Effort to Stem Dollar’s Rise in the Works, Analysts Say

A top official from the Japanese Finance Ministry met Wednesday with officials from the Treasury Department and the Federal Reserve, fueling speculation in global markets that Tokyo is seeking a multinational effort to brake a surge in the U.S. dollar that is threatening prospects for recovery in Asia’s battered economies.

In international currency markets Wednesday, the dollar fell about three yen from an earlier 5 1/2-year high of 134.25 yen per dollar as traders braced for the possibility that officials in the U.S. and Europe might join Japan in a coordinated effort to stem the dollar’s rise by selling greenbacks.

The yen held steady in early trading Thursday in Tokyo, but there was no signal from the Treasury that U.S. officials were contemplating market action. Many analysts concluded that U.S. officials were insisting on bolder economic reforms from the Japanese government, as the price of U.S. help in halting the dollar’s climb.

“I have got to believe that the U.S. is saying, ‘Yes, we can help, but that’s only possible if you make some basic changes in your policies,’ ” said C. Fred Bergsten, director of the Washington-based Institute for International Economics.

A standoff between the United States and Japan would be likely to exacerbate Asia’s financial crisis, which took yet another turn for the worse Wednesday as stock markets and currencies across the region declined sharply, led by a 6% plunge in Hong Kong’s Hang Seng index.

One bright spot on the Asian financial front Wednesday was South Korea. Financial industry sources said banks in the U.S., Japan and Europe are likely to agree Thursday to extend for up to 90 days a previous accord to roll over their loans to Korean borrowers.