BEIJING -- The United States has not ruled out again selling dollars to buy yen to strengthen the Japanese currency, U.S. Treasury Secretary Robert E. Rubin said yesterday.
"Intervention can be appropriate under some circumstances, certain circumstances; it would not be appropriate under other circumstances and this is something we watch very closely on a regular basis," Rubin said after he met with Chinese government officials.
Rubin also said the officials promised that China would maintain its exchange-rate peg in an effort to avoid a deeper financial crisis in Asia.
Rubin, who met with Chinese Premier Zhu Rongji, Finance Minister Xiang Huaicheng and Bank of China Governor Dai Xianglong, said they had agreed that economic reform and recovery in Japan is the key to Asia's recovery.
Japan and the United States sold dollars at 142 yen June 17, pushing the U.S. currency as low as 133.69 yen by June 19. The dollar rebounded to trade above 143 yen yesterday as concerns increased that Japan's economy won't emerge soon from recession. The dollar closed yesterday at 142.44 yen.
Asked what the intervention accomplished, Rubin said that the United States "didn't just intervene; we intervened in a context."
The Clinton administration agreed to sell dollars for yen only after Prime Minister Ryutaro Hashimoto and Finance Minister Hikaru Matsunaga issued statements promising to speed reform, and after they agreed to be hosts of a meeting of finance ministry officials from the Group of Seven leading industrial nations in Tokyo last weekend.
At the meeting, the Japanese agreed to language in a communique calling Japanese reform of the highest urgency.
"As a consequence of that, you now have the whole world focused on Japan on the importance -- I would say the imperative -- of Japan doing what it needs to do," Rubin said. "So, I would say the situation is very different today than it was a week or two ago.
"What you've got is a dynamic in the world now where the whole world is focused on Japan taking action."
Rubin said the Chinese made it clear to him that they have no pTC intention of devaluing the yuan, also known as the renminbi, even though the weakness of the Japanese yen is having an impact on Chinese exports.
There have been concerns that if the yen weakened much more, the Chinese might devalue, a move that could send other Asian currencies falling and slow growth worldwide.
"I interpret the remarks to mean that China is putting pressure on the U.S." to keep supporting the yen to avoid devaluation of the yuan, said Takeshi Imamichi, a foreign exchange manager at Industrial Bank of Japan Ltd.
Rubin said the Chinese made "very clear expressions of intent to maintain the exchange rate. Unambiguous statements of intent."
Chinese officials "certainly expressed a strong view that they feel maintaining the currency exchange rate is in their interest," Rubin said. "I think it's very impressive when people responsible for a country's economic policy express that view as unambiguously as they did."
Pub Date: 6/27/98