A senior Japanese official said yesterday that a resumption of heavy Japanese capital investment in the United States depends on the stability of interest rates and exchange rates.

Toyoo Gyohten, vice minister of finance for international affairs, said that if market conditions are stable, "I am sure that Japanese investors will continue to find that it's quite safe to invest in the United States."

The attitude of Japanese investors is important because the U.S. Treasury has relied on heavy Japanese purchases of its securities to help finance the federal budget deficit, and strong Japanese participation has been a factor in the rise of U.S. stock markets.

Gyohten said the correlation between the flow of investment money and foreign exchange market stability could be seen in the drop in Japanese investments here from $4.6 billion in January and $6.7 billion in February to less than $1 billion in March and $2 billion in April after the dollar fell and long-term interest rates rose.

But he told reporters prior to his speech here to the U.S./Japan Economic Agenda that the underlying trend in Japan is pushing interest rates higher, and that U.S. interest rates also are moving up. He cited an inflationary trend in the Japanese economy and the Federal Reserve Board's recent increase in its discount rate.

"I do not see any sign of a recession in the United States," he said; "there is steady growth apparent {here}." The Japanese economy also is moving up, he said, generating some signs of materials shortages that he said could be solved by greater production or larger imports.

Gyohten denied reports that the Japanese central bank is pushing interest rates higher, attributing rising rates there to market forces. Reports of a tighter policy had driven U.S. bond prices lower on Thursday.

"The Bank of Japan is doing its best to maintain easy conditions," Gyohten said.

Gyohten's comments came amid preparations for the joint annual session of the World Bank and International Monetary Fund, beginning Tuesday. Finance ministers of the Group of Five western industrial countries -- the United States, Japan, West Germany, France and Britain -- are scheduled to meet today, with ministers of Italy and Canada joining them later in a session of the Group of Seven.

The Group of Seven will grow to the Group of Ten on Sunday with the addition of officials of Switzerland, Belgium, the Netherlands and Sweden (actually making 11).

The IMF's top policy board, the Interim Committee, also will meet on Sunday and Monday, and the joint IMF/World Bank Development Committee will meet on Monday.

The clear indication from official briefings by several governments was that the main aim of the G-5 and G-7 will be to endorse the commitment they made in February to try for stability in exchange rates around current levels.

U.S. officials, although saying West Germany should expand its economy to help global growth, acknowledge that there will be no "German bashing." A low profile is necessary, they said, until there is a clarification of the trend of the U.S. budget deficit.

Nor will there be any "Japan bashing," because of evidence that the huge Japanese trade and current account surpluses, under the influence of a sharply higher yen exchange rate, are finally moving down.

Gyohten said the Japanese surplus is definitely lower; the current account balance in July, he reported, "was $6.3 billion, down 25 percent -- and I am reasonably confident that it will continue that way."

Other nations are also looking to Japan to continue its boosted funding of the World Bank and the IMF, and perhaps to offer some new initiative to help solve the international debt crisis.

But Gyohten did make it plain that in terms of a special, concessional fund for African countries that IMF Managing Director Michel Camdessus is assembling, Japan will resist arguments that it should provide extra help because of its large trade and current account surpluses.

Camdessus had won the approval of the Venice economic summit for a tripling of the $3 billion IMF fund for concessional loans to African nations, and has been seeking contributions from major nations. Baker had indicated that the surplus nations -- Japan and West Germany -- should put up most of the money.

But Gyohten said "it's not a very viable argument" to look to the surplus nations to take an extra share of the burden, "because the trade surplus goes to the private sector," not to the government. In other words, Gyohten's response was that Japan, no less than the United States, had to be conscious of the drain on its national budget for its aid programs.

Gyohten said his country might support the sale of some IMF gold to boost the special fund, known as the Structural Adjustment Facility. But this idea later was criticized by former Federal Reserve Board chairman Paul A. Volcker, who said it would affect the creditworthiness of the institution.