JAPAN'S NEW ROLE IN THE CHANGING INTERNATIONAL ECONOMY, SELECTED ARTICLES FROM AN INTERNATIONAL MONEY MARKET SUPPLEMENT OF THE JAPAN TIMES, 17 JUNE 1974.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01194A000100610001-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 11
• Document Creation Date: November 17, 2016
• Document Release Date: August 7, 2000
• Sequence Number: 1
• Publication Date: June 27, 1974
• Content Type: REPORT

25X1 C
Approved For Release 2000/08/29 : CIA-
FEATU~s
This issuance contains articles from domestic and foreign
publications selected for field operational use. Recipients are
cautioned that most of this material is copyrighted. For repub-
lication in areas where copyright infringement may cause prob-
lems payment of copyright fees not to exceed $50.00 is authorized
per previous instructions. The attachment is unclassified when
detached.
27 June 1974
25X1 C ase 2000/08/29 : CIA-RDP79-01194A000100610001-8
CONFIDENTIAL
 Approved For Release 2000/08/29: CIA-RDP79 01194A000100610001-8
W6 conoinv Examined
.' V
adershiA
There opinion in some
soan
i prices
By HIROSHI
~L
tht i 1974 the economy would
r
n t e~
ante c cofronttheconomise oftl 'eop- Finance Critic rian. Since' the outbreak of the oil crisis ed Industrialized states with a triple sho an unpe-ct dly, early,, recoyery in
touched off by the fourth Middle East,- hardship'-namely, business stagnation,. such. countries as Japan and the U.S.
war in October 1973, the world' economy inflation and worsening balance of pay But the opinion continues predominant
.has`. undergone such a' structural up- iiienty =in 1974, affecting the economies + that a stagnant .tendency' would persist
11 heaval that the international economic of_ developing nations -as welI.".Mean- for the moment in both 'industrialized
framework -maintained for over ...4 prier . while. the Bank of ;Japan in its :forecast and developing nations. For- instals %_
d
ier Century since we L'tta uL nvliu .naa of the world`s eo onomic. jtren is saI
ear world economy'-published In April that
Ir- a..?.,
t +., be "a ,
y
ou
d o g
th
e en
examinee. With the of the greatest ordeal since
advent of `the 1970's, the war," 'pointing"out the world would dustralized nations in 1974 would aver-
the. United States' be compelled to face such difficult prob- . , age .1.3 to 2.4 per' cent, falling far short
clearly' began to lose lems as a reform of the world 3none- of 6.6 per cent for 1973. It also said
its-leadership among tary system and a new round of multi- that the stagnation of developed ' coun-
the advanced indus- lateral negotiations for expansion of tries' economies would' -deter the - eco-
trial. states' as its world trade, in addition to the oil crisis. nomic growth of developing nations,
superiority, of strength In the spring of 1974, the sharp crude ` keeping the latter's' real growth' rate
steadily - weakened. oil price hikes began 'to cast a shadow for 1974 to only 2.5 per cent on the
As'a consequence, the : over the economies of the advanced in- average.
world started to grope dustrialized nations in the form of ac- One of the bur-ring Issues In'- the con-
for new ways to re- celerating inflation and the worsening text of the impact of the oil crisis is
orient the international monetary and of the balance of payments. The Or- the balance of payments position of in-
trade setup, in keeping with the hew ganization for Economic Cooperation dustrialized 'nations, which are major
multi-polar tendency in world politics. and Develdpment (OECD) announced.on oil consumers. It is estimated that the
The - world's economic upheaval since May 16 that the consumer prices of its increase in oil prices will boost the oil
the oil crisis has brought 'home to the 24 member nations increased by an revenues of Middle-Eastern and North
nations of the world that they, must average of' 12.1 per cent in the one- African oil-producing countries in 1974
pursue a "total" relationship of -co- , year. period ending March 1974. as much as - about four times over the
operation, based on, equality among all By country, sharp rises were register- - previous year to $57,500 million. On the
nations, both industrialized and develop- ed by all major nations with Japan in other hand, the sharp oil price spiral
ing, in all aspects of international eco- the lead 'with 24 der cent, followed by will 'produce an estimated total deficit
no fiic activity, such as monetary issue, Italy (14.3 per cent), Britain (13.5' per of $35,000 million to $40,000 million in
commerce and distribution of resources. cent),' France` (12.2 per. cent), Canada the current. accounts of developed na-
As -for the direct impact of oiI crisis, '(10.4.per cent), the U.S. (10.2 per cent) tions (24 members 'of OECD) because
anxiety over the depletion of oil re- and West Geiinany (7.2 per cent). The of increased costs of oil imports.
sources has lost its urgency in Japan, galloping inflation was due to steep There is a possibility that such a huge
as in many . other developed industrial price spirals against the background, of'
current account deficit, if left uncheck
nations. The focus of .attention is now a global excess liquidity with the ad- ed, might cause the nations, involved
on the soaring. prices of crude oil in the. vent of the 1970's, 'followed by.-the oil to step up their 'export drive, trigger-
context of inflation in.these countries. a crisis, which pushed. up the production thg a fierce export race and import
That is, crude oil prices have more than costs' of industrial . manufacturers fur- curbs fact, Italy adopted an im-
quadrupled this year. Dyer 1973, 'bring'- thee. There is a large body .bf opinion ' port deposit system In May, while Den-
Ing further heavy pressure'to bear 'upon that holds that the global inflation, ac- mark also sharply raised domestic in-
advanced industrial nations, which are companied by high money rates, has direct taxes ,71n order to prevent such
suffering from "stagflation."` already taken firm root in the world protectionism from spreading, to the
From the latter half of 1972 to' the economy to some extent. For example, detriment of the world economy, the
first half of 1973, the economies , of in- the Sumitomo Bank said in a report on Minis terial".?Council of the OECD, in a
dustrialized nations showed such a ' world inflation, released in April, that meeting in Paris May 19 and 30;? adopt-
rapid, simultaneous advance as'. had ' the acceleration rate of inflation in ed a declaration of the "member' Gov-
ernments that restrictive measures re-
rarely been 'witnessed'-In -,'the `postwar terms of the average increase rate of
years. But their real growth pace GNP deflator for OECD-s 24 member garding trade, such as import curbs,
markedly slackened in the latter half countries stood at 5.7 per cent' on the excessive export promoting measures
of 1973. Meanwhile, wholesale prices in average from 1970 to 1973 or, two. to and export curbs, would not. be taken
Indications are,
these nations zoomed. up in 1973. 'This . three times as high- as in the 1960's. during the next year.
brought about a clear concomitance of As. the -latter half of the 1970's, the moreover, that a conference of the Com-
business stagnation and -Inflation-to bank forecast that the inflation rate mittee of 20- finance ministers, to be
"by the
wit, stagflation. Many economics ana- ' would show no major drop because of . held in Washington in -mid-3une-,(IMF),
?-lysts, in industrialized nations predicted ` world monetary instability andT the International Monetary Fuuui that the 'outbreak of -the oil crisis would mounting `resources nationalism in will -also adopt a declaration calling for
give added impetus to this stagflation developing nations. 'Therefore, it. pre- restraint on exchange ` restrictions,
tendency.. This was also true of Japan. . dieted. an annual inflation rate of 4 to which 'might set off a currency devalua-
For example, the, Economic Planning 'St" `per cent would continue, keeping the Fyn race, in addition -to trade restric-
tion
in a report on foreign aeon- f-~wtirid in a state of "high-pressure eco- ins.
omies published In January 1974 .fore- ;nom ; ` Now that the. on crisis bas, X~esulted
Approved For Release 2000 08/ 9" :CIA-RDP79-01 I 94A000 00610001-8
 Approved For Release 2000/08/29 : CIA-RDP79-01194A000100610001-8
In intensifying a conflict of interest be- closely watched the Investment attitude
tween developed industrialized states,
efforts are being made through such
international bodies as the IMF and the
OECD to take emergency self-restraint
measures against trade and exchange
curbs so that theconflict of interest
may not bring about `a .diminution of
the volume of world trade and a pro-
tracted stagnation of.the world economy.
Of course, developed industrialized
nations, with such self-restraint as a
leverage; are- hoping to translate into
reality their'long-cherished goal of.:put
ting on a smooth track the ' multilateral
trade negotiations at GATT ,(General
Agreement on Tariffs and- Trade) and,
at the same time, establishing a new
international monetary system as
"based orf reliable, though"adjustablet t
currency values.". But the Situation has
become so serious as to make it hardly
likely that such .hope can be .easily:
realized. .. .. ;
The "C-20" finance ministers' confer- -
ence has been studying. the reform' of
the international monetary .. system : with:
the target of reaching: broad . agreement
by July 1974. ' But, 'it appears,. the work
is about to be shelved With virtually. no
notable achievements. Indications point
to the present controlled. float' system
having to be maintained for at least the
next two or three, years; These cir-
cumstances are snaking the' monetary
unrest a "chronic" one, leading people
to feel a sort of disillusionment about
financial assets, as pointed out in ,the
. If developed industrialized nations,'in~
coping. with the : current: account ldeficI
or Arab oil-producing states since the
raising of crude oil prices, have said
that they, art
tuheapectedly, tatttlous
Itj
,
;
t
their Inve'str~ent" setlvityj : For' tt-2 re-
? ' Selit';..they -said,' these hatiohs ` t 111 prob
ably continue. their investments in short-'
term fields . as represented by bank
-
depos1ts, and short-term '..government
securities
Nevertheless, the recyc~tng Toutes of
to oil dollars are not hecessarllyrestricted
to 'international money markets, -sueh
a9 ,the 'Iturodohat? market and the New
York market. `'Another route' Is through
internatiohal organizations, and this may
be, said to- be desirable from: a vlew
point of ensuring a balanced idevelop-
' rnent'bf the world econo*. as "a'; whbleri? ''
because . such-'recycling could' lead ~ to
alleviating the balance : of . Payments,
difficulties of, nonoll-producing develop
ing nations, which ave been hit hard
directly and Indirect] y;by the oil crisis
t
di
- $
n g1
-
naa ;.( about
1!' dill
llon)'.'bbond -byl,tht;' ASiaii,ibeveiopmeht
Batik on' ' May .1 for public subscription; '
- Meanwhile, the World Bank signed an
agreement In March to, obtain a .$200,
million- loan from;ahe Iranian Govern-
merit, and then concluded. pn ,agreement y
with. the Abu .Dhabi Government In May,
lion) bond. `In `the: United' Aiab Emi-
have agreed to provide the'bahk with
0 Pilaf _n
- r _.. i .' ..
$3
d $2Q
; u+aylayi!!g !s
brought about: by the: