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Just a few weeks after the new year began, the U.S. dollar dropped to the 105 yen range for the first time in three years and four months, and also hit a new low of $1.28 against the euro.

The primary factor behind its weakness is the threat of terrorism and the huge exter- nal and budgetary deficits of the U.S. economy. Although the administration of President George W. Bush publicly continues to advocate a strong dollar, it is widely believed in Japan and Europe that Bush, with an eye toward capturing votes from export-oriented domestic industries, is in fact condoning a weaker dollar.

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