JAPAN UNDER ATTACK OVER TRADE SURPLUS

  Japan's economic policies face fierce
  international attack as hopes fade of a substantial drop in its
  trade surplus, international monetary sources said.
      At a meeting this week in Paris, senior government
  officials from major nations are considering an Organisation
  for Economic Cooperation and Development (OECD) staff report
  that forecasts a continuing large Japanese trade surplus, they
  said.
      Though Japanese exports have become more expensive with the
  yen's sharp rise against the dollar, they still tend to surge
  when growth picks up, according to the OECD.
      As a solution, the OECD staff has urged Japan to redirect
  its export-driven economy, boosting domestic demand and imports
  by adopting a more flexible fiscal policy, they said.
      That recommendation echoes calls made recently at secret
  meetings of the International Monetary Fund's executive board.
      The monetary sources said Japan's policy was criticized
  when the board met to consider the country's economy under the
  annual consultations it holds with each of its members.
      The United States, which until recently has been reluctant
  to criticize Japan's fiscal stance, joined in the attack, he
  said.
      The IMF staff has also cast doubt on the Japanese
  government's forecast of 3.5 pct economic growth in the fiscal
  year beginning April 1. Most independent forecasters, including
  the IMF, believe that growth in calendar 1987 will be below
  three pct, monetary sources said.
      The Finance Ministry has been particularly sensitive to
  such criticism because it is already under mounting domestic
  pressure to boost an economy hard-hit by the yen's rise. The
  yen's climb has lost exporters sales and profits in the huge
  American market.
      Tokyo is also eager to avoid any suggestion that a further
  yen rise might be needed to cut its trade surplus, which last
  year amounted to a record 93 billion dlrs.
      Japan cannot tolerate a further rise of the yen, Foreign
  Minister Tadashi Kuranari said recently. The yen closed here
  today at 151.53 to the dollar. Most Japanese politicians,
  including Finance Minister Kiichi Miyazawa, are clearly hoping
  the yen will weaken, government officials said.
      At a meeting in Paris last month, Britain, Canada, France,
  Japan, the United States and West Germany, agreed to cooperate
  to hold currencies at around current levels.
      Officials said that wording represented a compromise.
  Miyazawa hopes the agreement will hold the yen stable for a few
  months, before it weakens later in the year.
      Japan wanted the Paris communique to imply a higher value
  for the dollar, perhaps by substituting the word "recent" for
  "current," while the United States wanted it to more clearly
  point to the dollar's weaker levels now, perhaps by use of the
  word "present," they said.
      In the months leading up the February 22 agreement, the
  dollar dropped some 10 yen.
      The officials also sought to discredit suggestions in the
  market that recent U.S. Action to prevent the dollar from
  rising above 1.87 marks pointed to a 153 to 155 yen ceiling for
  the U.S. Currency.
      Japan has also attacked OECD forecasts, which it says do
  not take account of the structural changes in the Japanese
  economy that will be triggered by the strong yen.
      Officials said there are already signs of that. More and
  more companies have announced plans to move production
  facilities offshore to take advantage of cheaper costs abroad,
  they said.
  

