JAPAN UNDER ATTACK OVER TRADE SURPLUS
Japan's economic policies face fierce
international attack as hopes fade of a substantial drop in its
trade surplus, international monetary sources said.
    At a meeting this week in Paris, senior government
officials from major nations are considering an Organisation
for Economic Cooperation and Development (OECD) staff report
that forecasts a continuing large Japanese trade surplus, they
said.
    Though Japanese exports have become more expensive with the
yen's sharp rise against the dollar, they still tend to surge
when growth picks up, according to the OECD.
    As a solution, the OECD staff has urged Japan to redirect
its export-driven economy, boosting domestic demand and imports
by adopting a more flexible fiscal policy, they said.
    That recommendation echoes calls made recently at secret
meetings of the International Monetary Fund's executive board.
    The monetary sources said Japan's policy was criticized
when the board met to consider the country's economy under the
annual consultations it holds with each of its members.
    The United States, which until recently has been reluctant
to criticize Japan's fiscal stance, joined in the attack, he
said.
    The IMF staff has also cast doubt on the Japanese
government's forecast of 3.5 pct economic growth in the fiscal
year beginning April 1. Most independent forecasters, including
the IMF, believe that growth in calendar 1987 will be below
three pct, monetary sources said.
    The Finance Ministry has been particularly sensitive to
such criticism because it is already under mounting domestic
pressure to boost an economy hard-hit by the yen's rise. The
yen's climb has lost exporters sales and profits in the huge
American market.
    Tokyo is also eager to avoid any suggestion that a further
yen rise might be needed to cut its trade surplus, which last
year amounted to a record 93 billion dlrs.
    Japan cannot tolerate a further rise of the yen, Foreign
Minister Tadashi Kuranari said recently. The yen closed here
today at 151.53 to the dollar. Most Japanese politicians,
including Finance Minister Kiichi Miyazawa, are clearly hoping
the yen will weaken, government officials said.
    At a meeting in Paris last month, Britain, Canada, France,
Japan, the United States and West Germany, agreed to cooperate
to hold currencies at around current levels.
    Officials said that wording represented a compromise.
Miyazawa hopes the agreement will hold the yen stable for a few
months, before it weakens later in the year.
    Japan wanted the Paris communique to imply a higher value
for the dollar, perhaps by substituting the word "recent" for
"current," while the United States wanted it to more clearly
point to the dollar's weaker levels now, perhaps by use of the
word "present," they said.
    In the months leading up the February 22 agreement, the
dollar dropped some 10 yen.
    The officials also sought to discredit suggestions in the
market that recent U.S. Action to prevent the dollar from
rising above 1.87 marks pointed to a 153 to 155 yen ceiling for
the U.S. Currency.
    Japan has also attacked OECD forecasts, which it says do
not take account of the structural changes in the Japanese
economy that will be triggered by the strong yen.
    Officials said there are already signs of that. More and
more companies have announced plans to move production
facilities offshore to take advantage of cheaper costs abroad,
they said.
 REUTER
