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Western Press Review: Yen Responds, But Will Japan?

  • Don Hill

Prague, 18 June 1998 (RFE/RL) -- The United States's dramatic ride to the rescue yesterday of the falling Japanese yen answered the immediate problem, but Western press commentary remains -- at best -- quizzical about the solution's permanence.

NEW YORK TIMES: There are more questions than answers

Nicholas Kristoff, in a New York Times commentary, lists a few of the questions as follows: "As currency trading resumed (today) in Asia, the central question was simply: How much has changed? Has Japan, in making pledges (yesterday) on an economic program to strengthen its economy, really committed itself to far-reaching changes? Do its pledges mark a turning point that will lead to a firmer yen and to greater economic stability for Asia as a whole? Or are they merely warmed-over promises from yesterday? If so, will the currency intervention by the United States and Japan be overwhelmed within a few days by market forces, leading to an ever-cheaper yen and to greater economic turmoil around the world? For now there are more questions than answers, but there is evidence for both propositions."

WALL STREET JOURNAL: Japan could pull its economy out of recession

In The Wall Street Journal Europe, staff reporters Jathon Sapsford and David Wessel, put it this way: "Japan's leaders seem to have convinced the United States that they're serious finally about reviving their troubled economy. But are they?"

Their analysis goes on: "The big question now is whether the Japanese government will fulfill the promises that won the U.S. support. The joint intervention came after Prime Minister Ryutaro Hashimoto and other senior Japanese officials publicly vowed to strengthen domestic demand, break up the country's bad-debt logjam, and abandon the notorious convoy system under which strong banks effectively are required to keep weak ones afloat.

"If Japan pulls off this daunting task, it could pull its economy out of recession and help stop rot in other Asian economies. If it fails the test -- and many observers fear it will -- the consequences will be grave for the entire world."

SUEDDEUTSCHE ZEITUNG: Trust in Japanese determination to attack the problem is at zero point

Commentator Nikolaus Piper in the Sueddeutsche Zeitung answers the questions, "Probably not." He writes: "Nothing is currently so unsettling for the global financial markets as the yen's slide, and rightly so. Japan, the world's second largest economy, is stuck in deep recession."

Piper writes: "The United States more than any country has good reason to fear the disease is catching. After all, Japan is the U.S. government's main creditor and if Tokyo's banks should panic and start dumping American bonds, a stock market crash would be the direct result. At the European Union summit in Cardiff, British Prime Minister Tony Blair spoke of Japan as the biggest danger for the world economy in 20 years. The World Bank already sees the risk of a depression. Helplessness reigns in Washington and Brussels, as the crisis can only be solved in Tokyo. But trust in Japanese determination to attack the problem is at zero point."

TIMES: Japan's crisis is mainly political

"Mr Hashimoto, like St Augustine, is pledged to virtue, but not yet.," says The Times, London, in an editorial. (Editors: The 5th century Christian saint Augustine was reputed to have prayed, "Oh Lord, make me chaste, but not just yet.")

The Times' editorial says that Hashimoto, "promises to deal with the banks' bad loans -- after the July elections; he has promised tax reforms -- sometime next year. Japan's crisis is mainly political. This Bill Clinton, his mind sharpened by his imminent trip to Beijing, now appears to understand. America's refusal to take 'not yet' for an answer should be echoed in every finance ministry, bank and dealing room in the industrial world."

LOS ANGELES TIMES: Washington's action signaled a more forceful U.S. role

A Los Angeles Times news analysis by James Flanigan and Evelyn Iritani says: "The U.S. intervention to bolster the Japanese yen bought breathing space for Asia's troubled economies, experts said (yesterday.) But the big change (yesterday) was in Washington, not in Asia. Washington's action signaled a more forceful U.S. role in reforming the Japanese economy and helping the rest of Asia recover from its financial crisis. It also in effect placed a floor under the yen and other major currencies in Asia.

"Those were the biggest factors inspiring confidence in Asia and around the world. The intervention quickly brought Japan's government to a new level of commitment and urgency about reforming the nation's recession-bound economy. And it ensures that 'China and Hong Kong will not devalue their currencies in the near-term,' said Gary Hufbauer at the Washington-based Council on Foreign Relations. But the applause will be short-lived unless the Japanese government takes actions to convince the markets that it is serious about turning its economy around."

SUEDDEUTSCHE ZEITUNG: A visit by the U.S. deputy treasury secretary seems to work wonders

Another commentary in the Sueddeutsche Zeitung, this one by Rainer Koehler, says that the United States has a right now to expect one thing from the Japanese: "Reform, and reform fast."

Koehler says: "Lawrence Summers was expected in Tokyo for a crisis meeting on (today), and already the yen began turning round. A visit by the U.S. deputy treasury secretary seems to work wonders. On Monday a dollar cost 146 yen, two days later the price had dropped to 138 These exchange rate changes cannot be explained by the underlying economic data alone."

The writer says: "What are the currency markets expecting from Summers' flying visit? First, that the Americans will abandon their standpoint that any yen exchange rate is acceptable if it at least prevents the collapse of the Japanese economy."

Rebellion and strife in the Serbian province, Kosova, also attract the attention of Western commentators. Writers in the Los Angeles Times and in the Financial Times, London, perceive a new determination on the part of NATO. The Washington Post's analyst isn't so sure.

LOS ANGELES TIMES: The fight rumbled along uneasily

Richard Boudreaux in the Los Angeles Times -- "The fight between ethnic Albanian guerrillas and Yugoslavia's armed forces rumbled along uneasily (yesterday) with each side glancing over its gun sights at the newly assertive power in the southern Balkans -- NATO."

FINANCIAL TIMES: This is not the fence-sitting NATO

Alexander Nicoll in the Financial Times -- "This week, NATO whistled up 85 aircraft from 13 air forces at four days' notice in a show of force intended to send two messages to Slobodan Milosevic. The first was obvious: the Yugoslav president should stop sacking the villages of ethnic Albanians. (And) the second was more subtle. It was about NATO itself. The message to Mr. Milosevic was that this was not the fence-sitting NATO of the prolonged Bosnian conflict."

WASHINGTON POST: Western powers are now wrestling with serious doubts

William Drozdiak in The Washington Post -- "Despite much saber-rattling, Western powers are now wrestling with serious doubts about the feasibility of outside military intervention to halt the Serbian crackdown on ethnic Albanians in the province of Kosova, according to U.S. and European officials.

"Several governments, including France, Italy, Denmark and Germany, have declared they will not approve the use of force by the NATO alliance without a U.N. mandate. Britain has circulated a resolution endorsing 'all necessary means' to be used to stop the bloodshed, but its prospects seem dubious because Russia and China -- two of five permanent U.N. Security Council members -- have vowed to veto such a measure."