Lower interest rates Prime Minister Yasuhiro Nakasone ordered the Bank of Japan and the Japan's Finance Ministry to lower key Japanese interest rates. For some time, the United States has been asking Japan to lower its interest rates in order to stimulate domestic buying of foreign goods. Stimulate domestic economy The Nakasone government will spend $35 billion to stimulate the domestic Japanese economy. Nakasone promised this would be ``real money.'' In the past, the Japanese have agreed to spend more, but have just taken the funds from the next year's budget.
Give more to debtor countries Japan will give $30 billion in unrestricted funds to the debtor countries. This includes $10 billion to the World Bank and $20 billion to such institutions as the Asian Development Bank. ``Unrestricted'' means the Japanese will not require the recipients to spend the money on Japanese goods.
What US plans to do on trade:
Slow dollar's fall Paul Volcker, the chairman of the Federal Reserve Board (the United States central bank) tightened credit. As a result, major US banks raised their prime lending rate to 8 percent on May 1. (Japanese investors are more likely to be attracted by higher US interest rates, and buy dollars with which to invest; this helps boost the dollar's value against the yen. The falling dollar was making Japanese exports more expensive to US consumers, and Japan was worried about losing some of its share of the US market.)
Review trade sanctions Although the US will not immediately end the $300 million in tariffs tacked onto selected Japanese products, the US agreed to review the situation in mid-May when it has new data. If the figures show more US semiconductors shipped to Japan and fewer Japanese chips shipped to countries such as Korea and Hong Kong, the US will end its sanctions. Semiconductor chips are the silicon wafers used in making computers.