand still has reservations about eliminating tariffs on Japanese automobiles while Japan has successfully demanded that several agricultural products, including rice, be excluded from trade talks.

In a move designed to tap into the demand for foreign luxury cars, Japanese automaker Toyota has begun selling its Lexus vehicles in Japan for the first time.

Toyota has opened 143 specialized dealerships this week devoted to the Lexus. Brand general manager Yukihiro Fujimori says the automaker is hoping sales of the luxury cars will help increase its lackluster domestic profit picture.

Mr. Fujimori notes this is the first time in Japan that vehicles made by Toyota will not have the familiar Toyota badge on the front grill. Instead the logo is a stylized "L" for Lexus.

Toyota introduced the Lexus in the United States in 1989, where it has become a top-selling luxury brand with a reputation for high quality. Toyota will aim the brand in Japan at a well-heeled crowd that can choose among such foreign luxury brands as Mercedes, BMW and Jaguar.