The dollar continued its slide against the Japanese yen yesterday, closing at a seven-year low in Tokyo of 183.50 yen, or about 30 percent below the Japanese currency's 1985 peak.
The dollar also was weak against all other currencies except the Canadian dollar, as traders tried to sift out the probable effects of the collapse of oil prices and the direction of the American economy.
For the second day in a row, the dollar lost more than three Japanese yen -- an extremely wide fluctuation -- when the Bank of Tokyo made clear it was not intervening to reverse a sharp, three-week rise of the yen. Earlier in the week, traders and market-watchers had thought that the Japanese authorities might try to prevent the yen from becoming stronger than 190 to the dollar. Now, traders do not know where a support level might be reached.
Meanwhile, a Reagan administration official reiterated a call for a further 10 to 15 percent decline in the average price of the dollar against the currencies of U.S. trading partners.
U.S. Trade Representative Clayton Yeutter said an additional dollar decline of that magnitude is needed to help reduce the nation's trade deficit, which reached $149 billion in 1985.
Yeutter's statement, made privately Wednesday to a group of reporters and confirmed by his office yesterday, stirred concern among some financial analysts who believe that the dollar may be beginning a dangerous free fall.
Sam Nakagama of Nakagama & Wallace Inc. said that "the dollar is taking quite a plunge, and talking about another 10 or 15 percent reduction is ridiculous. The administration had better shut up, or they'll be 'Carterizing' the dollar, a la Blumenthal."
The reference was to the 1978 period during the Jimmy Carter administration, when Treasury Secretary W. Michael Blumenthal was accused of "talking the dollar down." Nakagama said that the low point of the dollar against the Japanese currency was 178.80 yen in that cycle.
"That's only a bit from where we are now. Another 15 percent would carry us to 155 to the dollar," Nakagama said.
The dollar was down at yesterday's opening in Frankfurt to a three-year low of 2.3546 West German marks from 2.3605 the day before. In European markets and in New York, the mark failed to respond to a statement by Finance Minister Gerhard Stoltenberg that the German government did not want to see the mark appreciate more against the dollar.
Nakagama and some others fear that, if the dollar slides as much as Yeutter proposed, foreign investors may lose confidence in the American economy, and withhold the infusion of capital that has been financing the U.S. budget deficit. Another result of a sharper decline in the dollar could be the inflationary impact of higher-cost imported goods.
Stoltenberg warned that further declines in the dollar not only might cause inflationary problems here, but might touch off global economic problems. German officials said that, if the mark -- also up about 30 percent against the dollar in a year's time -- rises much more, it could hurt German exports.
On the other hand, C. Fred Bergsten, director of the Institute for International Economics, agreed with Yeutter that the dollar must come down substantially against an average of foreign currencies, but not necessarily as much against the yen, which was less undervalued against the dollar than were European currencies when the Group of Five began its intervention process last Sept. 22.
Bergsten said that, if the dollar were to hold steady now against the other currencies and show no further decline, it would not be sufficient to turn the global deficit situation around. Despite the benefits of lower prices for oil imports, the task of cutting the 1985 trade deficit of $149 billion is enormous, Bergsten said.
But the yen now has appreciated enough against the dollar (if present rates continue) to reduce the U.S. bilateral trade deficit with Japan by about $20 billion in 1987, Bergsten said. "You could have the unusual situation in which our global deficit might be increasing while our deficit with Japan is decreasing," he said.