§ Mr. Deakinsasked the Chancellor of the Exchequer why the European Community Council in October agreed that the yen should better reflect the strength of the 403W Japanese economy; and if this decision reflects change in Her Majesty' Government's view that exchange rates are matters for the market.
§ Mr. Ian StewartThe Foreign Affairs Council on 17 October noted the continuing deterioration in trade trends between the Community and Japan; and observed that this problem would be eased if, among other things, the value of the yen better reflected the strength of the Japanese economy. Japan, like the United Kingdom, has a floating exchange rate, and the value of the yen is broadly determined by market forces. Market judgments will be influenced not only by the underlying competitive strength of the Japanese economy but by a complex of other factors including the state of regulation and development of yen financial markets, and the relative balance of fiscal policy in Japan and elsewhere, as was recognised in the agreement between the Japanese and United States Governments announced on 10 November. There has been no change in Her Majesty's Government's exchange rate policy.