The dollar plunged to a post-World War II low against the Japanese yen yesterday, further improving the outlook for American firms under siege from imports. But some economists are beginning to worry that other countries will start adopting measures to protect their trade balances.
The dollar's fall, which makes foreign goods more expensive here, yesterday led to the second price rise this year for Toyoto Motor Corp. cars and trucks sold in the United States. The price rise was blamed on the appreciating yen and followed similar increases by other Japanese car and electronics companies.
The dollar broke through its previous record low of 175.50 yen set on Oct. 30, 1978, closing at 175.45 yen in Tokyo. It had been 177.70 yen on Friday. The dollar bounced back slightly in London to 175.68 yen, but closed in New York at 175.20 yen, down from 176.725 yen on Friday.
The dollar fell against all major currencies yesterday, except the British pound.
Some foreign currency traders blamed the dollar's rapid slide on speculation about passage of a proposed 5 percent withholding tax on interest earned by foreigners in the United States and concern that the U.S. economy is weaker than expected.
Other analysts said that the outlook for lower interest rates, in addition to profit-taking, were feeding the dollar's continuing decline. The analysts also said that they are relatively unconcerned about the decline of the dollar and that it still has a little further to go before U.S. firms become fully competitive in world markets.
Since reaching its peak in February 1985, the dollar has fallen 27.5 percent against a basket of major currencies, according to the Federal Reserve Board. Most of the dollar's fall occurred after a Sept. 22 meeting of Treasury Secretary James A. Baker III and the finance ministers and central bankers of Britain, France, West Germany and Japan, when those officials agreed to a coordinated effort to push the U.S. currency down.
Since that meeting, the dollar has fallen 18 percent against major currencies and 27 percent against the yen, the Fed said.
As a consequence, exports have become more expensive and U.S. goods have become cheaper abroad. Yesterday, for example, the Toyota Motor Corp. announced in Tokyo that it will raise the retail prices of its cars sold in the United States by 4.3 percent, or nearly $470 per car. Truck prices will also rise 3.7 percent or an average $315 more, Toyota said.
That increase was the second since January for Toyota and it followed similar increases by Mazda Motor Corp. and Nissan Motor Co. earlier this month. The increases were blamed on the sharp appreciation of the yen against the dollar.
According to wire service reports from Tokyo, a Bank of Japan governor said that the yen's appreciation is occurring too fast, and Finance Minister Noboru Takeshita said that "the drastic change" in exchange rates that had taken place was undesirable. Takeshita, according to reports, called for international coordination to stop the dollar's fall.
"People still think the dollar can go lower," said Jack Regin, head of foreign currency options trading at Dean Witter Reynolds Inc. "I still think it will go lower. The feeling is the dollar is still going to go down against the other currencies."
Regin said that "many people on the street" feel the dollar should trade at about 170 yen.
One consequence of the dollar's fall is increasing worry among economists and members of Congress that America's trading partners, particularly the Europeans, are becoming concerned that with a cheaper dollar they will begin to lose market share gained in the last five years and their governments will start erecting protectionist barriers against U.S. goods.
Already, Japan has begun subsidizing some small and medium-sized companies that export to the United States, economists said.
"Foreigners are beginning to feel their products are going to be hurt in American markets," said Robert D. Hormats, a vice president at Goldman Sachs. "What you may find is an attempt by other companies to get their governments to give them subsidies" to make up for the price difference caused by the dollar.