G-7 Won’t Join Japan in Propping Up Weak Yen

Top economic officials of the United States and its major trading partners signaled Wednesday that they would not join Japan in intervening in the foreign-exchange markets to support the yen, leaving Tokyo to go it alone in propping up its beleaguered currency.

After a closed-door meeting, the Group of Seven finance ministers instead told Tokyo to make sure its new economic stimulus package is strong enough to be effective. That, in turn, would “correct” any excessive weakness in the yen, they said in a communique.

The politely worded rebuff marks an attempt by the allies to hold Tokyo’s feet to the fire. Last Thursday, Japan announced that it would enact a $75-billion package of tax cuts and spending programs, but conspicuously omitted details of what it would include.

Although Japanese officials have been saying they would unveil more details of their stimulus package soon, they apparently provided no more specifics at the finance ministers meeting. Western officials are expecting further information to emerge next week.

Though Japan has not formally asked the United States and other allies to help prop up the yen, the Bank of Japan last week intervened in U.S. currency markets. But the U.S. Federal Reserve Board refused to join the effort.

The fact that the Japanese stimulus package was on the finance ministers’ agenda sparked speculation in the financial markets this week that the United States might intervene, but Treasury Secretary Robert E. Rubin denied such plans.

Wednesday’s communique sent the dollar soaring to 131 yen in Tokyo early today, from 129.36 in New York.

The communique amounted to a continuation of the finance ministers’ previous stance on the Japanese stimulus package. While formally “welcoming” the Japanese announcement last week, they withheld any judgment on the proposal until all details are out.

Although the stimulus package is large in scale, U.S. officials have been skeptical. At least $30 billion of the tax cuts were described as temporary, and the plan lacked a firm indication of where the spending would be targeted.

Rubin and other Western finance ministers have been worried about Japan’s economy slipping further, fearing that would exacerbate the Asian financial crisis. In healthier times, Japan has been a major customer for Asian exports.

At a news conference after the meeting, Rubin told reporters that there had been “no specific discussion” about joint intervention by the allies, although the communique clearly implied they would not join in.

The ministers did, however, give their stamp of approval to Japan’s efforts to intervene unilaterally, as it did last week. Tokyo’s action in the foreign-exchange markets last week pushed the yen up temporarily by 4.5% over several days.

Rubin also declined to predict for certain that the yen would rebound if the Japanese stimulus package turned out to be a strong one. He said only that the markets “would make a judgment.”

Besides the United States, the finance ministers group includes economic officials of Britain, France, Germany, Japan, Canada and Italy. The session was held in conjunction with the spring meeting of the International Monetary Fund in Washington.