A crisis atmosphere pervades government and business circles here as the yen soared on the Tokyo foreign exchange market yesterday. Deputy Finance Minister Toyoo Gyoten set out for Washington, presumably to implore American cooperation to halt the dollar's steep decline from the 160-yen level at the beginning of the year to the 150 level, and yesterday the 140 level.
Noises from Washington and New York are scarcely encouraging. There is talk of the United States waging an exchange-rate war against Japan and West Germany in an effort to force the two countries to pump-prime their economies - attract more imports and reduce their huge trade surpluses. US discontent is greater with Japan than with West Germany because of Japan's much larger surplus - more than $50 billion with the US alone.
An agreement reached between Japan's Finance Minister Kiichi Miyazawa and US Treasury Secretary James Baker in October to try to stabilize the dollar to yen rate seems a dead letter. West German politicians are immobilized by elections scheduled for this weekend.
In the absence of clear-cut agreements between the principal Western powers, foreign exchange markets around the world feed on rumors and fears for the future. Is the dollar bound to come down to the 130-yen level, as a prominent New York analyst suggests? Or to the 125-yen level, as Sen. Lloyd Bentsen (D) of Texas, chairman of the Senate Finance Committee, demands?
Bank of Japan sources say that 150 yen to the dollar is about as bad as things will get. Speculators tend to get cautious at this rate, they say, because they know the Bank of Japan is intervening vigorously to control the situation. And, they do not think that a dollar much lower than the 150-yen level would help the US, since it may rekindle inflation and lead to higher interest rates.
K. Nukazawa, an economist at Keidanren, the Federation of Economic Organizations, believes a falling dollar will accelerate the rate at which Japanese manufacturers move their operations abroad - to South Korea, Taiwan, and even the US. Unemployment will rise here, he says, and there may be some major bankruptcies.
Such moves abroad, plus the decline in Japanese exports (already noticeable in terms of quantity, and soon to be seen in terms of dollar value) will gradually convince foreign exchange markets that there is no great advantage in stockpiling yen. Meanwhile, businesses, large and small, want the government to ``do something.''
Steelmakers were hurting badly when the dollar was at 170 yen. Carmakers will increasingly feel the pinch. Small factories and workshops have no fat to trim. A maker of screws in East Osaka reduced his workforce from 18 to 8, and carried out other economies, but never quite enough to keep up with the yen spiral. ``What more can I do?'' he asked. ``I'll do anything legal to survive.''
In the long run, more and more Japanese are going to be manufacturing - and living - abroad, because they will no longer be able to afford to live and work in Japan, Mr. Nukazawa suggests. Barriers, such as prohibiting rice imports, still keep prices at home inordinately high.
``In dollar terms, my salary has increased by 40 percent,'' said an office worker when the dollar was still about 160 yen. ``But do I feel 40 percent richer? No sir! My apartment is still matchbox size. Neither my food nor my clothes are any less expensive than they used to be. Well, maybe a few yen, but certainly not enough to make me feel that a high yen has its advantages.''
Some Japanese have been calling for Prime Minister Yasuhiro Nakasone's government to take bold measures to stimulate the economy. So far their cries have gone unheeded. But if the yen continues to soar, the government may be forced into a 180-degree change in policy.