Page:Economic Reform Policy by Envoy Dodge (Dodge Line).pdf/4

 On Foreign Exchange Rate

There exists a general desire for the early establishment of a single rate of exchange on foreign trade transactions. The urge to accomplish this is easily understood and there is an official objective to do so as soon as practicable.

While it is not too difficult matter to compute a rate based on present circumstances that is not all there is to the problem. There are other factors which should be considered.

It is one thing to establish a single official rate and another to defend it after it has been established. No one should want a rate which jiggles violently up and down.

Today the dollar rate is almost the sole consideration and concern because the present pattern of imports is overwhelmingly in dollars. However, that is not the historical patter of Japanese foreign trade, and may not and probably should not be the pattern of the longer term future. Thus the ultimate patter of Japanese trade is a factor also deserving of consideration.

Finally it should be remembered that the primary objective must be the accomplishment of a rate which will stimulate exports without unduly penalizing imports, and that an effective economic stabilization is closely related to achieving a sound and satisfactory result.

On Inflation and Stabilization

Real stability and progress have to be based on a sound fiscal and monetary approach to the nation's problems. An effective stabilization requires relating all policy decisions to the Government budget as a primary instrument of financial policy.