Washington springs to defence of the yen
Thursday 18 June 1998
America spent about $2bn (pounds 1.2bn), intervening in defence of the yen for the first time in six years. The move represents a crossing of the Rubicon for the US, which has so far resisted currency intervention to support other currencies, and indicates the growing concerns about the effect of Asia's crisis on the world economy.
President Bill Clinton said that he had spoken on Tuesday night to the Japanese Prime Minister, Ryutaro Hashimoto, who had committed Tokyo to boosting its recovery efforts. "I was very encouraged by the prime minister's statement that he intends to pursue aggressive reform of their banking institutions and intends to do the things that were necessary to get their economy going again, and therefore I thought it was important that we support them," he said.
"Japan is very important to the world, especially to the United States, and to the efforts we're making to support an economic recovery in Asia, which is very important to keeping our own economic progress going." But the Treasury Secretary Robert Rubin indicated America wanted to see more, and faster, action from Tokyo to boost the sagging Japanese economy. "We look forward to the implementation of a comprehensive action program that will create the conditions that are essential for a healthy and prosperous economy," he said.
Deputy Treasury Secretary Larry Summers, the chief US economic trouble shooter, was due to leave for Tokyo last night, another sign of the gathering pace of concern at the crisis in Asia. Other deputy finance ministers from the Group of Seven were also due to convene an emergency meeting this Sunday.
Weakness in Asian economies has already hit the US, with a surge of cheaper imports undercutting US products, and American exports to Asia slumping. Financial analysts said the aggressive US dollar sales, closely co-ordinated with the Bank of Japan, were aimed at preventing Japan's weak currency from going into free-fall and pulling others down with it.
"The real risk of a spreading of the crisis and a deepening of the crisis was immediate," said Fred Bergsten, who heads Washington's Institute for International Economics.
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