At the G7 conference of finance ministers and central bank chiefs that was held in Washington over the weekend, the delegates from other member nations agreed to adopt a read-between-the-lines statement in which the world's top financial managers shared their worry over the recent sharp rise of the yen. This official expression of joint concern over the potential dan gers entailed in the yen's rise was reciprocated by a promise from Japan to implement business-stimulating measures de signed to put the economy on the path of stable growth driven by domestic demand.

Recent government reports note the Japanese economy is showing signs of an upturn. Gross domestic product, for example, recorded positive growth in both the first and second quarters of this year. This, however, encouraged a pre-emptive buying of the yen on foreign exchange markets, causing the yen's value to soar. Ironically, the rising yen drew only a negative reaction from the stock markets, which began to fall.

Both developments posed a dilemma for the Japanese government and the central bank, which feared that these hostile markets could nip the nascent economic recovery in the bud. But Japan's effort to sound out the United States and other G7 economic powers on the possibility of coordinated market intervention backfired. The reason was that the latest rise in the yen was generally regarded as Japan's own problem. The U.S. therefore persisted in thinking that Japan should first take substantial measures to relax the money supply before it talked about a coordinated market intervention.