DAVOS, SWITZERLAND, JAN. 28 -- Former Japanese prime minister Yasuhiro Nakasone tonight suggested that the United States consider a bond issue denominated in foreign currencies as part of an international effort to stabilize exchange rates.
Nakasone said it is crucial to the global economy that the United States avoid a recession, avert protectionism and stabilize the dollar.
Nakasone, who left office in November, spoke at the opening session of the 1988 World Economic Forum, a privately sponsored week-long meeting of businessmen and officials on the state of the global economy.
An American bond denominated in a foreign currency was suggested previously by some of the economic partners of the United States, but until now it had not been publicly proposed by a Japanese leader of Nakasone's stature. The former prime minister is a senior adviser to the ruling Liberal Democratic Party and still is considered an important spokesman, especially on foreign issues.
A bond issue denominated in Japanese yen or West German marks, for example, would serve two purposes.
First, it would add to the supply of currency available to the United States for intervention to bolster the dollar on foreign exchange markets. Second, it would transfer to the United States some of the risk absorbed by foreign investors when the dollar falls.
Treasury Secretary James A. Baker III is said to be strongly against such a bond, arguing that it should be issued only as a last-resort tactic in defense of the dollar.
But several Japanese businessmen here speculated that Nakasone would not have brought up the subject at the forum in Davos if discussions with the Treasury were not well along. One Japanese banker said that if the dollar drops below 120 yen, then a so-called "Reagan bond" would be logical.
A Reagan administration bond would be similar to Carter administration bonds sold in 1978 when President Jimmy Carter faced a sharp decline in the value of the dollar.
To make a Reagan bond possible, the United States presumably would also have to tighten its interest rate policy to prevent further sagging of the dollar.