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The mighty yen

By YN / September 12, 1986



JAPAN is now at a singular point of decision. Should it continue to stress its successful export-driven economy, which has captured huge market shares for Japanese products throughout the world? Or can its leaders muster up the courage to look more inward than they have in past years -- reconciling an expansion of their long-neglected domestic economy with the obligation to fulfill a more visible global role consistent with the nation's economic wealth? How Japan answers those questions in the weeks and months ahead will have profound impact on the world community, particularly Asia. When Japan prospers and grows, other nations in the region prosper and grow. Conversely, when Japan runs into economic difficulties, the repercussions can be felt all up and down the Pacific Basin.

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For all the chorus of protestations and anguish coming out of Tokyo about how Japan is suddenly hurting -- talk of ``economic downturn'' ostensibly triggered by the rising value of the yen against the United States dollar, which has slowed Japanese exports -- Japan is still doing quite nicely, thank you.

Japan's latest growth figures, for the first quarter of this fiscal year ending June 30, were up 0.9 percent over the previous quarter. That translates into an annual growth rate of 3.6 percent. Japanese economists note that the economy actually contracted during the previous quarter. Still, Japan is expected to post a real growth rate of 2.5 to 3 percent this year.

Signs of Japan's continuing economic vitality can be found everywhere. Big-ticket exports, such as cars, are holding their own. The nation's trade surplus continues to swell. Japanese companies are buying into venture-capital deals abroad. Tokyo has given companies the go-ahead for participation in the US ``star wars'' program. The Tokyo stock market maintains its upward climb. And if the rising yen is a negative, it certainly hasn't hurt the giant Dai-Ichi Kangyo Bank, which has become the world's largest commercial bank, surpassing Citicorp in assets.

What all this adds up to seems clear:

Japan should more vigorously expand its domestic economy to offset lost export sales abroad because of the yen appreciation, and to help correct its huge trade imbalance with the US. A government stimulus package, to be unveiled next Friday, should help.

Japan should follow through on promises to open up its domestic markets to overseas, particularly US, companies.

Japan should exercise a more vigorous international political and financial role. After all, it continues to spend far less on defense than the United States or Europe does, in great part because of the American defense umbrella. In other words, US taxpayers have been helping to underwrite Japan's defense -- and prosperity.