Japan adopts emergency plan to end dollar's fall against yen

April 14, 1995|By New York Times News Service

TOKYO -- Japan's government completed an emergency plan this morning aimed at halting the precipitous fall of the dollar against the yen and at rescuing the nation's fragile economy from the brink of another recession.

As part of its effort to bolster the dollar, the Japanese central bank announced it would cut its discount rate today by three-quarters of a percentage point from its current level of 1.75 percent.

In putting together the plan, officials in Tokyo hope to convince a skeptical world that they are serious about reducing their country's huge trade surplus, which is considered a major factor behind the relentless rise of the yen and the parallel fall of the dollar.

The package also is an acknowledgment that Japan must act on its own because the United States does not appear fully intent on propping up the dollar against the yen.

Japan is so desperate to halt the rise in the exchange rate of its currency -- which has the effect of a vise squeezing its export economy -- that some politicians argued into the early morning hours for the nation to show its commitment by setting a numerical target to cut the trade surplus in half in five years.

That would have been an extraordinary reversal, given that Japan has spent the last two years fighting attempts by the United States to establish just such targets.

But government bureaucrats, who are generally more powerful than elected officials, apparently managed to get such targets deleted from today's package.

Some analysts said the plan -- which includes steps to increase public works spending, spur imports and accelerate deregulation -- was too weak and unspecific and could be rejected by the markets, sending the dollar plunging again.

Indeed, the dollar slipped against the yen in early trading in Japan today. Traders cited the plan's failure to mention how much Japan will reduce its trade surplus.

"It's very big and broad and comprehensive in the skeleton with very little meat attached to it," said Mineko Sasaki-Smith, an economist with Morgan Stanley & Co. in Tokyo. "I think this is going to disappoint the market."

The fall of the dollar from a level of about 100 yen at the beginning of the year to about 83 yen now makes Japan's exports of automobiles, electronics and other products less competitive in world markets.

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