U.S. to Seek Cooperation on Global Economic Ills : Reagan Rebuffs Japan’s Appeal on Rising Yen

TOKYO — President Reagan on Saturday rebuffed a plea from Japanese Prime Minister Yasuhiro Nakasone for help in stemming the rapid appreciation in the value of the yen.

At an hourlong meeting on the eve of the economic summit meeting, Nakasone complained that the yen’s “very rapid” appreciation--it has gained more than 40% in the last seven months--has deprived Japanese business firms of the “certainty” that they need for planning. But Japanese officials told reporters that Reagan said only that he “understood the kind of difficulty Japan is facing” as the yen’s appreciation erodes Japanese competitiveness in export markets.

A U.S. official, who asked not to be named, said Reagan only “noted” Nakasone’s “serious concern.” He said the President pointed to “the important role adjustment (in the yen-dollar exchange rate) is playing in the overall adjustment of the trade imbalance (between the United States and Japan),” and he added that “Nakasone did not disagree with that.”

Opposed to Intervention

Treasury Secretary James A. Baker III also made it clear that the United States still opposes intervention in currency markets to reverse the slide in the dollar in relation to the yen and certain other foreign currencies.

“We prefer to concentrate on finding ways to enhance international economic cooperation and coordination,” Baker said, “rather than talking about intervention.”

Baker warned that the U.S. trade deficit will remain at a “politically unsustainable level” unless Japan and European nations agree to push for faster domestic economic growth. Last year, the U.S. trade deficit soared to a record $148.5 billion, and Baker said the deficit is likely to remain as high as $100 billion in 1988 unless the United States’ major trading partners change their economic policies.

Relying on Exports to U.S.

The Reagan Administration wants Japan and West Germany to adopt policies to stimulate their domestic economies. That would help boost imports from the United States and other countries and allow Japan and West Germany to absorb more of the output from their own industries rather than relying heavily, as they now do, on exports to the United States.

Japanese officials, by contrast, come to the summit seeking a promise from the U.S. government and European nations to try to stem the appreciation of the Japanese currency and keep the dollar from sinking below about 180 yen to the dollar.

The yen, however, closed Friday on the Tokyo Foreign Exchange Market at 170.70 to the dollar, a 41.8% appreciation (by International Monetary Fund formula) since top economic officials of the world’s five leading industrial nations agreed last Sept. 22 to drive down the value of the dollar.

Nakasone couched his appeal to Reagan in general terms. He did not specifically ask Reagan to support joint intervention in exchange markets to promote “stabilization” of exchange rates--a Japanese euphemism for propping up the value of the dollar. But his complaints about the rapid appreciation of the yen and the troubles he said Japanese businesses are facing all were clearly designed to solicit American help.

A More Direct Plea

Japanese Finance Minister Noboru Takeshita, however, made a more direct plea to Baker, which was also rejected, according to Japanese officials.

In a briefing for reporters, Baker said the only realistic choice facing Japan and West Germany is to boost growth or accept even greater declines in the value of the dollar.

Baker made it clear, however, that he was not threatening to deliberately push the dollar down further if Japan and West Germany fail to boost growth.

Saying that a continuing large U.S. trade deficit has fulfilled the prophecy he made last fall that “protectionism would be returning in full flower in the spring,” he cited recent congressional action on trade measures as a compelling reason for the summit participants to accept the Administration’s approach to avoid a full-blown trade war.

No Specific Target

Japanese officials said Nakasone told Reagan that Japan has no specific target for the yen’s value. He did complain, however, about unnamed officials in other countries who, he said, were disturbing exchange-market transactions by talking about what the exchange rate should be.

Nakasone did not name any officials, but Clayton K. Yeutter, Reagan’s trade representative, has declared publicly that the yen’s value should rise to about 150 to the dollar.

In his meeting with Nakasone, Reagan also underscored again the importance he attaches to a beleaguered attempt by Nakasone to transform the structure of Japan’s export-oriented economy into one more dependent upon domestic demand for growth.

Reagan asked Nakasone what follow-up steps he had taken to implement a promise that the Japanese prime minister made at Camp David, Md., on April 13--but downgraded after returning to Japan--to carry out the reforms “as a historic change for Japan.”

Call for Reforms

Nakasone pointed to a decision made Thursday by a joint meeting of the Japanese Cabinet and the ruling Liberal Democratic Party to set up action groups to hammer out measures implementing reforms proposed by a commission headed by Haruo Maekawa, the former governor of the Bank of Japan. The commission called for sweeping reforms to slash what it called the “crisis level” of Japan’s current accounts surpluses.

After he returned to Japan from Washington, Nakasone denied that he had made a promise to Reagan when widespread criticism arose from within his own party over the prospect of losing more than 1 million manufacturing jobs in the next 14 years through industrial restructuring--one of the Maekawa proposals.

A U.S. official, speaking on condition that he not be identified, noted that “the prime minister has had his difficulties over here since he got back from Camp David in terms of . . . whether or not he will be able to actually deliver” on his promise of reform. He said, however, that Reagan is not concerned about “what might be retrenchment” from the Camp David promise.

Renewal of Interest

Reagan’s renewal of interest in the Maekawa plan followed a special statement, made earlier by White House spokesman Larry Speakes, that was apparently aimed at encouraging the Japanese government to pursue the economic reforms.

The only question now, Speakes said, is whether the Japanese Parliament will approve necessary legislative reforms. Nakasone has said that he will use the Maekawa recommendations as the centerpiece of his defense against possible criticism from his summit guests of Japan’s burgeoning current accounts surpluses.

Speakes said the endorsement given to the reform proposals at Thursday’s meeting of the Cabinet and the ruling party showed that the program “is moving forward at an excellent pace.”

The Cabinet and ruling party endorsed a “steady reduction” of current accounts surpluses as “a national goal,” but the meeting set no specific targets and made no detailed commitment for specific reforms.