Japan Wants to Boost Value of Yen : Stronger Currency Would Help Cut Huge Trade Surplus
Japan’s vice finance minister for international affairs indicated Wednesday that Japan wants the U.S. dollar to be worth less than 200 yen and predicted that the Japanese currency will eventually begin a “second stage” of appreciation.
“I am not satisfied with today’s exchange rate of 211 yen to $1,” Toshimitsu Oba told the Japan National Press Club. The yen closed Wednesday on the Tokyo Foreign Exchange Market at 211.67 to the dollar, its highest value since March 31, 1981. (At the end of trading in New York, the dollar had climbed back to 212.45 yen.)
The closing price in Tokyo represented a 12.5% gain in value since the finance ministers and central bank governors of the United States, Japan, France, West Germany and England met in New York on Sept. 22 and pledged to strengthen the value of non-dollar currencies.
“The yen must grow far stronger,” Oba said. “We have to reduce our black ink in current accounts. Therefore, it will be good to strengthen the yen further.”
A nation’s current account is the total of both its trade and such non-trade transactions as investments, shipping and tourism.
Although Satoshi Sumita, governor of the Bank of Japan, has repeatedly declared his intention of continuing strong intervention in exchange markets to drive up the value of the yen, Oba’s remarks were the most forceful by any Japanese official in support of a stronger yen since the Sept. 22 meeting, when the yen stood at 242 to the dollar.
An increase in the yen’s relative value drives up the cost of Japanese goods in foreign markets and lowers the prices of foreign goods sold here.
Spurt in Surpluses
Oba said his ministry had calculated that each 10-yen decrease in the value of the dollar will reduce Japan’s current accounts surplus by $1.5 billion after the effects of the so-called J-curve occur.
A “J-curve” is a temporary spurt in surpluses that occurs as a result of the higher value of exports for a short period after a currency appreciates but before the appreciation starts reducing overseas sales.
By this calculation, he noted, a 40-yen decline in the value of the dollar will eventually reduce Japan’s current account surplus by $6 billion.
In fiscal 1984, which ended March 31, Japan’s current accounts registered a surplus of $37 billion; that surplus is expected to exceed $50 billion this year.
A separate Finance Ministry announcement Wednesday disclosed that Japan recorded a record current accounts surplus of $26.6 billion and a record trade surplus of $29.2 billion for the first six months of fiscal 1985, through September.
Oba also mentioned exchange rates of 180, 170 and 160 yen to the dollar as levels at which a reaction against yen appreciation might occur. But currency speculators most likely would start seriously trying to determine the exchange rate at which they will begin buying dollars again if its value falls below 200 yen, he said.
In the wake of the Sept. 22 meeting in New York, he said: “I felt it would be strange if the yen did not appreciate by at least 10% in the first stage.” Now that more than a 10% appreciation has been achieved, “I feel we will enter a second stage (of yen appreciation),” he added. Oba said the United States’ support for a decrease in the dollar’s value was “a very big factor” in helping to promote the value of the yen.
But he added that new efforts to promote economic growth at home and to liberalize Japan’s financial market will back up intervention in support of a stronger yen.