JAPANESE PUT ROSY FACE ON GROUP OF 7 MEETING YEN MARTS TAKE DIFFERING VIEW

JAPANESE PUT ROSY FACE ON GROUP OF 7 MEETING YEN MARTS TAKE DIFFERING VIEW

Japanese efforts to label a meeting of the Group of 7 nations a success in winning support for the yen ran into market skepticism Tuesday, leaving Tokyo monetary authorities in a bind over how to defend their currency, economists said.

''There was certainly an effort by the Finance Ministry to put the best face on it," said Robert Alan Feldman, a Salomon Brothers Asia economist. ''They put forward the view that it was a big success. It was aimed at the markets here."The Group of 7 leading industrial nations - the United States, West Germany, Japan, France, Britain, Italy and Canada - capped a weekend meeting in Paris with a pledge to continue cooperation in foreign exchange markets and economic policies.

But a communique after the meeting that said the yen's fall had undesirable consequences did not specify what action would be taken to support it.

Currency analysts said such official pronouncements were traditionally ambiguous and the Japanese authorities naturally sought to put this one in the most favorable light.

At a news conference when he returned from Paris, Ryutaro Hashimoto, Japan's finance minister, said the Group of 7 had come out in favor of a higher yen.

Yasushi Mieno, governor of the Bank of Japan, said the Group of 7 nations were ready to act properly and in a timely way based on the latest pact.

Early market reactions to the Group of 7 communique were skeptical, with dealers in New Zealand on Monday boosting the U.S. dollar to a high of 159.70 yen.

But the dollar later slipped back, opening at 155.80 in Tokyo. Dealers here said a key factor in the fall was a front-page story in the leading

financial daily, Nihon Keizai Shimbun, stating that the Group of 7 had agreed to buy the yen against their own currencies rather than intervening through the dollar/yen.

"The Japanese papers carried stories yesterday (Monday) totally different

from the gaijin (foreign) papers," said Mr. Feldman.

Stock market investors seized on the positive interpretation of the Group of 7 meeting to continue a share price rally that began on Friday. The key 225-share Nikkei index finished the day up 1,119.15 points, or 3.82 percent.

But on Tuesday, a less rosy view of reality for the yen seeped through domestic markets after overseas currency markets shrugged off concerted central bank intervention.

Tokyo share prices plunged, ending 773.25 points or 2.54 percent down at 29,624.68 as investors, discouraged at the yen's failure to strengthen, increasingly feared that Japan may have to raise its interest rates to defend the currency.

"It looks like the G-7 compromise looks more fictitious day by day," said one foreign broker.

The dollar ended steady after quiet, lackluster trading in a narrow range, ending the day at 158.15 yen against 158.14 and 1.6930 at Monday's New York close. It was little changed in New York's early trading Tuesday.

Economists said Japanese monetary authorities are caught in a bind over how to halt the yen's persistent decline given other Group of 7 nations' reluctance to lower their interest rates or intervene wholeheartedly to help out the Japanese currency.

The yen has fallen close to 9 percent against the dollar since the start of the year.