Japan signalled Friday that it wants next week's meeting of the Group of Seven finance ministers and central bank governors to discuss ways of improving the system of floating currencies.
But in spite of this year's sharp fall of the US$ against the yen and the mark, there was little sign the initiative would be taken up by other G-7 nations or that any concrete results on exchange rates would emerge from the talks in Washington on Tuesday.
Japanese Finance Minister Masayoshi Takemura said there is growing interest in reviewing the floating exchange rate system and discussing ideas such as target zones for currencies and strengthening currency intervention.
But the minister's remarks appeared to be wishful thinking in the context of next week's G-7 meeting of the U.S., Japan, Germany, France, Britain, Italy and Canada, when he admitted there was "no consensus among the major nations on how to improve the system."
Some economists have billed the meeting as the most important such gathering in several years, but it seems increasingly likely to be a damp squib.
Analysts suggested Takemura's remarks are a sign of anguish over the 22% rise in the value of the yen against the US$ since the beginning of the year. The minister's concerns were echoed by the Bank of Japan, which warned Friday in its latest quarterly bulletin that the yen's rise risks terminating the economic recovery.
Germany, which has seen the mark rise by more than 10% against the US$ since the start of the year, has made clear that it is not seeking international currency reform. Chancellor Helmut Kohl called on U.S. President Bill Clinton on Thursday "not to let the dollar drown" while Bundesbank president Hans Tietmeyer made clear the onus for restoring stability to the world economy lay with weak-currency countries trying to solve their economic problems.
Such top-level posturing has become a frequent occurrence ahead of G-7 meetings. It helps clear the air of differences with the aim of allowing ministers to avoid direct confrontation on controversial issues such as currencies when they meet.
One senior G-7 official suggested this pattern is being repeated ahead of Tuesday's talks. "There is nothing left to say. Germany and Japan have made their moves," he said, referring to the cuts in German and Japanese interest rates in recent weeks. "The U.S. is not going to say anything about interest rates. There has been no international co-ordination. And there is no co-ordination left to have."
At most, officials expect the G-7 will hold a round-table discussion in which each country will air its views and concerns about recent currency movements before moving on to other matters.
There is scant possibility the U.S. will take action to prop up the US$. Its partners recognize that U.S. authorities can argue the US$ is not particularly weak because its fall against the Japanese and German currencies has been largely offset by its gains against other currencies such as the C$ and Mexican peso.
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Revised: June 3, 1995
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