It hits you almost the moment you collect your bags at Narita airport and prepare to spend your money, using the new, stronger Japanese yen: there are no more bargains for the American tourist.
For each of those weak American greenbacks, I received about 165 yen. When I was here 10 months ago, the going rate was about 250 yen to the then-strong dollar.
Back home, we refer to this dramatic change as a 34 percent depreciation of the dollar against the yen (the difference of 85 yen divided by 250). But in terms of the appreciation of the yen against the dollar (85 divided by 165), it is a stunning 51 percent. (When currency changes are small, the depreciation of one is pretty close to the rise in value of the other. But in huge swings such as the ones we've been experiencing, the relationship diverges.)
The visitor here gets his first jolt when buying a bus ticket to a downtown hotel for 2,700 yen. Last June, that came to just under $11, but on Monday, it meant almost $17 -- reasonable enough for the two-hour ride when you realize that an 18,000-yen taxi for the same distance would have set you back $108. (Even with the yen at 250 to the dollar, the taxi ride from Narita airport cost $72.)
Fresh orange juice at a good hotel, thanks to Japan's restrictive quotas to protect its citrus farmers, was always expensive -- 950 yen on the breakfast menu. With the shift in the exchange rate, that's now gone from just under $4 to $6 a glass. A 12,500-yen Seiko watch costs $76 instead of $50. (A quick look around suggests no reductions yet in yen price tags.)
The Nakasone government has been battered by this huge and rapid appreciation of its currency -- not by tourists, but from large and small exporters who fear loss of their markets abroad. It is taking the same kind of heat that the Reagan administration experienced during the high-dollar era.
In an interview, Japanese Finance Minister Noboru Takeshita said that a group of porcelain exporters at Tajima, near Nagoya, told him bluntly that they'd like to kill him. Takeshita, who had jawboned the yen up to 190 in a Washington interview in January, has now turned cautious. Apart from repeating that the yen has moved up too fast, he was close-mouthed on future prospects. Japanese appeals to Treasury Secretary James A. Baker III for help have so far gone unanswered, because Baker sees room for a further decline of the dollar.
To be sure, Japanese export prices won't rise 50 percent, because highly profitable companies will be able to "eat" some of the higher exchange- rate cost and still stay competitive. But the higher yen is bound to curtail Japan's trade surplus eventually. That is what Japan and the other Group of Five major nations intended to accomplish with their organized assault on the overvalued dollar/cheap yen syndrome, an assault that began at the New York Plaza Hotel last September.
But no one expected the extent and the rapidity of the dollar's slide and the yen's appreciation. At the time of the Plaza meeting, the yen was 240 to the dollar. By the beginning of 1986, it had risen to 200 to the dollar, and the Nakasone government felt it should stay there for a while.
Without further intervention from the G-5, the exchange markets determined otherwise. The dollar slipped under 190, then under 180, then under 170, despite unilateral efforts now by the Japanese to intervene the other way, to bolster the dollar.
One indication of the seemingly inexorable trend is that as recently as April 19, the respected Japan Economic Journal published a survey of Japanese forecasters who predicted that within "the long term or three years" the yen would soar to 160 to the dollar.
Now, not even three weeks later, the yen is within hailing distance of 160, and market gossip freely contemplates 150 yen, or even more. The thought of a yen so strong causes panic in the Nakasone administration, although American economists such as C. Fred Bergsten of the Institute for International Economics have been arguing for a long time that unless the yen appreciates in this way, there can be no cure for the U.S. trade deficit with Japan.
As this process goes on, "Yasu" Nakasone feels increasing heat. Undoubtedly, he will appeal to his fellow heads of government at the economic summit that starts on the weekend, and especially to his pal "Ron" to help bail him out of a political fix.
Yukitsugu Nakagawa, a private economist who is one of Nakasone's personal advisers, was quoted in the Japan Times this week as saying that the yen should go up on "a step-by-step basis, and not in a spiral manner." But Nakagawa also said that while he once thought that the era of 100 yen to the dollar wouldn't occur until the end of the century, "nowI am inclined to foresee an early arrival of such an era."
Let's see, that will make the bus from the airport $27, that taxi ride $180, orange juice $9.50 a glass, and today's $76 Seiko $125. Any takers at those prices?