JAPAN MINISTRY SAYS DOLLAR SHOULD BE ABOVE 170 YEN
The dollar should worth more than 170 yen
based on purchasing power parity, the Ministry of International
Trade and Industry (MITI) said in its annual white paper on
international trade.
    Using 1973 as a base year, the ministry said inflation
differentials pointed to a yen/dollar rate of 172 in fourth
quarter 1986. The dollar opened here today at 144.90 yen.
    MITI also said the so-called "J-curve" and the drop in oil
prices together accounted for 33.2 billion dlrs of the 36.6
billion dlr rise in Japan's trade surplus last year.
    On a customs cleared basis, the Japanese trade surplus rose
to a record 82.66 billion dlrs last year.
    The ministry said the fall in oil prices accounted for 16.5
billion dlrs and the "J-curve" 17.2 billion dlrs of the rise in
the 1986 surplus.
    Analyzing the expansion in Japan's trade imbalance in
recent years, MITI calculated that 37 pct of it could be
accounted for by exchange rates, 24 pct by differences in
economic growth rates between Japan and other countries, and 36
pct by so-called price elasticities of imports and exports.
    Analyzing the expansion in the U.S. Trade deficit from 1982
to 1985, the ministry said 24 pct was accounted for by exchange
rates, 34 pct by differences in the income elasticity of
imports and exports and 39 pct by differences in economic
growth rates. The figures do not tally to 100 pct because other
minor factors have been left out.
    "One index of trade structure, the income elasticity of
exports and imports, shows that the U.S. Is more likely to
experience increases in imports, while Japan is structurally
predisposed to growth in exports," MITI said.
    Structural adjustment is already underway in Japan, under
the impact of the strong yen, MITI said. Japanese companies are
stepping up their imports and expanding capacity overseas.
    Japanese consumer attitudes are also changing. The ministry
cited a survey showing that price was now the number one factor
in the purchase of imports from the U.S. And Western Europe,
replacing design and brand reputations.
    "The smooth adjustment of the economic structure calls for
measures to address the needs of affected firms," it said. "Whole
industries have felt the pinch and employment is expected to
suffer."
    "Sustained economic growth, led by domestic demand, will
also be an essential condition," the ministry said.
    It said four structural factors have contributed to the
growth of the U.S. Trade deficit in recent years -- a decline
in U.S. Industrial competitiveness, insufficient productive
capacity, an increase in foreign procurement by U.S. Companies
and short-sighted U.S. Management attitudes.
    "While (U.S.) exports have picked up somewhat with the
dollar's fall in value, no marked improvements have appeared in
the import picture," MITI said.
 REUTER
