Prime Minister Yasuhiro Nakasone said Wednesday that Japan will bear the shock of a substantial appreciation in the relative value of its currency as its international responsibility.
Nakasone’s statement, made to American reporters, was the strongest affirmation yet that Japan is prepared to stick with an exchange rate of about 180 yen to the dollar, an appreciation of 30% since last September. The stronger yen means that Japanese exporters now get about 60 fewer yen for every dollar of goods that they sell overseas.
Japanese industrialists have complained that the yen’s appreciation has gone too far too fast and have advocated an exchange rate of 190 to 200 yen to the dollar to ease the export pinch.
‘Not Necessarily Open’ in Past
Nakasone took issue with 53 U.S. senators who said in a letter to President Reagan on March 9 that Japan was “unwilling to assume the burdens and responsibilities incumbent upon the second-largest economy in the free world.”
“That is correct in some aspects,” Nakasone told the reporters, “but incorrect in others. In the past, we were not necessarily open in providing access to our market, but in this last year, we have achieved remarkable progress.”
Since the finance ministers of the world’s five leading industrialized nations met last Sept. 22, Nakasone said, “a great change has occurred in the yen-dollar exchange rate. We have achieved--and we are maintaining--a 30% appreciation of the yen. This is imposing a very severe shock on some of Japan’s small enterprises. But we must bear (this shock).”
After the yen set a record high of 174.90 to 1 on March 18, the Bank of Japan intervened twice, on March 19 in New York and on April 1 in Tokyo, to drive down its value. No intervention, however, has been reported since April 1, when the yen closed in Tokyo at 178.50 to 1.
On Wednesday, the yen closed here at 180.20 to 1, a gain in value of 34.3% compared to the 242-to-1 rate that prevailed before last Sept. 22.
Nakasone’s statement came amid widespread suspicion in financial circles that Japan might allow--even force--the yen to cheapen against the dollar after the economic summit meeting scheduled for May 4-6 in Tokyo. He not only said that Japan was “maintaining” the yen at a high level but argued that benefits from the yen’s appreciation should be utilized to spur the economy.
“Indeed, I want not only to sustain (the yen’s appreciation) but to use it to boost the economy even further beginning in the summer,” he said. “In the fall, conditions will change a great deal, I believe. I am convinced that exports will become sluggish and imports will increase and that economic conditions will improve considerably.”
Nakasone is to meet with President Reagan in the United States on Sunday and Monday, and he said they will discuss stabilizing the yen-dollar exchange rate “at an appropriate level.”
He said he will also tell Reagan of Japan’s determination to carry out the reforms contained in a report that he received Monday from a commission headed by Haruo Maekawa, a former governor of the Bank of Japan. Among other things, the report calls for action to reduce Japan’s trade surplus.
Nakasone acknowledged that the report’s recommendation for restructuring Japan’s “export-oriented economy” will be as difficult to achieve as climbing Mount Everest but added that “we can do it, and we intend to do it.”
Big Trade Surplus
He pointed out that the Ministry of International Trade and Industry has made many of the same recommendations contained in the Maekawa report. And he said his Cabinet will set up the machinery to follow through and implement the Maekawa recommendations.
He also said he is aware that Japan’s trade surplus with the United States--$49.7 billion last year and growing--contains the potential to cause new friction between the two countries, even though Congress is “busy deliberating the U.S. budget and tax reform.”
He said that Japan’s exports, in terms of volume, are beginning to slow down but that their higher dollar value, combined with lower prices for imported oil, has increased Japan’s trade surplus.
Meanwhile, the Finance Ministry announced Wednesday that Japan’s global trade surplus in fiscal 1985, which ended March 31, was a record $52.6 billion, up 50% over the figure for fiscal 1984. Exports rose 7.7% while imports declined 3.3%, the ministry said.