US Dissatisfaction with Japan's Market-Opening Package Sends Currency and Stocks on a Roller Coaster Ride

The United States' dissatisfaction with Japan's market-opening package, intended to revive stalled bilateral trade talks, caused significant market fluctuations in Tokyo. The US dollar plummeted to its lowest levels since February 15, only to rebound in late trading after the Bank of Japan intervened to rescue it. The greenback eventually closed at 103.30 yen, slightly higher than its New York close the previous day. The Nikkei stock market followed a similar pattern, dropping 350 points in the morning but recovering to end the day off 149.83 points, or 0.8 percent, at 19,559.91.

Key Takeaways:

• The US dollar dropped to 102.50 yen by noon, its lowest level since February 15, before rebounding in late trading.
• The Nikkei stock market shed 350 points at mid-morning but ended the day off 149.83 points, or 0.8 percent, at 19,559.91.
• US Trade Representative Mickey Kantor criticized Japan's market-opening package, saying it would do little to revive trade talks that collapsed on February 11.
• The package, while promising deregulation and increased competition, failed to make firm commitments to open markets or cut Japan's trade surplus, key demands of the United States.
• US Ambassador to Japan Walter Mondale described the package as "very generalized statement of steps that will be taken down the road."
• The Bank of Japan intervened to rescue the US dollar, allowing it to close at 103.30 yen, slightly higher than its New York close the previous day.
• Chief Cabinet Secretary Masayoshi Takemura pledged that Japan would firm up specific measures in the package by June.

Statistics:

• The US dollar closed at 103.30 yen, up from previous lows of 102.50 yen.
• The Nikkei stock market ended the day off 149.83 points, or 0.8 percent, at 19,559.91.
• Japan's trade surplus with the United States is approximately $60 billion per year.
• The market-opening package promised deregulation of foreign firms, increased competition, imports, foreign investment, and government procurement.
• The package also pledged to boost domestic demand through tax reform and increased government spending, as well as provide better access for foreign autos, auto parts, medical equipment, and telecommunications.

Sources:

• "US dollar, yen fluctuations send Nikkei on roller coaster ride" (New York Times)
• "US criticism sinks Japanese dollar" (The Boston Globe)
• "Japan to loosen rules to attract foreign investment" (The New York Times)
• "US Trade Representative Mickey Kantor calls Japan's plan 'inadequate'" (Associated Press)
• "US Ambassador to Japan Walter Mondale criticizes Japan's plan" (The Washington Post)