U.S., Japan Talks on Dollar Skirt Jittery Financial Markets

The United States and Japan reiterated earlier pledges Friday to work together to help stabilize the dollar on foreign exchange markets, but they stopped short of pledging any new measures to calm financial markets in Tokyo and around the world.

In a two-paragraph joint statement following an afternoon of routine consultations in Los Angeles, U.S. Treasury Secretary Nicholas F. Brady and Japanese Finance Minister Ryutaro Hashimoto pledged to “continue their commitment” to coordinating their economic policies and maintaining stability in the foreign-currency markets.

But the brief communique, which officials hinted came largely at the request of the Japanese, seemed designed more to bolster the Japanese government at home politically than to signal any new policy stance on the part of the two governments involved.

Speaking to reporters later, a senior U.S. official said the ministers had sought to convey a sense of “stability and a real feeling that school will keep”--despite the recent turmoil in the Japanese stock market and currency markets, in which stock prices and the value of the yen both have been falling sharply.

Although Hashimoto apparently reiterated Japan’s hope that the United States could reduce its interest rates to help take pressure off Japan, U.S. officials resisted any commitment to push rates lower. They also sidestepped indirect suggestions that the two countries intervene more forcefully to stem the yen’s decline.

Although some Administration officials have worried that the recent drop in the value of the yen--the result of accelerating inflation and political uncertainty in Japan--might erode recent gains in reducing the U.S.-Japan trade deficit, the independent U.S. Federal Reserve has been reluctant to go along with either move for fear of exacerbating inflation pressures in the United States.

Both U.S. and Japanese sources said Hashimoto sought U.S. cooperation on the exchange-rate front at least partly to help bolster his own political standing at home. The new Japanese finance minister is regarded as an emerging political figure in Japan, but so far his record has been limited.

Despite the absence of any new initiatives, officials said the two ministers discussed a wide range of global economic issues, from the state of the world economy to the impact of German reunification and the formation of the new European Bank for Reconstruction and Development, designed to provide new lending for Eastern Europe.

Brady said he also made a special appeal to Hashimoto that Japan be forthcoming in broad-ranging discussions that the two governments are holding on how to reduce their trade imbalance. President Bush issued a similar call during a meeting with Japanese Prime Minister Toshiki Kaifu in Palm Springs three weeks ago.

Brady held similar discussions with European finance ministers in late February in preparation for a full-fledged meeting of Western finance ministers and central bankers in Paris on April 6 and 7. He said Friday he plans to meet next week with Canadian Finance Minister Michael Wilson.

The session to be held in Paris, known informally as the Group of Seven, includes officials from the United States, Japan, West Germany, Britain, France, Italy and Canada. The group meets several times a year to review existing policies and hammer out joint approaches to world economic problems.

The Brady-Hashimoto meeting initially was intended as a chance for the two finance ministers to discuss issues informally--as Brady did with the Europeans late last month--but it quickly took on a life of its own after Hashimoto leaked it for domestic political reasons and invited Japanese reporters to come along.

At a news conference following the meeting Friday, Brady declined to comment on the recent sharp decline in stock prices in the Tokyo stock market, asserting that what was important was that bourses around the world had remained stable despite Tokyo’s slide.

He also dismissed as “entirely counterproductive” suggestions that Congress might pass new legislation aimed at retaliating against Japan for its current trade practices.

Bush told Kaifu earlier this month that the United States wanted to help give Japan a wider say on a broad range of international issues, but warned that it would be hampered from doing so as long as both countries were preoccupied with trade frictions.