January 1999 © CNNFN

NEW YORK -- As the U.S. dollar sinks against the Japanese yen, already-struggling Japanese companies may soon be faced with even greater difficulties - an inability to export their products overseas.

But Karou Yosano, the Japanese minister of international trade, tells CNNfn that the market sets currency exchange rates, saying currency fluctuations are a "fact of life."

He also noted that economic reform in Japan is beginning to bear fruit and said Japanese steel mills estimate that exports of their product will likely be down this year to around 1997 levels.

Here is a transcript of Yosano's interview on CNNfn's Street Sweep program:

JOHN METAXAS, CNNfn ANCHOR, STREET SWEEP: Joining us with more on trade and currencies is Karou Yosano, minister of international trade for Japan. Welcome to CNNfn.

KAROU YOSANO, MINISTER OF INTERNATIONAL TRADE, JAPAN: How are you?

METAXAS: We are doing well, glad to have you. With the recent rise in the yen, as the minister in charge of trade, are you at all concerned that a rising yen will hurt Japanese exports.

YOSANO: Well I think I have to be very careful. And I think that any official of government should refer to the adequate level of rate. The rate of the yen should be decided through the market, I believe. However, volatility of the exchange rate is not desirable for any country. And the present rate -- I have no comment. It has been decided by the international market. So we have to ask the market why the dollar went down, or the yen went up.

HOPKINS: But the stronger yen hurts trade in Japan. It's more difficult for your companies to export goods. At some point -- when does that become a problem?

YOSANO: It is the fact of life. We accept that.

METAXAS: There has been talk that the finance ministry has been hinting about intervening to support the dollar. Do you give any credence to these reports? Can you tell us anything about them?

YOSANO: Well, I think, if any comment or statement by officials miscarried and triggered, the end rate change. This is a lamentable situation.

METAXAS: What about internally in Japan right now? We've spoken about exports. What about your efforts to drive up internal demand. Do you see any fruit in some of the reform efforts?

YOSANO: Actually between your country and Japan, actual import is not rising. It is not rising. What has happened is that our import from your countries has decreased quite a bit.

HOPKINS: Has decreased?

YOSANO: Decreased, because of economic stagnation at home. So therefore we are taking measures. First we have to strengthen our financial institutions. The second is we have drafted very aggressive fiscal stimulation. And this is all meant to have a domestic-demand led economy -- to be more emphasized. And that will eventually contribute to the lessening of trade imbalance between the two countries.

HOPKINS: But are you starting to see any change? Are the Japanese consumers starting to spend more money. Is the Japanese economy starting to improve?

YOSANO: I think so. During the last two years, Japanese consumers have lost confidence in the future of our economy. But since many reforms have been carried out, I think Japanese consumers are starting to regain confidence in the future of (the) Japanese economy. And in certain areas already the demand is rising, like in small cars.

And I believe that together with tax cuts in corporate tax and income tax, Japanese consumers would start to consume goods whether they are produced domestically or overseas.

METAXAS: The United States-based steel companies have said they would like Japan to cut back its exports of steel. How much friction do you expect in this arena? And is it representative in your view of perhaps increasing trade friction with the United States.

YOSANO: Trade friction could always be solved. But what happened is that your steel demand in your market in 1998 was very, very strong and orders and quotation came from your country to Japanese steel mills. So we exported.

But because many specialists point out that there would be decline in demand in the U.S. steel market, Japanese private steel mills forecasts suggest that the export level in 1999 fiscal year would be close to the level of 1997. And this is not my personal promise or commitment of our government, but private focus says that in 1999, the level of export (will) naturally be down to the size of 1997.