Word: yen
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Already, the Nixon plan had made some solid gains. By far the most important was Japan's decision to float the yen on international currency markets (see BUSINESS). In addition, some banks?including New York's Chemical Bank and Atlanta's Trust Company of Georgia?reduced interest rates on consumer loans. Such rates are not governed by the Nixon program, but the Administration has applied strong pressure on bankers to freeze or lower them voluntarily...
...grass on the hilltop"-ready to blow with the prevailing political winds. The winds, it must be conceded, have been generally favorable. Despite such Mao-inspired aberrations as the Great Leap Forward of 1958-59 and the Cultural Revolution, the country is now relatively stable. Jobs are available, the yen is firm, and the kind of famines that used to wipe out 20 million people at a time are a fading memory...
Grating Noise. To officials in Tokyo, those threats seemed too draconian to be believed. A special U.S. tariff lasting until the yen was revalued enough to please Washington would amount to an unprecedented and almost unimaginable action; the U.S. would be attempting to blackjack a friendly nation into fixing a value for its money that Washington in effect would decide. Finance Minister Fukuda dismissed that talk as a zatsuon (grating noise). A Tokyo banker added that the idea of cutting U.S. shipments of raw materials to Japan was "reminiscent of the eve of Pearl Harbor, when the Roosevelt Administration placed...
Outside the government, however, more and more Japanese are coming to recognize that the nation cannot forever maintain a patently undervalued currency and continue to enjoy relatively free access to foreign markets, particularly to the U.S. Tokyo economists reluctantly concede that a 5% yen revaluation is likely by this fall, or perhaps sooner, and some businessmen are beginning to act as if it were inevitable. Japanese shipbuilders, for example, are demanding that foreigners signing contracts for oil tankers agree to pay in yen, rather than in foreign currencies that may be worth fewer yen by the time the ships...
...Administration last week may have been indulging in inept bluffing, but the fact that so drastic an idea as a special U.S. tariff on Japanese goods could even be discussed illustrates how dangerously monetary imbalances are fanning political bitterness and protectionist sentiment round the world. The undervaluation of the yen is now by far the greatest of those imbalances. The sooner a revaluation of the yen comes, and the bigger it is, the better...