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To: J. Nelson who wrote (15788)	8/13/1998 5:36:00 AM
From: Alex	Read Replies (1) \| Respond to of 116903

Frustrated U.S. May Let the Yen Keep Sliding By Glenn Somervilleÿÿ<Picture: Reuters>WASHINGTON - President Clinton and senior officials discussed Asia's deteriorating economic situation on Tuesday, as analysts said the United States may let the Japanese yen slide out of frustration with Tokyo's promise of reforms. Tokyo's repeated failure to deal decisively with a banking crisis or to cut taxes and stimulate its economy appeared to make it nearly impossible to help Japan prop up its currency, as the United States did in June. "Why would the United States waste its money if Japan is not going to do anything to address its fundamental problems," asked economist Narman Behravesh of DRI/McGraw Hill Inc. in Lexington, Mass. Japan's economy, second only to the United States in size, has been stagnant for most of the 1990s and there is mounting concern its woes could drag the global economy into recession. The analysts suggested U.S. officials may be weighing contingency plans for dealing with a worsening Japan situation that could trigger fresh problems in the form of a Chinese currency devaluation or fresh instability in Eastern Europe and Latin America. The White House refused to specify what Clinton discussed with Treasury Secretary Robert Rubin in a 10-minute telephone call on Tuesday but said wobbly financial markets, where a slide in the yen's value accelerated, were a factor. "They reviewed the fundamentals of the U.S. economy, assured that trends are sound on jobs growth and inflation," a White House official said. "They reviewed the volatile trends in international markets. Basically they're monitoring it closely," he added. Treasury officials refused to comment on Rubin's discussions with Clinton. Stock prices worldwide tumbled Tuesday, with the Dow Jones industrial average losing 112 points to close at 8,462.85 after being down more than 250 points earlier in the session. The dollar shot up to 147.63 yen at one point, highest since August 1990 and well above the level at which the United States joined in a coordinated intervention with Japan on June 17, buying yen to support its value. But analysts saw little prospect of renewed intervention soon because repeated Japanese pledges to act on its problems have not been fulfilled. "The difference between now and two months ago is that it has become fairly clear the problem is not that of a particular Japanese Prime Minister but a system that is entirely paralyzed," Behravesh said. He foresaw the yen sliding in value "easily beyond 150, probably to 160 and possibly 165 in coming months." Japan's government, led by Prime Minister Keizo Obuchi who replaced Ryutaro Hashimoto last month, conceded Tuesday its economic picture was grim but so far it has failed to persuade financial markets it is coming to grips with its problems. Economist Sung Won Sohn of Norwest Corp. in Minneapolis similarly said he expected the yen's value to slide and said he doubted a coordinated intervention was in the works. "Too many times now we've gotten the 'Tokyo tease' and they've let us down on action too often," Sohn said. "I don't think the United States could justify an intervention on the basis of Japanese promises to do something as in the past." He said a slide in the yen's value raised the risk of China devaluing its currency to try to protect its exporting industries from losing sales in world markets. If that occurred, financial markets in the United States and around the world could be quickly unsettled. "Suppose we got a major bear market, that could have serious implications for the U.S. economy and at that point a recession here is not out of the question," Sohn added. Federal Reserve Chairman Greenspan shares the concern the U.S. economy could be damaged if stock prices fell dramatically as happened in the late 1980s, the New Yorker magazine said. Referring to a meeting nearly two months ago between economists and the Fed board, the magazine said the parallels between the stock market crash of 1929 and the more recent stock market crash in Japan were discussed. Behravesh of DRI/McGraw Hill said Japan's government seemed "totally gripped by policy paralysis," which raised the risk of potential recession for the United States to about one-in-four next year and left unanswered questions on how to spur Tokyo to action. foxmarketwire.com