Next month's heads-of-state summit in Tokyo will concentrate on the changes that major countries need to make in their longer-term economic policy, Treasury Secretary W. Michael Blumenthal said yesterday.
In testimony that led off three days of hearings on international economic issues before a Senate Foreign Relations subcommittee, Blumenthal reported that other major summit topics will relate to energy and so-called North-South issues-that is, problems arising between rich and poor nations.
Meanwhile, Blumenthal expressed confidence in the strength of the dollar, as well as doubts that "moves to reduce the international role of the dollar" get at "the root cause of exchange market problems."
Nevertheless, Blumenthal reiterated U.S. willingness to consider a "substitution account" in the International Monetary Fund. At the IMF's annual meeting in Belgrade in October, such an account through which dollars could be exchanged voluntarily for special drawing rights will be discussed in detail. SDRs are a monetary unit issued by IMF to member nations.
Blumenthal said the U.S. will consider a substitution account as an evolutionary step toward more reliance on SDRs, but not as "an emergency support effort for the dollar."
The Tokyo summit will take place June 28 and 29, the fifth in an annual series that began in Rambouillet, France (1975), and continued in Puerto Rico (1976), London (1977) and Bonn (1978).
In recent years, Blumenthal noted, summit sessions emphasized shortterm economic policy, notably an effort to induce Germany and Japan to assume higher growth-rate targets. Both Germany and Japan have boosted economic growth, and Japan is in the process of reducing its large international surpluses, Blumenthal pointed out.
As examples of the longer-term macroeconomic policy that the summit will concentrate on, he cited the need for the U.S. to expand its export drive and for Japan to "re-orient more toward production for the domestic economy." All nations need to strengthen productivity and enhance capital formation, he added.
In assessing the reasons leading to suggested changes that would reduce the role of the dollar, Blumenthal said there are two related areas of concern: The Eurocurrency market and the so-called "dollar overhang."
Blumenthal said there is a consensus among the U.S.% AND OTHER MAJOR NATIONS FOR MAKING SUPERVISORY TECHNIQUES STRONGER AND THAT A MINIMUM-RESERVE REQUIREMENT ON EURODOLLAR DEPOSITS IS BEING CONSIDERED.
HE EXPRESSED LESS CONCERN ABOUT THE IMPACT OF THE DOLLAR OVERHANG, THAT IS, DOLLAR BALANCES HELD ABROAD. ESTIMATES RUN TO $225 BILLION IN CENTRAL BANKS AND ANOTHER $400 TO $600 BILLION HELD PRIVATELY.
BUT BLUMENTHAL SAID THAT LESS THAN HALF OF THESE AMOUNTS INVOLVE FOREIGN CLAIMS ON THE U.S. In any event, he said that recent experience suggests that confidence in the U.S., based on policy and performance, seems to have more to do with exchange market decisions on the dollar than does the so-called overhang.