Surging Yen Cuts Pace of Growth of Japan’s Economy

Japan’s economy still is expanding, but the pace of growth has slowed considerably because of the yen’s appreciation against the dollar during the past seven months, government statisticians reported Monday.

The release of reports on economic indicators and production came less than a week before leaders of the world’s major non-communist industrialized nations convene in Japan to discuss economic problems.

The Japanese are expected to complain that the surging value of the yen, primarily against the dollar, is hurting their export-oriented economy by making Japan’s products more expensive and therefore less competitive abroad.

But the United States is expected to support a further fall in the dollar’s value, arguing that it will help stem the amount of U.S. imports, which helped cause a $148.5-billion trade deficit in 1985.

Britain, France, Japan, the United States and West Germany agreed at a financial summit Sept. 22 to devalue the dollar through a coordinated strategy of lower interest rates and foreign exchange market intervention. Since then, the dollar has declined up to 40% against other major currencies.

Japan’s Economic Planning Agency said the index of leading indicators for February, the most recent reporting month, stood at 50.0, down from 66.7 in January. The index, which measures near-term economic trends, foretells economic expansion at any reading above 50 and contraction below 50.

Agency economists attributed the decline to slumping machinery orders abroad and a decline in the money supply, which are among 12 components of the leading indicator index.