The Japanese yen, which has risen about 14 per cent against the U.S. dollar this year, broke through an historic landmark today to set a new post-World War II record high.
The yen opened on the foreign exchange market at 253 to the dollar, bursting through the old post-war high of 253.20 set in 1973 and raising a new possibility of direct government intervention.
The immediate causes were a renewed speculative surge against teh dollar and the reported discovery of a large oil field of Sakhalin Island by a joint Japanese-Soviet exploration team.
The long-range explanation lies in Japan's mounting trade surpluses with foreign countries, especially with the United States. Government and private economists said this week they expect those surpluses to grow tven larger - despite the official plan to reduce them - and to force the yen even higher against the dollar.
The yen closed on the foreign exchange market here Thursday at 255.77, and some sources had predicted it would settle at around that point. But when the market opened this morning, a wave of speculative buying prompylt pushed it over the post-war record. Within minutes it rose to 253.
There was a new wave of rumors that the government would intervene on a large scale to prevent the yen from rising further if it hits 250, but those reports were denied.
During the current surge, the government as intervened once slow the yen's appreciation, buying up more than $400 million in U.S. currency. Howere, it described this as "a smoothing operation," designed merely to curb "erratic fluctuations." It insited it will do nothing to permanently hold down he yen.
"Our basic policy is to let the currency find its own value according to market forces except when the exchange rate goes up or down sharply," Teiichiro Morinaga, governor of the Bank of Japan, said in mid-week.
Since the early 1970s, the Japanese government's official position has been that the yen should be allowed to find its own true value in the market without government manuipulation.
From the U.S. government's point of view, the yen's appreciation has been welcome. Its theory is that as the yen's value goes up, Japan's exports become more expensive and imports become cheaper. The combination, in theory, should, in long run, narrow the large trade surplus Japan now runs with United States.
The theory has many doubters here. Japan's exports hit a near-record high in September. Although the rate of increase is slowing down slightly, economists in and out of the government forecast continued increases will into next year. One Japanese banker said that letters of credit issued by trading companies indicate exports will grow even faster for the rest of this year than in the past few months.
The rising yen did, howere, prompt a flurry of government announcements about the desirability of increasing Japan's imports.
Prime Minister Takeo Fukuda this week instructed cabinet ministers to accelerate plans design to bring more foreign goods into Japan.