The dollar should worth more than 170 yen based on purchasing power parity the Ministry of International Trade and Industry (MITI) said in its annual white paper on international trade. Using 1973 as a base year the ministry said inflation differentials pointed to a yen/dollar rate of 172 in fourth quarter 1986. The dollar opened here today at 144.90 yen. MITI also said the so-called J-curve and the drop in oil prices together accounted for 33.2 billion dlrs of the 36.6 billion dlr rise in Japans trade surplus last year. On a customs cleared basis the Japanese trade surplus rose to a record 82.66 billion dlrs last year. The ministry said the fall in oil prices accounted for 16.5 billion dlrs and the J-curve 17.2 billion dlrs of the rise in the 1986 surplus. Analyzing the expansion in Japans trade imbalance in recent years MITI calculated that 37 pct of it could be accounted for by exchange rates 24 pct by differences in economic growth rates between Japan and other countries and 36 pct by so-called price elasticities of imports and exports. Analyzing the expansion in the U.S. Trade deficit from 1982 to 1985 the ministry said 24 pct was accounted for by exchange rates 34 pct by differences in the income elasticity of imports and exports and 39 pct by differences in economic growth rates. The figures do not tally to 100 pct because other minor factors have been left out. One index of trade structure the income elasticity of exports and imports shows that the U.S. Is more likely to experience increases in imports while Japan is structurally predisposed to growth in exports MITI said. Structural adjustment is already underway in Japan under the impact of the strong yen MITI said. Japanese companies are stepping up their imports and expanding capacity overseas. Japanese consumer attitudes are also changing. The ministry cited a survey showing that price was now the number one factor in the purchase of imports from the U.S. And Western Europe replacing design and brand reputations. The smooth adjustment of the economic structure calls for measures to address the needs of affected firms it said. Whole industries have felt the pinch and employment is expected to suffer. Sustained economic growth led by domestic demand will also be an essential condition the ministry said. It said four structural factors have contributed to the growth of the U.S. Trade deficit in recent years -- a decline in U.S. Industrial competitiveness insufficient productive capacity an increase in foreign procurement by U.S. Companies and short-sighted U.S. Management attitudes. While (U.S.) exports have picked up somewhat with the dollars fall in value no marked improvements have appeared in the import picture MITI said.
JAPAN MINISTRY SAYS DOLLAR SHOULD BE ABOVE 170 YEN