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Dollar Plunges to Another Record Low, Stocks Fall Back

August 13, 1993

TOKYO (AP) _ The dollar plunged to yet another record low against the Japanese yen today, driven by a lack of effective policy responses in Japan, analysts said. Tokyo share prices fell back after a four-day advance.

The dollar closed at 102.40 yen, down 0.97 yen from Thursday’s finish, which was the U.S. currency’s previous lowest close in Tokyo since modern exchange rates were established in the late 1940s. It finished overnight trading in New York at 102.91 yen.

The dollar now has fallen a total of 22.58 yen, or 18.06 percent, since Feb. 2, when it closed at 124.98 yen.

After opening at 102.90 yen, the day’s high, the dollar fell as low as 101.89 yen.

Dealers said the Bank of Japan bought dollars, largely in vain, to stem the advance of the yen, which also gained ground against major European currencies.

The central bank does not normally comment on its intervention.

″There is absolutely nothing that can stop the yen’s surge now,″ said Tamaji Ikehata, a dealer with Tokai Bank.

The uncertainty surrounding European currencies and the continuation of Japan’s massive trade surplus were causing a shift of European funds to the yen, dealers said.

Shoichiro Koike, general manager of the treasury and securities division at the Long-Term Credit Bank of Japan, said the dollar may go below 100 yen unless Japan’s new government responds effectively.

″The only way of halting the yen’s rise is to accelerate an economic recovery through domestic demand measures,″ Koike said.

New Japanese Prime Minister Morihiro Hosokawa, who formed his Cabinet Monday, has said Japan will continue to expand domestic demand, but has announced no concrete steps.

Some U.S. officials have favored a stronger yen in hopes it will help reduce Japan’s trade surplus by making Japanese goods more expensive abroad and foreign products cheaper in Japan.

Japan posted a nearly $50 billion trade surplus with the United States last year.

Finance Minister Hirohisa Fujii told a news conference that Japan must deal with the yen’s surge by continuing to respond ″appropriately and in timely fashion″ by keeping in close contact with other major industrialized nations.

Meanwhile, the 225-issue Nikkei Stock Average fell 20.11 points, or 0.10 percent, closing at 20,745.17 points. On Thursday, the index gained 32.71 points, or 0.16 percent.

The Nikkei was up some 126 points at the end of the morning session, but fell back in the afternoon on profit taking. The index had gained 407.34 points in the four previous sessions.

The Tokyo Stock Price Index of all issues listed on the first section fell 3.10 points, or 0.18 percent, to 1,683.08. The TOPIX rose 5.95 points, or 0.35 percent, the day before.

An estimated 480 million shares changed hands on the first section, down from Thursday’s 505 million shares. Much of today’s turnover was related to the special quotation to settle August options contract prices, dealers said.

Advancing issues outnumbered decliners 497 to 483, with 178 unchanged.

The yield of benchmark No. 145 10-year Japanese government bonds closed at 4.040 percent, up 0.045 percentage points from Thursday’s finish. Their price fell 0.17 yen to 109.29 yen.