JAPAN ISOLATED, YEN RISES, WORLD FEELS CHEATED Japan is becoming dangerously isolated again as the U.S. And Europe feel they have been cheated by Japanese promises to switch from export to domestic-led growth, officials and businessmen from around the world said. As the dollar today slipped to a record low below 145 yen, making Japanese exporters and holders of dollar investments grit their teeth harder, Finance Minister Kiichi Miyazawa said there was a perception Japan had reneged on its promise. The problem goes deep and centres on misunderstandings by both sides over the key Maekawa report of April, last year. The document was prepared by a private committee formed by Prime Minister Yasuhiro Nakasone and led by former Bank of Japan head Haruo Maekawa. It recommended that to stop friction due to its large trade surpluses, Japan must "make a historical transformation in its traditional policies on economic management and the nation's lifestyle. There can be no further development for Japan without this transformation." Americans and Europeans took the report to heart and have looked in vain for clear signs of this historic change. But the Japanese remain doubtful about the short, or even medium term prospects of totally transforming their economic habits. The bubble of frustration against what appears as Japanese prevarication burst last week. The U.S. Said it intended to raise tariffs of as much as 300 mln dlrs on Japanese exports to the U.S. On the grounds Japan had abrogated a bilateral semiconductor pact. British Prime Minister Margaret Thatcher threatened to block Japanese financial firms from London after the Japanese placed what the British say are restrictive conditions on a bid by British firm Cable and Wireless to join a domestic telecommunications joint venture. On Friday, European currency dealers said European central banks, annoyed at restrictive Japanese trade practises, might leave Japan alone to intervene to staunch the rise of the yen. Eishiro Saito, head of top Japanese business group Keidanren, spotted the dangers inherent in such contradictory views last November when he visited the European Community. "Related to this matter of (trade) imbalance, the point that I found to be of great cause for alarm during this trip to Europe was the excessive degree of hope placed by the Europeans in the results of the Maekawa report," he said. "We explained that the process of restructuring the economy away from its dependence on exports toward a balance between domestic and external demand...Would take time," Saito said. Saito's words were ignored. In February, EC Industrial Policy Director Heinrich von Moltke came to Japan and said "I only know that your government, under the leadership of Maekawa, points to restructuring your economy into a less outward looking, more inward looking one. It is the Maekawa report which has attracted the most attention in Europe." And Europeans and Americans want quick action. "A far better answer than protectionism would be structural change within the Japanese economy, the kind suggested by the Maekawa report. And we hope to see changes occur in the near future," visiting Chairman of General Motors Roger Smith said in March. Such expectations are now ingrained, which was partly the fault of Nakasone, who heralded Maekawa's report as a sea of change in Japanese affairs, said U.S. Officials. Months before the report was issued, U.S. And EC business leaders met their Japanese colleagues to discuss the trade problem. "We are more anxious than ever that the new approach of the Maekawa committee does lead to speedy and effective action," said EC Industrial Union leader Lord Ray Pennock. "The important implication of the Maekawa report is that it is finally looking to let Japanese enjoy the fruits of their labour," said Philip Caldwell, Senior Managing Director of Shearson Lehman Brothers. Contents of the report were leaded well ahead of issuance. Japanese officials say they are implementing the report as fast as they can, said a European ambassador who has travelled the country asking about this issue. He said People mentioned many things in line with the spirit of the report, including restructuring of the coal and steel industries. A major misunderstanding is that the private report was government policy. Europeans are confused about this, underlined by von Moltke's reference to the "leadership" of the Maekawa report. Even so, Japanese officials point to last September's government programme of new economic measures. "Without endorsing the report as policy, officials point out that the government has put its signature to a programme designed to implement the report," the ambassador said.