Japan last night won a formal expression of "concern" from the Group of Seven industrial nations that the yen's value is moving too high. The group gave no pledge of immediate action to drive down the currency, but said it would monitor the situation "and cooperate as appropriate."
Japanese officials hope the statement will help drive down the yen's value in world financial markets. In recent days they have been publicaly worrying that the rise could choke off the glimmerings of an end to the economic stagnation that has choked Japan for a decade.
The officials have been seeking expressions of support from the United States, but officials here have refused to respond, merely repeating past statements that Japan should take measures on its own to boost its economy.
A communique issued last night by the G-7 nations represents a shift for the United States, the largest member of group that includes Britain, Canada, France, Germany, Italy and Japan.
The statement also included a pledge by Japanese authorities to take the kind of stimulus actions that the United States wants.
"We shared Japan's concern about the potential impact of the yen's appreciation for the Japanese economy and the world economy," said the communique, which was issued after G-7 finance ministers and central bankers sat down yesterday at the historic Decatur House downtown.
"We welcomed indications by the Japanese authorities that policies would be conducted appropriately in view of this potential impact," the communique said. "We will continue to monitor developments in exchange markets and cooperate as appropriate."
Exchange rates are a key determinant of patterns of international trade. Rising currency values tend to make a home nation's goods more expensive to foreigners and can reduce exports, which can close factories and destroy jobs.
The yen has risen about 15 percent against the U.S. dollar since May and Friday was trading at 104.18 to the dollar.
Rates are influenced by the fundamental strength of economies. But they also rise and fall on the speculative bets investors make. Governments sometimes try to influence those bets through public statements--if speculators think governments may intervene in markets to drive down a currency's value, they may sell their holdings in the currency to avoid losses, which brings about the desired effect of lowering the value.
The day began with Finance Minister Kiichi Miyazawa meeting with his U.S. counterpart, Treasury Secretary Lawrence Summers, at the Treasury Department. No statement was issued after the hour-long meeting, which occurred shortly before the G-7 officials met at the Decatur House.
Japan has intervened on its own in an unsuccessful attempt to lower the yen, which has risen 15 percent against the dollar since May. Some analysts said Japan had hoped for a stronger statement from the G-7, perhaps mentioning joint intervention.
But the communique is the first concrete message to the world that Japan is not alone in its concern about the yen. The real test, however, will be whether financial institutions and traders interpret the communique's wording as real commitment or a bluff, and whether they buy or sell the yen.
If they do bid down the yen, the corresponding stronger dollar could have the effect of further widening U.S. trade deficits.
G-7 officials also conferred with senior Russians yesterday, urging them to step up economic reforms and combat corruption, the communique said. The Russian government will be expected to put new financial and budget controls in place before the International Monetary Fund makes any more disbursements to the country, it said.