Nakasone Criticized on Libya and Yen

Japanese Prime Minister Yasuhiro Nakasone came under attack Tuesday for agreeing to condemn Libya as a terrorist nation and for failing to win the cooperation of other summit leaders to brake the climb of the yen.

The criticism, from Japanese businessmen, the media and members of his own ruling party, erupted as the yen’s value shot up to yet another post-World War II record and heightened fears of an economic setback here.

Despite the hopes expressed before the summit by both Nakasone and Finance Minister Noboru Takeshita that they would secure allied help to halt the upward spiral of the yen, the Japanese currency gained 3.3% in value, compared with last Friday, in trading on the Tokyo Foreign Exchange Market. Trading was closed Monday for a national holiday.

The yen finished at 165.20 to the dollar in trading here after momentarily reaching 164.85, new postwar highs for both a closing price and a single transaction. The dollar later strengthened in New York trading, closing at 165.80.

‘Ron-Yasu’ Relationship

The mass-circulation newspaper Asahi said that before the summit, Nakasone may have counted too much on his first-name, “Ron-Yasu” relationship with President Reagan to win support on the exchange rate issue.

“Business and friendship don’t mix,” the newspaper said. “The two men might as well have been strangers” when it came to securing U.S. backing for Japan’s position.

After the summit closed, Nakasone admitted publicly for the first time that he was forced to yield to the other six summit leaders’ insistence that Libya be singled out for its sponsorship of international terrorism.

“Except for Japan, all of the countries favored naming Libya because evidence of its involvement, as a government, was clear,” he said. “As chairman, I was in a position in which I felt I must accept the opinions of the others.”

Pro-Arab Policy

The labeling of Libya as a terrorist state was regarded here as an abandonment of the pro-Arab Middle East policy that Japan has followed since the first oil crisis in 1973. Critics also condemned Nakasone for sympathizing publicly with Reagan’s motivation in bombing the Libyan cities of Tripoli and Benghazi on April 15.

Nakasone, however, insisted that the naming of Libya represented “no change in our policy toward Arab countries or toward the Middle East.”

The naming of Libya came as a particular embarrassment to Nakasone because Japanese government officials had informed Japanese journalists before the summit that the regime of Col. Moammar Kadafi would not be singled out.

After the U.S. raid on Libya, the Japanese government refused to condemn or support the attack and remained silent on Libya’s involvement in terrorism.

‘Better Understanding’

Only last Thursday did Nakasone take a step toward aligning himself with Reagan and the other summit leaders, saying briefings provided by the United States and Western European governments had given Japan a “better understanding” of the problem.

Nakasone defended the summit’s anti-terrorism statement as designed to establish a “joint defense structure” to enable the summit nations to protect themselves against terrorism.

The statement “does not convey the idea of sanctions” or other offensive measures, he said. Like the European nations represented here, Japan was unenthusiastic about Reagan’s proposal to suspend all economic ties with Libya.

Nakasone said that he had explained to the summit guests that the rising yen--which eats into the profits of Japan’s exporting firms--had “brought difficulties to the Japanese economy.”

“A climb of more than 40% in about half a year is much too fast. Businessmen can’t cope with this,” the summit participants were told.

Intervention Promised

To defend himself on the yen issue, Nakasone noted that the economic declaration issued by the seven leaders promised that they would intervene in foreign exchange markets when they deemed it “helpful.”

But he admitted that, except for West Germany, all the other countries expressed support only for the “principle” of stabilizing exchange rates, not for intervention now to halt or reverse the yen’s rise.

Shortly before Nakasone spoke, White House Chief of Staff Donald T. Regan gave the Japanese leader his third American rebuff during the summit by declaring in a television interview that “right now, we’re trying to get our balance of trade favorable, so we like a strong yen. It makes our products more competitive.”

On Saturday, both Reagan and Treasury Secretary James A. Baker III rejected Japanese appeals to step in to halt the yen’s upsurge, rebuffs that bankers cited as the major cause of the yen’s spurt Tuesday.

“Until the summit, there was a general expectation that some measures would be taken to curb the dollar’s fall,” said Hajime Fujii, Mitsubishi Bank’s deputy chief of foreign exchange. “But now that is more or less clear this is not the case, people are unloading their dollars.”

In an apparent attempt to help Nakasone, Reagan, in opening remarks in his press conference today, said that both Japan and the United States desire “greater stability in the yen-dollar relationship.”

Reagan also said the Tokyo summit was “the most successful of the six I have attended . . . due in no small measure to the leadership of Prime Minister Nakasone.”

September Agreement

By International Monetary Fund formula, Tuesday’s closing put the yen’s value 46.5% higher than it was before the finance chiefs of the United States, Japan, West Germany, France and Britain agreed last Sept. 22 to drive down the dollar’s value.

Before he visited Washington April 12-14, Nakasone declared that his government was prepared to live with an exchange rate of about 180 to the dollar, or an appreciation of 34%.

“A commitment for joint intervention was the last trump card to stop the yen’s rise,” said Koji Kidokoro, a manager at Mitsui & Co., a major trading company. “Maybe our expectations were too high.”

Criticism also broke out within Nakasone’s Liberal Democratic Party for letting Japan’s expectations on the currency question “end in vain,” as a high party official said.

‘Double Election’ Weighed

Nakasone faces an election for the upper house of the Japanese Parliament in late June or early July and is known to be considering a dissolution of the lower house to stage a “double election” on the same day.

Meanwhile, in Washington, Trade Representative Clayton K. Yeutter surprised Japanese officials by declaring in a speech that Nakasone had reneged on a promise made to Reagan on April 14 to transform Japan’s “export-oriented economy” into one dependent upon domestic demand for growth.

Yeutter, speaking to a Latin American trade group, charged that Nakasone regarded a report urging the reform merely as a recommendation, and he said the Japanese government has developed no consensus in favor of shifting its economic policy.

‘Dangerous Game’

Japan, he charged, is playing “a dangerous game” with the rising tide of protectionism in the United States.

A Foreign Ministry official, who asked not to be named, said Nakasone had never told Reagan that the reform recommendations have been made government policy. He added, however, that the government was “now making every effort to implement the recommendations.”

“I don’t think we are playing any game ,” the Foreign Ministry official said. “I don’t quite understand what the problem is. . . . There should not be any complaint from other countries on what we are doing.”

Only last Saturday, both Reagan and White House spokesman Larry Speakes praised Nakasone for obtaining the approval of a “working plan” to carry out the reform from both his Cabinet and the ruling party. Asked about Yeutter’s comments, Treasury Secretary Baker said, “I just left the President and he believes the prime minister.”