U.S., Japan to Cooperate On Stabilizing Currencies
Treasury Secretary James A. Baker III and Japanese Finance Minister Kiichi Miyazawa agreed last night that the dollar's recent fall has been too rapid and that both nations should cooperate to stabilize the foreign exchange markets.</br></br>A Treasury Department statement issued after the meeting of the two finance officials said the dollar's plunge created a period of "temporary instability" in the exchange markets. But it stopped short of pledging U.S. intervention to prevent a further decline in the dollar.</br></br>The initial reaction on foreign exchange markets was negative in Tokyo as the dollar dropped swiftly, according to Reuters news service. Dealers said market participants considered that the results of the meeting produced nothing new.</br></br>Meanwhile, financial sources in West Germany said the Bundesbank would reduce its discount rate from 3.5 to 3 percent today, which could help stem the dollar's slide against the West German mark, Washington Post chief foreign correspondent Jim Hoagland reported from Frankfurt. {Details on C1.}</br></br>U.S. officials have said a lower dollar against the West German mark, Japanese yen and other currencies could help relieve the nation's massive trade deficit by making American products more competitive. But Japanese officials have expressed alarm at the dollar's sharp drop in recent days because it makes Japanese goods more expensive overseas and squeezes their nation's economy.