The dollar goes down. It comes back up. It goes down, a bit further. It comes back again, but not to where it was before. That is how, for the past month and more, the dollar has been drifting down against the yen, the mark, the pound.
A return to stability in international exchange markets is not likely until West Europeans and Japanese sense a genuine determination in Washington to tackle the US budget deficit. This view is widely held outside the United States.
Here in Tokyo, Finance Minister Kiichi Miyazawa voiced this opinion after a Cabinet meeting yesterday, when he hoped for early implementation of the recent agreement between President Reagan and Congress to cut the deficit by $76 billion in two years.
And International Trade and Industry Minister Hajime Tamura has urged Mr. Miyazawa to visit Washington soon in order to impress the White House and Treasury Secretary James Baker just how seriously the Japanese view the situation.
The Japanese have become the biggest holders of dollars in the world. Naturally, they are the most concerned. Official reserves have reached $78 billion - more than any other country except for the US. Billions more are in private hands.
Monday the dollar declined precipitously in New York. In Tokyo Tuesday, it was down a bit, then up a bit, as the Bank of Japan bought dollars furiously. (It finally closed at 132.42 yen.) In Europe, central banks also bought dollars. This is called cooperative intervention, and it had its intended effect of supporting the value of the dollar. But only in the short run, many bankers believe.
Here in Tokyo, where the dollar has declined during the past month from the range of being worth 140 or so yen down to nearly 130 yen, the expectation is that early in the new year, if not before, it will be in the 120s.
``Behind the recent upsurge of the yen lies disappointment at the US decision on the reduction of its budget deficit,'' said Atsushi Nakajima, analyst for the Industrial Bank of Japan.
The disappointment felt by Mr. Nakajima and others stems from the feeling that the reduction is not drastic enough to cause a real change in US spending habits. In other words, the US continues to live beyond its means, borrowing from Japan, West Germany, and others to make up the difference.
The counterpart of the US budget deficit and its huge trade deficit is Japan's gigantic trade and current accounts surpluses. Both surpluses are declining as the dollar descends and the yen rises - but not fast enough to really turn the tide.
Prime Minister Noboru Takeshita pledges to turn the Japanese economy around from dependence on exports to dependence on imports and on domestic demand for growth. He has said this will require sacrifices from the Japanese people.
Mr. Takeshita's prestige as a fashioner of domestic compromises is on the line.
He is going to Washington next month for his first substantive talks at the White House and with Congress since becoming prime minister. His voice will carry weight to the extent he shows specifically how much and at what cost Japan is prepared to contribute to the economic health of the global community.