Japan Acts to Pass On Benefits of Higher Yen

Times Staff Writer

Prime Minister Yasuhiro Nakasone’s Cabinet decided Tuesday to lower gas and electricity rates and to reduce government support prices for beef, pork and butter, passing along to consumers part of the benefits from the 25% appreciation of Japan’s currency since last fall.

The lower utility rates, effective June 1, are the highlight of an otherwise largely cosmetic series of seven steps adopted by the Cabinet. The intent is to soothe fears of economic hard times at home and to persuade foreign trading partners--the United States in particular--that Japan is acting to stimulate domestic growth.

The move was taken four days before Nakasone, who will be host to the leaders of six other governments at an economic conference here May 4-6, is to leave for the United States. He will meet with President Reagan on Sunday and Monday.

Economic Reform Conference


The Cabinet also agreed to establish a ministerial conference to follow up recommendations submitted to Nakasone on Monday to reform Japan’s export-oriented economy. And Nakasone issued a statement saying: “It should be our national goal to steadily reduce the current accounts imbalance to one which is consistent with international harmony.”

The steps announced Tuesday also held out the promise, though without specifics, of lower international air fares and a reduction, in September, of the cost of international telephone calls. There was no explanation of why the reductions are being delayed.

Windfall profits as a result of the yen’s appreciation began after the finance ministers of five leading industrial nations agreed in New York last September to prop up the value of non-dollar currencies. Before the New York meeting, the exchange rate was 242 yen to the dollar; Tuesday it was 181.45 to 1.

Benefits to Japan from lower oil prices began showing up only in March, according to Kunio Miyamoto, deputy director general of the Economic Planning Agency’s coordination bureau. In February, the price of oil delivered in Japan was still more than $27 a barrel, he said.


The electricity bill of the average household in Tokyo will be reduced by the equivalent of $3 a month and the gas bill by $4.02. Final details of the rate reductions are still to be worked out, but only about 70% of the utility firms’ windfall profits from the yen appreciation and lower oil prices--estimated at $7.8 billion for fiscal 1986--are expected to be passed along to household and industrial consumers.

Reductions in the government supported prices for beef, pork and butter are a rarity. With the cost of imported feed down 5.8%, the Cabinet approved a reduction of 2.3% in the support price for beef. Domestic beef accounts for 70% of the beef sold in Japan.

Support prices will be lowered by 5.6% for pork and by 4% for butter.

The 3,000 shops authorized by the government to sell imported beef were ordered to offer an additional 10% discount over the regular discounts of 10% to 20% on retail prices. These shops make up only 10% of the retail beef outlets.


The government also promised to monitor the prices of 37 specific imported consumer products to put psychological pressure on retailers to lower prices in line with the yen’s appreciation. It said it would publish data on the prices of these products.

Effort to Speed Benefits

Miyamoto, the coordinating bureau official, said Tuesday’s steps were taken in order to speed up the benefits of the yen’s appreciation. All recent surveys, he said, including those made by the Bank of Japan, had detected “signs of weakening of business confidence” because of the negative impacts of appreciation, including decreased price attractiveness of Japan’s exports.

Also on Tuesday, the Cabinet announced that there will be an easing of regulations to promote urban redevelopment, lower interest rates for housing and more special low interest loans for small businesses. A hint was dropped that the central bank’s discount rate--the interest it charges on loans to private banks--might be lowered again. The rate has already been cut twice this year and now stands at 4%.