JAPAN'S government and central bank took steps yesterday to help stop the fall in the dollar's value, but some analysts here say the Japanese have already done what they can.
In Tokyo, as in other financial capitals, economists and traders awaited similar action by other governments and wondered why it hadn't happened. ``That's the $64,000 question everybody is asking,'' says Brian Martin, a Citibank economist in London.
In New York, traders were standing by yesterday to see if the United States would intervene and to hear what Federal Reserve Board Chairman Alan Greenspan would say in testimony to the House Budget Committee.
The dollar broke the ``parity level'' - where one yen equals one cent - in New York Tuesday when it sold briefly for less than 100 yen. The event was another milestone in the dollar's steady decline; in January 1992, it took 125 yen to buy $1.
Prime Minister Tsutomu Hata met yesterday with key economic advisers and promised to speed up deregulation measures aimed at making Japan's markets more open to international products. Tokyo has recently made some concessions in negotiations with the US over market access; the US this week applauded Tokyo's review of economic laws and regulations.
Economists who see the strong yen as a function of Japan's $130 billion annual trade surplus - because Japanese traders must turn dollars and other currencies they earn abroad into yen to bring profits home - say deregulation will ultimately ease the yen's value.
The Japanese central bank has frequently intervened in currency markets to buy dollars in exchange for yen, spending some $3 billion in May to boost the dollar. Currency traders estimated that the Bank of Japan spent $500 million for this purpose yesterday morning.
Japan's finance minister, Hirohisa Fujii, told reporters that he had urged his counterparts in other leading industrialized countries to come to the dollar's aid. The lack of intervention by US and European central banks has grown noticeable in recent days.
After all, says Mineko Sasaki-Smith, an economist at Morgan Stanley International here, ``We are not just talking about a high yen, we are talking about a falling dollar. Why [the US Federal Reserve] has not intervened is the biggest question.''
Mr. Martin says concerted action by US and European central bankers would keep the dollar more firmly above 100 yen than efforts of the Bank of Japan allow, but without some policy changes, even coordinated ``intervention is likely to prove futile.'' He says the underlying state of the world's economies is working in favor of a weak dollar and adding to the strength of European and Japanese currencies.
Noting the weakness in the US bond market and the ever-present trade gap, he says the pace of US economic recovery is softening, making US investments and the dollars necessary to make them less desirable. Consumption, which accounts for two-thirds of US gross domestic product, is ``subdued'' by low savings, flat earnings, and rising taxes.
The fear of inflation has prompted the Federal Reserve to raise interest rates four times since February - but not high enough to make US investment vehicles attractive enough to overseas investors.
Ms. Sasaki-Smith also observes that signs of weakness in the US economy - such as Tuesday's announcement that the trade deficit widened significantly in April, along with growing concerns about inflation - were fueling investors' skepticism about the dollar. ``The market is looking into the future, and saying, `Well, we're worried,' '' she says.
Meanwhile, Martin adds, economies in Europe and Japan are brightening, making their currencies more attractive to international investors.
In terms of the bilateral relationship between the US and Japanese economies, the weak dollar/strong yen scenario is a mixed bag. On one hand, it is supposed to boost the US economy because it makes US goods cheaper in the Japanese market. The Commerce Department said Tuesday the trade gap narrowed slightly (even as the overall deficit rose), meaning that US producers have made headway in Japanese markets.
But a strong yen is simultaneously tough on Japanese exporters.