G-7 Statement Stops Short of Resolve to Support Yen
THE world's financial markets open this morning wondering if the ``reaffirmed'' commitment to stable exchange rates by the world's seven wealthiest industrial powers is more than just words. The finance ministers and central bank governors of the Group of Seven nations concluded their meeting here Saturday with a statement mentioning the ``undesirable consequences'' of the Japanese yen's decline. They also emphasized the continuing need for economic policy coordination.
What remains less certain is whether the ministers and governors were concerned enough about the yen's fall - about 20 percent against the dollar since the G-7 last met in September - to intervene.
The meeting ended with a ``no comment'' on any action as of this morning by central banks to support the yen, since traditionally the ministers refrain from making such statements. But any coordinated action appears unlikely, given the lack of sympathy for Tokyo among the ministers going into the meeting.
Still, Japanese Finance Minister Ryutaro Hashimoto publicly expressed satisfaction with the meeting, pointing out that ``no country said the yen's level accurately reflects Japan's economic'' strength. In addition, Bank of Japan governor Yasushi Mieno said he expected the G-7's statement on the ``undesirable consequences'' of a low yen would be understood in financial markets and would take the currency higher.
United States Treasury Secretary Nicholas Brady told journalists after the meeting that he did not ``want to indicate that there were promises made.'' He did, however, evoke the US trade deficit with Japan, noting that ``if the yen-dollar ratio stays the same, there's more burden on [the deficit] than there was before.''
Financial analysts warn that a reinforced offensive of Japanese goods on the US market can be expected by 1991 if the yen doesn't rise to make those products more expensive. Yet coordinated intervention in the yen's behalf seems unlikely for at least two reasons: a widespread feeling that Japan can do more, such as further hikes in interest rates, to support its own currency; and an inordinate preoccupation among the G-7 members with internal economic concerns.
The most striking new example of that is West Germany, which is focusing on the complicated and costly monetary union of the two Germanys. The Berlin Wall had not yet fallen the last time the G-7 met.
Analysts have been uneasy about the potentially inflationary effects of German monetary union. But at a press conference following Saturday's meeting, French Finance Minister Pierre B'er'egovoy said West Germany assured the group that reunification could be completed ``without causing tension in interest rate levels.''
In their statement, the G-7 representatives said that German economic and monetary union should be a boon to world economic growth and ``to a reduction in external imbalances in Europe.''
An economist with a US investment bank here said most analysts expect the dollar to go somewhat lower against the yen after the weekend meeting. But he said ``things don't seem ripe for any major shifts.''
Some analysts say coordinated intervention is more likely later in the year, following subsequent G-7 meetings, if the yen remains low or falls further. That view reflects the feeling among some analysts and officials that the weekend's meeting was held before its time.