P. M. BRIEFING : Group of 7 Meets to Discuss How to Prop Up the Sagging Yen

Senior officials from the major capitalist nations met today in Japan to discuss ways of propping up the sagging yen, which has pummeled the Tokyo stock market and may impede progress on cutting the massive U.S. trade deficit.

Monetary sources said officials from the Group of Seven--the United States, Japan, West Germany, Britain, France, Italy and Canada--met at a secret location.

As the G-7 talks were under way, the yen’s value fell to an eight-month low as the rate of exchange rose to 150.98 to the dollar before rebounding slightly.

Tokyo believes the falling yen will lead to a burst of domestic inflation, but the prescription of higher interest rates often used by central bankers to combat inflation and prop up a weak currency is a risky one.

Officials at the Bank of Japan fear a rise in Japan’s discount rate from its current 4.25% could topple the Tokyo stock market, and perhaps trigger a worldwide stock market crash.

But continued yen weakness could also lower the price of Japanese exports, undermining progress on trimming the $49-billion U.S. trade deficit with Japan at a time when relations between the two nations are particularly tense.