The Yen Also Rises

ONE Japanese yen to one United States penny. If you are a Japanese tourist planning a vacation, that makes a trip to the US a pretty good deal. If you are a Japanese finance minister, especially during a recession, it spells trouble.

Tokyo is wringing its hands with concern and Washington is doing likewise with delight as the value of the yen against the dollar on foreign exchange markets, already at postwar highs, flirts with that yen-to-a-penny "parity" rate.

The yen's value has climbed by 18 percent against the dollar since the first of the year, when President Clinton noted that a stronger yen would help reduce Japan's trade surplus with the US and other major trading partners. Other Group of Seven countries apparently hold similar views; so far no G-7 central bank except Japan's own has stepped in to intervene. As the yen grows stronger, Japan's exports would be expected to grow more expensive and imports less so, reducing demand for Japanese goods oversea s.

That remains to be seen. One private forecast holds that despite the yen's rise, Tokyo's worldwide current account surplus could hit a record $150 billion by the end of the year, up $24 billion over last year. Last year, Japan's trade surplus with the US was $43.7 billion. But with Japan's surplus already pinpointed as the main cause of the yen's rise, such projections may prompt currency markets to push the value higher, raising concerns about a prolonged Japanese recession as the value of profits earne d overseas drops and export demand falls.

For the Clinton administration - which, like its predecessors, sees the trade deficit with Japan as symbolic of the failure to breach the walls of rules, regulations, and government-corporate relationships Tokyo has built to favor its businesses - the yen's rise is welcome. But it is no substitute for vigorous negotiations to open up Japanese markets to US goods and for adopting domestic economic policies that encourage savings and investment.

For the new coalition government in Tokyo, the additional economic squeeze brought on by the yen's rise should help focus attention on economic reforms, which include reducing restrictions and regulations that impede imports of otherwise competitive products. It also signals that in the absence of concrete policies to help reduce large trade surpluses, currency markets will wind up forcing the issue.