Ministers Huddle on Finance, But Announce No New Steps on Yen
TOKYO (AP) _ Japan’s top finance officials held emergency talks Thursday, but did not immediately announce any new initiatives to halt the expansion of the country’s trade surplus or the yen’s rise.
The meeting of members of the coalition government of Prime Minister Morihiro Hosokawa came as the yen again hit new postwar highs against the dollar. Currency dealers predicted more dollar selling if the meeting failed to yield concrete results.
The surge of the yen is harming Japan’s recession-bound economy by cutting deeply into export earnings. Dealing with the soaring currency is the first major test for the Hosokawa government, which took office ten days ago.
Some economists predict the yen will soon break through the psychologically important barrier of 100 to the dollar.
The U.S. currency, which fetched about 125 yen in early February, opened at 101.30 yen on Thursday, the lowest start in Tokyo in the postwar era.
The yen’s rise means that if a Japanese company sells a product for $10 in the United States, it takes in only about 1,010 yen, compared with 1,250 yen six months ago.
With revenue falling, companies are forced to cut back on investment in research and new equipment. A survey published Wednesday by the economic newspaper Nihon Keizai Shimbun showed manufacturers have slashed capital investment plans this fiscal year by an average 15.1 percent.
Lower investment will make it more difficult for Japan to break out of its 2-year-old economic slump. Private think tanks are predicting economic growth of less than 2 percent in the fiscal year ending next March 31, far below the official prediction of 3.3 percent.
″There’s no sign of any recovery in sight,″ Yasushi Kasai, of the Japan Economic Research Center, told Nihon Keizai.
Many economists are urging the new government to cut taxes to boost the economy and encourage imports. But there’s no sign yet that the powerful finance ministry will agree to the cut.
More sober expectations are for eliminating regulations that negate the price benefits Japanese consumers should have gained on imports from the yen’s sharp rise.
The Japan Employers’ Association issued a report Wednesday calling for cuts in the prices of such items as rice, beef, utilities, imported cars, international phone calls and taxi rides.
That could be done by relaxing inspections of imported cars and food, and easing restrictions on long-distance telephone services, the association said.
Theoretically, a $10 foreign product that cost 1,250 yen in Japan in February should cost 1,010 yen now because of the yen’s surge. But the association said Japan’s complex distribution system and anti-competitive business practices mean consumers don’t benefit as much as they should.
This damper on imports, along with the slump weakening overall purchasing power, have contributed to Japan’s huge overall trade surplus, which hit $107 billion in 1992.
That has flooded Japan’s financial markets with dollars, pushing down the U.S. currency against the yen.
The United States and other major trading partners also have favored a stronger yen to cut the Japanese surplus by making Japanese products more expensive abroad.