BANK OF JAPAN SATISFIED WITH YEN AT CURRENT RANGE
The Bank of Japan is satisfied with the
yen around its current range, a senior central bank official
told reporters.
    He said the pledge by major industrial nations in Paris
last month to cooperate to hold exchange rates around current
ranges applied in both directions, a dollar fall or a dollar
rise.
    Unilateral intervention itself cannot ensure currency
stability, but it can be useful when coordinated with other
policies and with other central banks, he said.
    The Bank of Japan is rather confident currency stability
will continue for some time, the senior bank official said, but
declined to be more specific.
    Finance Minister Kiichi Miyazawa told parliament on Friday
the current dollar/yen exchange rate is not necessarily
satisfactory for the Japanese economy.
    Asked what factors might destabilize the markets, the
official cited a lessening of market fear about intervention, a
completely unexpected change in the economy of Japan, the U.S.
Or West Germany, or resumption of comments by government
officials seeking to talk the dollar up or down.
    The senior bank official said he expects Japan's gross
national product (GNP) to grow three pct or slightly more in
the fiscal year beginning in April. That would be little
changed from the performance expected this year.
    Domestic demand may grow nearly four pct in 1987/88, but
the external sector will have a negative impact on GNP of
nearly one percentage point, he said.
    He said there was virtually no room for further monetary
policy action to boost the economy. The economy's performance
in the future very much depends on fiscal policy, he added.
    The central bank's monetary policy has already done its
part in stimulating the economy, the senior bank official said.
The Bank of Japan has cut its discount rate five times over the
last year and a half.
    Although the central bank does not see any imminent risk of
inflation, there could be some problems in the future, he said.
"We are sitting on a barrel of powder, but fortunately it may
still be wet," he added.
    Liquidity among private households and especially the
corporate sector has increased substantially, he said.
    The liquidity is the reason for the recent boom of stock
exchange prices, the bank official said. This inflow of funds
into the stock exchange, occurring also in other countries, may
continue, he said.
    The senior official said the Bank of Japan is hoping
Federal Reserve chairman Paul Volcker will be re-appointed when
his current term expires later this year.
    "He's a great man," the official said, adding that more and
more people expect his reappointment.
    Turning to exchange rates, the official said the
substantial drop in the dollar is beginning to have an effect
on reducing the imbalance in world trade, even though the
impact has taken longer than expected to show through. Even the
U.S. Trade position has begun to feel the impact, although so
far it has not been very strong, he said.
 REUTER
