The American dollar, which has been holding steady after it was badly mauled on European foreign exchanges in recent weeks, has prospered in Tokyo, capping a year-long revival.
The dollar has climbed steadily in v alue against the Japanese yen since last October, and indications are that it will continue to do so despite the recent massive intervention in the Tokyo market by the Japanese central bank.
Instead of the Americans looking urgently for some help, it is now the Japanese who are looking for a way out. Although the Bank of Japan issued some reassuring statements Wednesday, private bankers are not confident of an early resurgence in the yen.
Last Oct. 31, the dollar was traded at 175 yen, the low point in a long downward spiral caused mainly by the ever-growing U.S. trade deficits.
Today, it closed in Tokyo at 234.80, about 34 percent higher than that year-ago level. As it has done almost every day this month, the central bank was selling off dollars to stem the tide.
The central bank never tells how strongly it has intervened. One private banker said, however, that the authorities had sold more than $300 million worth of dollars Monday and that the total sold in all of last week was about $1.6 billion.
The bank's governor, Telichiro Morinaga, acknowledged that the yen has sunk to a "considerably low level." He predicted that the depreciation "will not progress furthur."
Monrinaga, however, added a major caveat, saying that the depreciation would be stemmed if there is not another round of price increases in crude oil, the factor that has been most important in driving the yen down against the dollar.
The government would prefer that the exchange rate settle somewhere close to 200 yen to the dollar. Private bankers also consider that a reasonable rate. One of them, Bank of America's foreign exchange specialist Yoshiro Niimi, said he believes the yen is "unreasonably undervalued" at the range of 230 to 240.
The main reason for the dollar's health in Tokyo is Japan's recurring international trade deficits, which have pushed the yen down. the main reason behind those deficits is the soaring world price of oil.
Fluctuations in the yen closely follow the trade figures. Japan still enjoys a sizable but diminishing surplus in its trade with the United States but it has run deficits on only small surpluses with the rest of the world all year long.
It ran significant current account deficits in July, August and september. The August deficit was $15 billion, unusually large.
The major factor has been Japan's crude oil bill, pushed up relentlessly by the price increases announced this year by oil-producing countries. Japan imports more than 95 per cent of the oil it uses. Oil amounts to nearly one third of all of Japanese imports.
The likelihood of more oil price increases to come has made some Japanese bankers pessimistic about the yen's future. Last week, as the dollar hit a 19-month high here, Bank of Japan Executive Director Koei Narusawa said he expected the oil supply outlook to become worse rather than better before the end of the year. That means there is little prospect for improvement in the balance of payments situation, and the yen will probably sink further, he said.
Narusawa doubted that even more forceful intervention by the Bank of Japan would help the yen.
For Americans living in Japan, accustomed to an ever-sagging dollar, the turnabout of the past year has been a pleasant surprise. It means, for example, that the 20,000-yen steak dinner in a fashionable restaurant costs them about $85, compared to $114 a year ago.
The turnabout actually began in early November when President Carter announced his emergency dollar-defense package in Washington. It included the first of several increases in bank lending rates and a special arrangement for intervening more forcefully in foreign exchange markets.
The effect in Tokyo was immediately -- the dollar climbed by nearly 10 yen the morning after Carter's announcement.
After that, the pressure of oil price increases took over, driving Japan's trade balances into deficit and pushing the yen down and the dollar up.
Each recent increase in the U.S. discount rate, part of the war on inflation, also tends to drive the dollar up against the yen in Tokyo.