Reagan Praises Takeshita's Policies, Pledges Effort to Support Dollar

Times Staff Writer

President Reagan gave Japanese Prime Minister Noboru Takeshita the strongest pledge to date that the United States will resist any further decline in the value of the dollar and praised Takeshita's defense and economic policies in a meeting at the White House on Wednesday.

Reagan, however, prodded the new Japanese leader to open his nation's markets to more U.S. farm imports and to allow American construction companies to participate in public works projects in Japan.

In a joint statement, the two leaders announced that new arrangements have been made to ensure adequate funds to support the dollar, which lost 21% of its value against the yen last year. Gains in the yen's value make Japanese goods more expensive on the world market, undercutting the competitiveness of Japan's exports.

The Plum of His Trip

Takeshita and other Japanese officials made it clear that they regard the agreement to stabilize exchange rates as the plum of the trip for the new prime minister, his first to the United States since taking office Nov. 6.

"The stability of exchange rates is indispensable" to achievement of economic goals shared by both nations, Takeshita said in a statement to reporters.

For the United States, the gains were more amorphous.

Reagan, who spent 2 1/2 hours with Takeshita despite having suffered an episode of nausea and vomiting that kept him up much of the night, said that he was "pleased" with Takeshita's assurance that talks would be reopened on providing "in a satisfactory manner" more access for the U.S. construction industry to Japanese public works.

Japanese barriers to U.S. firms' participation have frayed relations already strained by Japan's trade surplus with the United States.

Offer Called 'Framework'

However, a senior Administration official said that the Japanese offer amounted to only a "framework. It doesn't itself resolve all the problems involved."

On the question of Japan's import quotas on 12 agricultural products, the official, who declined to be identified, cited Takeshita's "forward attitude" in moving toward removing them.

In remarks to reporters in the East Room of the White House, Reagan said that the session helped the two leaders establish "an excellent personal rapport," although he mangled the pronunciation of Takeshita's name (pronounced Ta-KAY--shta) in his comments.

Ichiro Ozawa, deputy chief Cabinet secretary, told newsmen that in their talks, the two leaders generally called each other by their first names--Ron and Noboru--in the fashion of the "Ron-Yasu" relationship that Reagan and Takeshita's predecessor, Yasuhiro Nakasone, established.

Issue Joint Statement

A joint statement issued by Reagan and Takeshita on exchange rates declared that "a further decline of the dollar could be counterproductive"--wording that Makoto Utsumi, director of the Japanese Finance Ministry's international finance bureau, described as unprecedently strong coming from the President himself.

In the past, the Administration has issued vague signals on its position on the dollar, sensitive to the consideration that while the decline unsettles the financial markets, it makes U.S. goods more affordable overseas.

Utsumi said financial officials of the two countries set no specific exchange rate as a goal but added, "This (statement) makes it very clear that anything below the present rate (for the dollar) is unacceptable."

The dollar closed at $1 to 127.23 yen on the New York Foreign Exchange Market Wednesday, down slightly from Tuesday's 127.45.

The Finance Ministry official said the two countries have made new arrangements to guarantee that both the Bank of Japan and the Federal Reserve Bank of the United States would have sufficient funds to intervene in exchange markets to support the dollar.

Interest Rate Offer

In exchange for the strongly implied American commitment to intervene forcefully to support the dollar, Japan offered its own implied promise "not to resist any decline" in (its) short-term interest rates and to refrain from raising other interest rates, a senior Reagan Administration official said.

Reagan said he was "especially pleased" with Takeshita's "global economic perspective" and praised as "significant" Japan's plans to expand domestic demand and stimulate growth. The United States has been pressing Japan to take steps to increase Japanese imports of American goods.

Reagan also praised increases, outlined in Takeshita's first budget, in foreign aid, defense spending, and financial support for the 60,000 U.S. servicemen stationed in Japan.

He even offered a word of support for Japan against criticism that its rising military budgets--now slightly larger than $30 billion--might threaten to transform Japan once again into a strong military power.

"Japan's national defense program is entirely consistent with the concept of self-defense and in no way poses any threat to others," he said.

Desire to Ease Tensions

In his remarks, Takeshita, who will conclude his three-day visit after a speech to the National Press Club, stressed his nation's desire to ease the tensions in the United States over trade issues.

He specifically mentioned Japan's goal of slashing its surplus in current accounts--the sum of both trade and non-trade transactions, such as tourist, shipping and insurance payments--by $10 billion in Japan's fiscal 1988, which begins April 1. For fiscal 1987, the surplus was expected to amount to around $82 billion.

Japan, he said, would "carry out a vigorous economic . . . policy, with emphasis on expanding domestic demand to promote structural adjustment (of the economy), improve market access and strive for a further steady reduction of the current account surplus."

He also renewed a promise to "prevent the recurrence of illegal diversion of high technologies"--referring to the sale by a Toshiba Corp. subsidiary of sophisticated milling equipment to the Soviet Union. That episode, which enabled the Soviets to make detection of their submarines more difficult, triggered an angry outburst in Congress and the passage of sanctions against the firm.

The President urged Takeshita to speed up work on a new U.S.-Japan science and technology agreement, which has stirred resistance in Tokyo over fears that Japan might be forced to give up more than it gets through high-tech cooperation.

Cites Farm Products

In their meeting, officials said, Reagan singled out agricultural trade as an area in which Japan, by eliminating impediments to imports, could help him resist protectionist moves in Congress. He mentioned beef and citrus fruit quotas as examples, Ozawa told reporters from Tokyo.

A four-year agreement on trade in beef and citrus expires March 31 and the two nations are at loggerheads over how to handle trade in the politically sensitive items after April 1. Takeshita's suggestion of a new willingness to lift quotas applied only to 12 other farm products, including pineapples, ketchup, peanuts and processed cheese.

Takeshita also met with Rep. Thomas S. Foley (D-Wash.), the House majority leader, but officials said no specific trade issues were discussed. They said Foley told the prime minister that trade disputes with Japan makes blocking protectionist measures in Congress more difficult.

U.S. contractors see little new in Japanese proposals to open up public works bidding. In Business.

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