Word: yen
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International finance was dominated last week by a Pirandellian discussion of a statement that everyone solemnly insisted had never been uttered. The alleged non-remark was a request that Japan increase the value of the yen, and it supposedly was not made by U.S. Assistant Secretary of State Philip Trezise at an informal meeting of U.S. and Japanese government officials at Lake Kawaguchi near Tokyo...
...fact, Trezise did say it. But when the news leaked, he told a press conference that of course he would not presume to advise a foreign government what its money should be worth-even though, in his personal view, "the yen is an undervalued currency." The Japanese were incensed, but went along with the pretense. At a televised news conference, Prime Minister Eisaku Sato looked uncharacteristically menacing as he complained that "there could not have been a more outrageous case of interference in domestic matters." Later, however, Finance Minister Takeo Fukuda added that for that very reason, he could...
Artificial Insulation. This little word game masks a situation of the utmost seriousness. Japan's booming economy, multiplying exports and more than $6 billion in foreign-currency reserves have made a mockery of the yen's official value of little more than a fourth of a U.S. cent. The Japanese are understandably pleased with this situation, but their trading partners are furious. An undervalued currency gives Japanese goods an exaggerated price advantage in foreign markets; Toyota and Datsun cars, Nikon cameras and Sony TVs, for example, all cost less in the U.S. than they would if the yen...
...from the natural financial pressures that have forced increases in other undervalued currencies. Treasurers of international corporations and money speculators cannot pour funds into Japan-as they did into Germany last month when they correctly expected the mark to rise-because the Japanese government tightly controls the exchange of yen for foreign currency...
...exerting financial pressure, the Nixon Administration seems to have decided to apply political pressure. In addition to Trezise's remarks, U.S. officials last week inspired newspaper stories that the Administration is considering imposing a special tariff on all Japanese products in order to offset the undervaluation of the yen (which some high officials calculate is 20% below its prospective free-market value) or stopping Export-Import Bank financing of exports to Japan. That move could cut shipments of some U.S. raw materials, such as coal and lumber, that the Japanese badly need...