Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 15, 1994 TAG: 9402150068
SECTION: BUSINESS PAGE: C10 EDITION: METRO
SOURCE: Associated Press
DATELINE: TOKYO LENGTH: Medium
Worried Japanese leaders talked of producing their own market-opening steps after Prime Minister Morihiro Hosokawa's summit with President Clinton on Friday ended in a deadlock on how to cut Japan's trade surplus.
"We're looking at several options. I'm not ruling anything out," Clinton said Monday in Washington.
But even before Washington could act, Japan's economy received a shock when the yen shot up against the dollar Monday.
A higher yen tends to make Japanese goods cost more overseas, and it reduces the earnings of Japanese exporters when expressed in yen.
The U.S. currency finished Tokyo trading at 105.69 yen, down 2.57 from last week. Later Monday, the yen surged to 104 to the dollar in London.
"If the yen rises as far as 100 [to the dollar], we will have negative growth in 1994. That is for sure," said Kazuo Nukazawa of the powerful Japan Federation of Economic Organizations.
Tokyo stock investors took the yen's rise grimly. The benchmark 225-issue Nikkei Stock Average dropped 531.45 points, or 2.7 percent, to close at 19,459.25.
The timing could not be worse: Japan is faced with a severe economic downturn that has lasted three years.
"We are terribly concerned," said Hideaki Kumano, the top career bureaucrat at the trade ministry.
American officials in the past have supported a strong yen, because the higher price of Japanese goods overseas should in theory reduce Japanese exports, helping the trade imbalance.
But many analysts said a high-yen strategy - as well as economic sanctions - could backfire on Americans by causing Japan's recession to drag out and by reducing spending by Japanese consumers on imports.
Still, many Japanese felt some kind of U.S. sanctions was inevitable.
"This is not the time for easygoing talk about mature relationships between adults," said former Foreign Minister Michio Watanabe, referring to Hosokawa's description of the U.S.-Japan relationship at the summit.
"We have to go into this with a feeling that the Japan-U.S. war begins today," said Watanabe, known for his blunt style of speaking. "They're sure to introduce retaliatory measures one after the other."
Some Japanese leaders suggested Japan could take steps to open its market on its own without an agreement with Washington.
"Both the Japanese people and the business world believe we need to be more open," Foreign Minister Tsutomu Hata said.
Hosokawa told leaders of his governing coalition Monday he would like to have a package of measures ready by the July summit of leaders of the Group of Seven richest industrial powers.
Japan might cut back on government regulations that foreign businesses have criticized or increase government purchases of foreign goods.
by CNB