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Nakasone: Nation's Bank to Lower Rates

Tells Reagan Move Is Attempt to Spur Economic Growth

WASHINGTON--Japanese Prime Minister Yasuhiro Nakasone told President Reagan yesterday that he had ordered the Bank of Japan to lower short-term interest rates to spur Japanese economic growth, Reagan's spokesman said.

"The prime minister said, `I've instructed the Bank of Japan and the finance ministry to start the operation to lower interest rates, and it has started,'" White House spokesman Marlin Fitzwater said Yesterday.

The announcement came at the end of the first session of talks during Nakasone's three-day visit.

"The President was very pleased," said a senior U.S. administration official who spoke on condition he not be identified.

Fitzwater later explained that a major impact of reducing Japanese interest rates would be to boost Japan's economic growth and increase consumer demand, as well as increase imports from the United States and other countries.

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"This is a major opportunity for expanding Japanese markets for U.S. goods and the buying power of Japan generally," he said. The U.S. senior official said lower interest rates in Japan would also tend to bolster the U.S. dollar against yen.

Reagan welcomed Nakasone at a ceremony on the south lawn of the White House during which both leaders pledged to work to end their governments' nagging economic differences, as the Japanese and U.S. flags fluttered behind them

"Even the closest of friends can have differences," Reagan said. Nakasone also expressed hope that the two countries can put their relations on "unshakeable grounds."

In a reference to pressures in Congress for tougher measures against Japan, which had a $58.6 billion surplus in U.S. trade last year, Reagan said, "We recognize the domestic pressures that play a part in the decision-making processes of our respective countries."

But he added, "It is the long term well-being of our societies that must govern. Today the trading system is in need of adjustment. Yet the answer is not in restrictions but in increased opportunities. So together let us seek positive solutions."

At the same time, he called the trade imbalance "unsustainable" and called for Japan to open its markets to foreign goods. Such a development would help lower prices for the Japanese, he said.

Later, posing for pictures with Nakasone in the Oval Office, Reagan was asked if House-approved legislation for action against Japan would complicate his talks with the prime minister. "Only if I let it," Reagan replied.

He refused to say whether he would veto the measure, if it wins final congressional approval, or whether he would impose additional sanctions against Japan if it failed to take actions sought by the United States. Nakasone, asked if he was troubled by the House provision, declined comment.

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