A Relentless Breeze

For sheer stagecraft. Treasury Secretary John Connally's stopover in Japan last week rivaled a Kabuki drama. Two weeks before his arrival, rumors began emanating from the U.S. and Japan: in exchange for lifting the American import surcharge, Connally would demand that Japan revalue the yen upward by 15%, reduce the number of color television sets, automobiles and other big-selling items it ships to the U.S., pay part of the cost of keeping U.S. forces in Japan and drop trade barriers against U.S. farm goods. The Tokyo press started referring to the Secretary as "Typhoon Connally."

Japanese officials got the message--and so Connally felt no need of actually delivering an unpleasant ultimatum. Instead, he chose to play the role of an amiable but powerful friend seeking help. "I came as a gentle spring breeze," he joked. In two days of talks with Japanese leaders, including Prime Minister Eisaku Sato and Finance Minister Mikio Mizuta, he proved a rather relentless breeze. He continued to insist that the U.S. will not drop the surcharge until it can see a clear prospect of wiping out its balance of payments deficit. He left it to the Japanese--who are well aware of their dependence on the American market for their exports--to figure out a way of helping to do so. It would be "presumptuous" of the U.S. to specify a formula for another country, he said.

Pressing the Point. Lest anyone think he had softened, however, Connally lost few opportunities to drive home the U.S. position. At a press conference, a plaintive question about the U.S. surcharge prompted him to remark: "You can buy a Toyota in California for $2,000. You can buy an American-made Pinto there for approximately $2,000, but that same Pinto here in Japan would cost you $4,000. That is slightly more than 10%."

With obvious relish, Connally told the Japanese, who desperately want a quick solution to the international monetary crisis, that the U.S. was not responsible for delaying a settlement. He noted that he had to postpone the next meeting of the finance ministers of ten major non-Communist trading powers, a group of which he is chairman, from Nov. 22 until early December because "the European countries have had difficulty getting a common position." That remark touched a sensitive nerve in Common Market countries, which have been charging that the U.S. is dragging its feet on solving the world's monetary woes. The Europeans at this point agree only that a solution must involve a formal U.S. devaluation of the dollar, through an increase in the price of gold. They have not settled on what currency revaluations and trade concessions they will offer in return for that and the lifting of the U.S. surcharge.

On Nobody's Side. For all his friendliness in Tokyo, Connally is clearly trying to force a settlement with Japan and use it to pressure European countries into upvaluing their currencies against the dollar. For the moment, European disunity gives the U.S. the advantage, and Connally's strategy just might work. But he is taking the gargantuan risk that a continuing impasse could hobble world trade badly enough to touch off a global recession. Connally recently remarked that he feels "under no compulsion to settle." Federal Reserve Chairman Arthur Burns does not share that insouciance. Testifying to the House Banking and Currency Committee earlier this month. Burns said, "Time is on nobody's side."

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