On the eve of a much-heralded meeting between Treasury Secretary Robert Rubin and his Japanese counterpart, hopes for a breakthrough agreement to boost the dollar faded Saturday when a Treasury Department official derided Japan's latest emergency economic package as an inadequate attempt to curb its massive trade surplus.
The official's comment, made to reporters on condition of anonymity, strongly suggested that Rubin and Japanese Finance Minister Masayoshi Takemura will find it difficult to reach much common ground when they meet Sunday morning, because the two economic superpowers are continuing to blame each other for the dollar's plunge and the yen's surge.The meeting, held here on the island of Bali as part of a regularly scheduled gathering of Asian and Pacific finance ministers, has attracted close attention from the world financial community because it might produce a new concerted effort to break or even reverse the dollar's drop against the yen and other major currencies, including the German mark.
Hopes for the meeting have risen especially high in Japan, where the yen's soaring value is eroding the competitiveness of Japanese exports and threatening to pitch the nation back into recession.
But chances of an accord that might impress currency traders looked grim after the Treasury official scorned the Japanese economic package, saying: "We don't see much here that shows a fundamental change . . . It's mainly a restatement of things that have been out there for some time."
The official was referring to measures unveiled Friday in which the Japanese government pledged to accelerate its five-year deregulation program, spend more money on public works and establish more facilities to showcase imported cars and other products. The package was accompanied by a cut in the Bank of Japan's benchmark discount rate to a historical low of 1 percent.
The Treasury official said the interest rate cut will be "helpful" in stimulating the Japanese economy, but he voiced skepticism that the package substantially changes Japan's longtime reliance on exports and resistance to imports. There are no specifics on how much Japan will increase government spending to boost domestic demand, he noted.
The remarks underscore the Clinton administration's view that the turmoil in the currency markets is principally Japan's problem, attributable mainly to an excessively strong yen being driven higher by Japanese trade surpluses. The Japanese government reported today that while its overall trade surplus declined 3.2 percent in fiscal 1994, its surplus in trade with the United States swelled 8.9 percent.
The administration has said it does not want to see the dollar fall - a position reiterated by the Treasury official Saturday - but it can do little but periodically join coordinated dollar-buying efforts by international financial authorities.