Nakasone Under Fire as Yen Soars
As the yen climbed to another post-World War II high of 169.35 to $1 on Tuesday, Japanese Prime Minister Yasuhiro Nakasone was criticized by members of his own party for failing to persuade President Reagan to cooperate in stabilizing the yen-dollar exchange rate.
The criticism of Nakasone, who has a famed “Ron-Yasu” relationship with Reagan, took place after U.S. monetary officials apparently rejected pleas by Japan for joint intervention in currency markets to halt the rapid rise of the yen’s value.
At its close Tuesday, the yen had appreciated 42.9%, by the International Monetary Fund’s formula, since last Sept. 22, when the finance ministers of the United States, Japan, West Germany, France and England agreed to promote the value of non-dollar currencies.
In a meeting of Cabinet members and officials of the ruling Liberal Democratic Party, Nakasone was forced to admit that during his visit to the United States earlier this month he had told Reagan that Japan wanted to “stabilize” the yen-dollar exchange rate at around 180 to $1 but that he received no commitment in response.
Reagan merely “took note” of his comment, Nakasone reported.
In a news conference Monday, Reagan said the yen’s growing strength relative to the dollar is “appropriate.” The comment contributed to yet another round of heavy selling of dollars Tuesday on the Tokyo Foreign Exchange Market, traders said.
Opening at 170.10 to $1, another postwar high, the yen quickly rose to a record of 168.60 before ending the day at 169.35, a closing record and a one-day increase of 2.55 yen from Monday’s close of 171.90. (In late New York trading, the dollar was quoted at 168.60 yen.)
Only mild intervention by the Bank of Japan was reported Tuesday after its biggest intervention to date--a reported $1.5 billion worth of dollar purchases--failed to halt the yen’s climb Monday.
Until March 19, when the yen reached 174.30, breaking an 8-year-old record high, the bank had made no attempt to halt the appreciation.
At Tuesday’s meeting of party and Cabinet officials, Kiichi Miyazawa, chairman of the executive board of the Liberal Democratic Party, demanded that Nakasone explain his discussions with Reagan on the yen-dollar exchange rate.
He also pointedly noted that the Group of Five finance chiefs had promised to collaborate in their currency interventions.
Miyazawa declared that Japan “cannot cope” with the United States’ apparent effort to reduce its trade deficit with Japan, which reached $49.7 billion last year, by promoting even more growth in the value of the yen.
Two other ruling party officials joined Miyazawa in criticizing the lack of “cooperation” from the United States in what they called last September’s “cooperative” currency agreement.
Later in the day, both Finance Minister Noboru Takeshita and the governor of the Bank of Japan, Satoshi Sumita, admitted indirectly in Parliament that efforts to persuade the United States to join in intervention to prop up the dollar had failed.
Both said joint intervention to support the dollar was “difficult.”