As the finance ministers and central bankers of the Group of Seven industrialized nations meet Feb. 8 in Berlin to discuss a host of economic issues, Japan’s greatest concern going into the talks is how they assess the continued fall of the yen against the dollar.
Officials in Tokyo said Japan, which will be represented by Finance Minister Hiroshi Mitsuzuka and Bank of Japan Gov. Yasuo Matsushita, will stress that stable foreign exchange rates are best for the global economy. “As I have so often repeated, an excessively weak yen is as undesirable as an excessively strong one,” Mitsuzuka said before leaving for the G-7 talks.
International financial sources said it was a basic point of understanding that the value of one’s own currency should not fluctuate excessively, indicating that Japan would seek consensus on this point. But even if there is agreement on the need for stability, market participants remain doubtful whether Tokyo can get its other G-7 partners — the United States, Germany, Britain, France, Canada and Italy — to jointly agree to stem the yen’s fall in Berlin, since they basically support a strong dollar.
A strong dollar is a key component in supporting the robust U.S. economy and its bullish stock and bond markets, although U.S. automakers have begun to voice concerns about a rise in Japanese imports. It also enables European nations to gain competitiveness and improve their fiscal situation through lower interest rates and help meet the criteria for converting to the proposed single currency, the euro.
Since their April 1995 meeting, the G-7 has continued to welcome the “orderly reversal” of foreign exchange rates toward a strong dollar. Recent comments from U.S. and German financial authorities indicate Japan may be alone in its concerns over the yen’s value.