Presidential adviser Alan Greenspan doesn't expect the inflation rate to fall soon, and -- with the exception of the auto and steel industries -- there's no evidence tha inflation has done severe or irreversible damage.
Greenspan, addressing an Electronic Industries Association of Japan seminar yesterday, said his major concern is with economic forecasting over the next 10 years and not necessarly with current inflation rates. He is a member of the president's economic policy advisory board.
Greenspan said he isn't sure how the administration's economic recovery plan will fare in Congress, but the Senate's acceptance of Reagan's budget proposals so far have shown it's easier to make large cuts than small ones.
"If somebody had told me two or three years ago a president could cut a budget like this," he wouldn't have believed it, Greenspan said. "We probably learned if you give Congress small packages of cuts . . . you will invariably lose."
"If President Reagan had asked for $10 billion or $15 billion in cuts, he probably would have ended up with cuts of $3.67 or something like that. Instead, with $50 billion [in proposed cuts], he'll get $40 billion."
"The president can't lose any significant part of his expenditures package because the whole thing will begin to unravel and sink very quickly," Greenspan said.
The administration's major problem will be eliminating the "inflation premium," the average rate of inflation forecast over the long run that's embodied in long-term interest rates, Greenspan said. That premium appears to be at least 10 percent during this decade, Greenspan added.
Earlier in the day, Kazou Aicki, Japan's parliamentary vice minister for foreign affairs, said "trade issues have created tension and unpleasantness between" the United States and Japan. But Aichi didn't specifically mention the problems between the two countries over the export of Japanese cars here.
Aichi said Japan is ready to cooperate "in any way we can" to help the United States improve its economy but didn't mention any specifics. He said he hopes President Reagan's plan to revitalize the economy will be successful.
Akio Marita, chairman and chief executive officer of Sony Corp., also stressed the importance of good relations between Japan and the United States and said that the combination of American and Japanese management techniques led to the seccess of Sony in U.S. markets.