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SENATE BACKS U . S . RETALIATION IN GULF The U . S . Senate on Tuesday backed President Reagan ' s retaliatory strike against Iranian targets in the Gulf as it moved to take a greater role in making policy in the volatile region . Senators voted 92 - 1 for a non - binding measure that endorsed Monday ' s U . S . attack on two Iranian oil platforms in retaliation for an Iranian attack last Friday on a Kuwaiti ship flying the American flag . The measure said the attack was a firm indication of U . S . resolve that Iran " cannot take military action against the United States with impunity zulchzulu Earlier , the Senate cut off Republican stalling tactics and set a vote on a measure that could give Congress a larger role in making Gulf policy . The measure , however , does not require Reagan to comply with the 1973 War Powers Act , which could lead to a pullout of U . S . forces from the Gulf . While Democrats and Republicans praised the U . S . retaliatory strike , many voiced new fears about the growing U . S . involvement in the Gulf and some demanded that Reagan comply with the War Powers Act .

TREASURY ' S BAKER UNDER FIRE FOR WALL STREET DROP As official Washington sought to restore investor confidence after Monday ' s Wall Street collapse , Treasury Secretary James Baker came under fire from critics who claimed he helped to precipitate the crisis . Baker ' s weekend blast at the West German Bundesbank for boosting interest rates seemed to signal an unraveling of an international accord to stabilize currency values . Nigel Lawson , British Chancellor of the Exchequer , was among those who said the treasury secretary ' s statements helped spur a wave of stock sales by making already jittery investors think that a clash between the two major economic powers would damage the world economy . Lawson told a London television interviewer Tuesday , " I think the scale of the ( stock ) fall was very great . That , I think , was partly due to statements that have been made by senior figures on the other side of the Atlantic zulchzulu It was a dispute that should never have happened , he added . Although Baker appeared to patch over the rift at a hastily - called meeting with West German officials Monday , he still faced a storm of criticism on his return to the United States on Tuesday . Baker cut short a long - planned trip to Scandinavia to return here to deal with the economic crisis . Said one U . S . analyst of Baker ' s weekend remarks , " His timing could not have been worse zulchzulu One government bond salesman in New York said , " He actually thought that yelling at the Germans , and threatening to smack the dollar down would work . That doesn ' t show much understanding of international monetary gamesmanship zulchzulu However , some analysts said West Germany ' s stubborn march toward higher interest rates may have forced Baker ' s hand . " On the surface Baker may look responsible for this , but if you go back to see what caused it ( unsettling of financial

CITIBANK LOWERS AUSTRALIAN PRIME RATE TO 16 PCT Citibank Ltd said it would lower its Australian prime rate to 16 pct from 16 . 5 , effective tomorrow . The new rate , if unmatched by other banks , will be the lowest among Australian trading banks . Other primes range from 16 . 25 to 17 . 5 pct . Australian prime rates have now retreated from a recent peak of 19 pct in October in line with declining money market levels . Citibank said its reduction reflected the decline .

CITIBANK LOWERS AUSTRALIAN PRIME RATE TO 16 PCT Citibank Ltd said it would lower its Australian prime rate to 16 pct from 16 . 5 , effective tomorrow . The new rate , if unmatched by other banks , will be the lowest among Australian trading banks . Other primes range from 16 . 25 to 17 . 5 pct . Australian prime rates have now retreated from a recent peak of 19 pct in October in line with declining money market levels . Citibank said its reduction reflected the decline .

TOKYO STOCK PLUNGE COULD FORCE EASIER MONEY POLICY Plunging Tokyo stock prices will prevent the Bank of Japan from raising its discount rate and could even force it to ease monetary policy if the collapse continues , government and private economists said . A rise in interest rates now would only serve to spark further selling of shares that could ultimately have a major deflationary impact on the real economy , they said . Although Bank of Japan officials have consistently maintained that they had no plans to raise the 2 . 5 pct discount rate , many in the markets have thought otherwise . Fears of a rise in the discount rate were fanned by the central bank ' s apparent decision last week to countenance higher rates on commercial bills , dealers said . But today ' s stock market collapse -- prices fell nearly 15 pct -- means that the Bank of Japan would be hard pressed to raise the discount rate now , despite its concerns about a renewed outbreak of inflation , dealers and economists said . Japanese government bond prices rose sharply today as the markets concluded that the stock market ' s collapse precluded the central bank from carrying out the widely - rumoured discount rate increase . A senior government economist suggested that both the U . S . And Japan needed to ease monetary policy now to prevent a further drop in New York and Tokyo stock prices . " They need to support the stock and security markets zulchzulu he said . But Bank of Japan officials said they saw no need to change policy for the moment , although one admitted that the central bank may have to rethink its strategy if Tokyo stock prices continue to plunge during the rest of the week . Both government and Bank of Japan economists agreed the economy is better placed now to cope with the deflationary impact of plunging stock prices than it was a few months ago . With the economy recovering strongly , the steep drop in stock prices

JAPANESE TARIFFS SEEN AS WORLDWIDE WARNING The tough trade sanctions President Reagan imposed on Japanese exports are not only a shot across Japan ' s bow but also a sign Reagan will attack unfair trade practices worldwide , U . S . officials said . But Robert Crandall , a trade specialist at Brookings Institution , a think tank , said " a shot across their bow can often result in a shot in our stern zulchzulu He said it left the United States open to retaliation . The U . S . officials said the 100 pct tariffs Reagan ordered on 300 mln dlrs worth of Japanese goods will also show Congress that a tough pro - trade stand can be taken under existing laws , and no new protectionist legislation is needed . In the past year tough trade action had been taken against the European Community over corn and sorghum , Taiwan over beer and wine , South Korea over counterfeiting of copyrights , patents and zulchzulu and Japan on tobacco . White House spokesman Marlin Fitzwater told reporters the tariffs - up from five pct - should be seen as a " serious signal " to other nations on the need for fair trade practices . Reagan said he imposed the sanctions on certain computers , television sets and some hand tools because Japan did not honor an agreement to end dumping semiconductors in world markets at less than cost and to open its markets to U . S . products . The tariffs were placed on items which were available from other sources so there would be little effect on the American consumer , Fitzwater said . Reagan has come under heavy pressure to take tougher action - especially against Japan - to end global unfair trade practices and reverse the growing U . S . trade deficit . The alternative was that if he did not , Congress would . The U . S . trade gap last year was a record 169 . 8 billion dlrs , and continues to rise , with

zulchzulu LOOKS SET FOR EIGHT MORE YEARS AT zulchzulu For currency dealers Karl Otto Poehl is the scourge of speculators , for bankers he is the man who has played a key role in shaping the world ' s financial destiny for the last seven years , and for Germans he is the guardian of the mark . President of the powerful and independent West German central bank , the Bundesbank , Poehl is likely to have his contract renewed for another eight years when it expires at the end of this year , government officials say . ( Index of economic spotlights , see page ECRA ) But no official announcement has yet been made , raising eyebrows in West Germany ' s business community . The ebullient Poehl spent seven years in Bonn in top ministerial posts under the Social Democrats , now in opposition , before he moved to the Bundesbank . There has been speculation that Chancellor Helmut Kohl would try to replace Poehl with a man closer to his own Christian Democrats . But officials noted that Poehl has worked closely and successfully with Finance Minister Gerhard Stoltenberg since Kohl ' s government took office in 1982 . Poehl , the most senior central banker apart from Paul Volcker of the United States , enjoys a strong international reputation which it would take a newcomer years to build up . Given these circumstances , Kohl will probably overlook Poehl ' s past as an adviser to former Social Democrat Chancellor Willy Brandt , and top aide to Helmut Schmidt when he was Finance Minister , bankers said . It was Schmidt who , as Chancellor , appointed Poehl to his present job in 1980 . In recent months , with the mark ' s strong rise against the dollar , Poehl has made exchange rates the central concern of the Bundesbank ' s council , a highly conservative institution which has doggedly pursued monetary policies to prevent inflation catching hold . Older Germans can remember two bouts of galloping inflation this century . But with

INDIA RELAXES RULES FOR EXPORT PROMOTION The Reserve Bank of India , RBI , announced new rules to allow exporters of 25 products to use foreign exchange up to 10 pct of their firm ' s total annual export earnings for export promotion abroad . The move is designed by the government to improve India ' s trade deficit . Products eligible for the new Blanket Exchange Permit Scheme include tea bags , cigarettes , coffee , leather , various textiles , chemicals , pharmaceuticals , plastics , engineering and electronic goods , ready - made garments , processed food , sports goods , fabricated mica and consultancy services . The scheme replaces current rules which allow different amounts of foreign exchange to be used only when firms attain a minimum annual turnover prescribed for each product . RBI said under the new rule , 16 other products will qualify , on a discretionary basis , for overseas promotional spending of not more than two pct of the freight - on - board value of annual export earnings . These include oil cakes , cereals , raw cotton , raw and semi - processed leather , gems , castor and sandalwood oil , psyllium husks and seeds , opium and various mineral ores . RBI said exporters of products not covered by either of the two groups will be eligible to use up to five pct of their freight - on - board value of their annual export earnings . Industry sources said the new entitlements , considerably higher than the previous limits , are also more flexible because holders of new permits no longer need to frequently apply to RBI for release of foreign exchange for export purposes .

U . K . RESERVES LIFT HOPES OF FURTHER BASE RATE CUT The record 4 . 9 billion dlrs rise in U . K . Reserves in May to a total 34 . 7 billion has lifted hopes for a further cut in bank base lending rates after the June 11 general election , market analysts said . Sterling would have risen on the much better than expected number but for market nerves about the poll outcome , they said . But the weight of foreign currency and gold reserves now available to the authorities to support the pound should curb any market tendency to panic if U . K . Opinion polls show the ruling Conservative Party ' s lead slipping , they added . " We have been intervening to a very much greater extent than we have done hitherto zulchzulu Chancellor of the Exchequer Nigel Lawson said at a news conference today , commenting on the news of the record reserves rise . He put the U . K . Intervention in the context of the Louvre accord between leading industrial nations to stabilise the dollar , partly through direct intervention on foreign exchanges . " We have been playing a very full part ourselves zulchzulu he said . But market analysts see the recent upward pressure on sterling , and consequent need for official sales to damp down its rise , more in the light of local factors . Steven Bell , chief economist at Morgan Grenfell Securities , said that corporate money has been flowing back into Britain amid hopes of another Conservative government , after fears last autumn of a Labour election victory sent it flooding out . U . K . Portfolio investment is also returning , while foreign buyers see U . K . Growth propects and high bond yields as attractive . They will be strong buyers of U . K . Assets , notably equities , once the election is out of the way , Bell said . Analysts see this pressure as the main hope for lower interest rates

U . S . SENATE TEAM WANTS MULTINATIONAL GULF FORCE The leaders of a U . S . Senate team probing American defense strategy in the MidEast Gulf said they favored a multinational force to keep oil flowing through the waterway . Sen . John Glenn and John Warner , in Kuwait as part of a Gulf Arab tour , said at a news conference that top officials in the area appeared ready to discuss extra facilities needed if the U . S . upgraded its defense role . The Senate team next heads for the United Arab Emirates , their last stop on a fact - finding mission prompted by Reagan administration plans to let half of Kuwait ' s 22 - tanker fleet fly the U . S . flag . Glenn and Warner said the U . S zulchzulu Britain and France , should explore the possibility of a unified Gulf force . " The American ships , the British ships , the French ships now talk to each other and all we ' ve got to do is formalize this arrangement zulchzulu Warner said . Glenn said a multinational force could be effectively deployed within 24 hours of a decision . Glenn voiced a preference for a United Nations multinational force , or failing that , an American , British , French force with cooperation from the Gulf Arab states . Warner voiced concern that the Soviet Union might use the situation in the Gulf to raise its presence . " And , unequivocally , all GCC states we have talked with , have said that would not be in the interests of the Arabian peninsula zulchzulu

BANK OF JAPAN DETERMINED TO KEEP EASY MONEY POLICY The Bank of Japan bought 100 billion yen in certificates of deposit ( CDs ) via repurchase agreements today to show its determination to maintain an easy money policy , central bank officials said . " Today ' s CD buying operation was designed to seek an announcement effect , in which we would reassure the market of the fact that we have not changed our policy stance zulchzulu a senior central bank official told Reuters . The bank also bought 400 billion yen in two - month commercial bills to smooth out tight credit conditions in the interbank market today , the officials said . The central bank was concerned about growing market expectations of higher interest rates , which were in part responsible for the recent plunge in stock and yen bond prices , the officials said . But money traders said the market generally shrugged off the bank ' s CD operation because it was small and at a rate far below prevailing market rates . The rate on the key three - month CDs in the primary market was 4 . 08 / 00 pct , while the bank ' s bid was 3 . 75 pct , they said . The bank ' s bill buying operation also had little impact because it was regarded as a routine operation , they said . The money traders said they regarded the central bank ' s CD buying operation as simply a gesture to live up to Japan ' s pledge to guide interest rates lower and stimulate the economy . " We did not expect the central bank to ease its credit grip any further zulchzulu a bank manager said , adding that the prevailing market expectation of higher rates will remain . " If this is the case , the three - month CD rate will stay above four pct for the time being zulchzulu he said .

U . S . STUDY SAYS TARIFFS AND QUOTAS COULD BACKFIRE The use of tariffs and quotas to reduce the flow of foreign goods into the United States will do little to cut the nation ' s swelling trade deficit , a government study said . In fact , the Federal Trade Commission ( FTC ) report said , such protectionist policies could make U . S . Products less competitive in the world marketplace by raising the cost of imported products that are re - exported in different forms . " Such policies are much more likely to hurt , rather than help , the productive capabilities of the U . S . Economy zulchzulu it said . The 218 - page report , written by FTC economists John Hilke and Philip Nelson , blamed the rising trade shortfall , which climbed to a record 166 . 3 billion dlrs last year , on shifting currency exchange rates and growing U . S consumer demand . Other factors commonly blamed for the deficit , such as foreign trade practices , deteriorating U . S . Industrial competitiveness , high labour costs and government restrictions on mergers , added little to the problem , it said . " Although each industry ' s competitiveness affects the level of imports and exports in that industry , in general we find that there have been no significant industry - specific changes affecting competitiveness that would explain the increase in the overall trade deficit zulchzulu the study said . " To the extent any government action is needed to deal with the trade deficits , policies should focus on economy - wide phenomena such as exchange rates and relative economic growth zulchzulu the FTC study said . Supporting its conclusion that broad - based economic shifts were the cause of the increase in the trade deficit , the report said it found that nearly all U . S . Industries lost some domestic market share to foreign competitors in the 1980s . It also said it found a " fairly direct relationship "

NEW ZEALAND BUDGET FORECAST SEEN AS POSITIVE Analysts said they were surprised at the government ' s announcement of a forecast budget surplus for fiscal 1988 but said it was consistent with previous policy statements and positive for the economy . Finance Minister Roger Douglas predicted a budget surplus for the year ending March 1988 of 379 mln New Zealand dlrs against a 1 . 95 billion deficit last year . Analysts polled by Reuters said the forecast budget surplus was even more positive than the most bullish analysts ' forecasts and that this was good news for financial markets . Market expectations among analysts questioned by Reuters before the budget varied widely between a balanced budget and a 2 . 3 billion dlr deficit . But none predicted a surplus . The forecast initially looks positive for both the bond and the foreign exchange markets , one analyst said . Paradoxically , the New Zealand dollar could rise in the medium term , despite lower interest rates , as overseas investors became more confident about investing in New Zealand , he said . However , some foreign exchange dealers disagreed , saying the local dollar is primarily interest rate driven and will move lower . The local dollar dropped to 0 . 5940 / 50 U . S . Dlrs in after hours trading , against 0 . 5970 / 77 just before the budget release . Analysts said the budget was also positive for the share market , despite an increase in the contribution of company taxation to revenue figures . One equities analyst predicted that the budget surplus announcement could push the share market up by 50 points tomorrow . The Budget statement was broadly as expected , with a continuation of existing policies , and the absence of traditional pre - election incentives would be viewed positively by overseas investors , another said . But one merchant bank economist said that certain anti - tax avoidance measures could damage some sectors of the share market , particularly multi - national companies . The government is also

U . S . TAKES TOUGH STAND ON GATT FARM ISSUES The United States is prepared to " pull out all the stops " to defend its agricultural trade rights under the General Agreement on Tariffs and Trade ( GATT zulchzulu U . S . Ambassador to GATT Michael Samuels said . Those rights are now being challenged by the European Community ' s ( EC ) agricultural support policies , he told a conference sponsored by the American Soybean Association . He reiterated Washington ' s firm intention to retaliate if the EC goes ahead and bans imports of hormone - fed beef without the issue being investigated by a GATT special committee . The U . S . claims the EC directive , due to come into effect on January 1 , threatens to cut 100 mln dlrs worth of U . S . meat shipments into the EC . The U . S . also will oppose all EC efforts to impair U . S . trade via the EC oilseeds regime , which supports EC oilseed prices over the current market level and which may be extended to include a hotly disputed oils and fats tax , Samuels said . Reduction of trade - distorting world agricultural subsidies , an aim of most key participants in GATT multilateral trade negotiations , " is meaningless if import barriers continue to be erected zulchzulu Samuels said . Samuels called the U . S . plan to eliminate world farm subsidies by the year 2000 , proposed at GATT in July , " visionary " and " very serious zulchzulu The EC and Japan have said it is unrealistic . The EC Commission this month announced its draft proposal on farm trade reform , expected to be tabled at GATT formally next week . The EC scheme involves emergency measures to reduce tensions in troubled surplus sectors of cereals and cereals substitutes , dairy and sugar . It also calls for reduction of farm subsidies . The U . S . Is not opposed to short - term measures

SHULTZ WELCOMES TOKYO ECONOMIC PACKAGE U . S . Secretary of State George Shultz said the 6 , 000 billion yen economic package announced by Tokyo last week went further than the U . S . Had expected . But he said the U . S . Would not lift the selective economic sanctions it imposed on Japanese imports in April until Tokyo changed its sales policies concerning computer microchips . Speaking in a televised news conference linking several European capitals , Shultz said it was heartening that the Japanese had confronted the problem of stimulating domestic and global demand . " There is an even greater amount of stimulus than was originally thought zulchzulu said Shultz , speaking from Washington . " It is a lot more than nothing . It is more than was talked about when ( Prime Minister Yasuhiro ) Nakasone was here . " It involves a major reduction in tax rates and we believe that getting the tax burden down is one way of stimulating the economy zulchzulu he added . But asked by Japanese reporters , also linked into the news conference , whether the positive reaction meant the U . S . Might decide at next week ' s Venice summit to lift its sanctions on some Japanese electronic goods , Shultz replied : " These sanctions were undertaken on the basis of an agreement that had been reached between the United States and Japan on various sale practices and prices relating to the chip market . " They will be lifted as the facts of change by Japan to the agreement that it made become evident zulchzulu He said U . S . Officials had only been able to monitor the situation for a month and that it was impossible to determine a trend on only one month ' s data . The U . S . Imposed 100 pct import duties on personal computers , colour televisions and power tools , alleging that Japan had violated last September ' s bilateral agreement by selling computer chips at below fair market

BRITISH MINISTER SAYS HE WARNED TOKYO OF SANCTIONS A British minister said he had given the Japanese government a clear warning of sanctions against Japanese companies if Tokyo did not allow more access to its internal markets " and it was clearly understood zulchzulu Corporate Affairs Minister Michael Howard said on his return from a visit to Japan he thought the Japanese were beginning to appreciate the need to be " fair and open " about access to their own markets . At an airport news conference Howard denied opposition charges that his trip had been a failure because he had returned empty - handed . " I did what I set out to do . I was sent to deliver a clear message to the Japanese government , and I delivered it very clearly , and it has been clearly understood zulchzulu Howard said that under the Financial Services Act the govenment had considerable flexibility in taking sanctions against Japanese companies and finance houses operating in Britain . " It is not simply a question of withdrawing or refusing operating licences . We can ban firms from certain countries from carrying out certain kinds of business , while allowing them to carry out other kinds zulchzulu " I hope we don ' t have to use these powers , but I made it clear in Japan that if our timetable isn ' t met , we shall use them zulchzulu He said it would be unfortunate if Britain and Japan became involved in a tit - for - tat exchange , adding that Japan gained more than anyone else from an open trading relationship . " I think they are beginning to appreciate that if this relationship is to continue , it is very important for them to be fair and open about access to their own markets zulchzulu On the question of the British firm Cable and Wireless Plc & lt ; zulchzulu . L zulchzulu which is trying to win a significant share of telecommunications contracts in Japan , Howard said he had told the Japanese this

U . K . CENTRAL BANK WARNS OF EXCESSIVE RATE CUTS Bank of England governor Robin Leigh - Pemberton said lowering interest rates too fast could jeopardise recent economic achievements in the U . K . In remarks prepared for delivery to businessmen in Birmingham , he said prospective returns on real investment are more favourable , relative to those on financial assets , than for a good number of years . " It would surely be foolish to put that favourable conjuncture at risk by lowering interest rates prematurely or excessively zulchzulu he said . " We might enjoy a short - term boost to activity , but at the risk of a damaging return to the uncertainty and acrimony of high inflation zulchzulu he added . Leigh - Pemberton said he recognised there are some who would argue that interest rates are still too high and deter investment in industry . " But we should not forget that less than a year ago we were intervening to support sterling and had some temporary difficulty in persuading the markets that a one pct increase in base rates , to 11 pct , was a sufficient tightening of policy at the time zulchzulu he added . Base rate is currently nine pct .

SOVIETS OUTLINE 1988 ECONOMIC TARGETS The Soviet Union outlined its economic targets for 1988 on Monday , stressing the need to improve standards in the country ' s sluggish engineering industry . Planning chief Nikolai zulchzulu told the Supreme Soviet industrial output should rise by 4 . 5 pct in 1988 , up from a planned 4 . 4 pct in 1987 . It rose 3 . 6 pct in Jan - Sept 1987 . zulchzulu said national income , the nearest Soviet equivalent to gross national product , should rise by 4 . 3 pct against a planned 4 . 1 pct this year . Gross national product measures the output of a country ' s goods and services . He said the Kremlin planned to produce 235 mln tonnes of grain in 1988 versus a planned 232 mln this year . Moscow produced 210 mln tonnes in 1986 . Kremlin leader Mikhail Gorbachev has described machine - builing as a sector whose rapid modernization is essential if the Soviet Union is to compete effectively on world markets . " Certain difficulties have arisen this year in the machine - building industry . The economy is not receiving a considerable amount of the equipment that it requires zulchzulu said zulchzulu , who heads the state planning committee zulchzulu . Soviet data show the machine - building industry , which makes machine tools , instruments and other engineering goods , increased output by 3 . 3 pct in the first nine months of 1987 compared with the same period last year . However , this was far below the 7 . 3 pct increase planned for the industry for the whole of 1988 . zulchzulu said the ruling Politburo had concluded at a recent meeting that an improvement in economic performance depended to a large extent on conserving resources better . " Large - scale measures are planned to save resources zulchzulu he said . Finance Minister Boris Gostev told the Supreme Soviet that defense spending in 1988 would total 32 billion dlrs , the same figure as was announced

KUWAITI DINAR RATES FIRM , AID WINDOW OPEN Interest rates on Kuwaiti dinar deposits held firm in scattered trading despite a Central Bank decision to revive limited funding lines , dealers said . The Central Bank , which last Tuesday shut a daily aid window through which it lent funds of up to one year , reopened the facility for three month money , which was available at seven pct , they said . It offered one month funds at seven pct through swap facilities , dealers said . Today ' s Central Bank action , combined with sales of dollars by some banks , helped ease a recent credit squeeze engineered by the monetary authority to stem a rush for the U . S . Currency arising from attractive U . S . Interest rates and Gulf tension , dealers said . However , as one dealer noted : " The market is still unsettled zulchzulu Overnight funds , bid at 20 pct at the outset of business , traded up to 30 pct before easing as liquidity dragged offers down to 10 pct by the close . Tomorrow - next , for which buy / sell quotes started at 30 , 20 pct , ended at 14 , eight . Spot - next was indicated at 8 - 1 / 2 , seven after opening bids of 10 . Dealers quoted one - week at eight , seven against an early 9 - 1 / 2 , 7 - 1 / 2 . One month rates were at the same level after trade at eight then 8 - 1 / 2 . Dealers quoted three months at seven , 6 - 3 / 4 pct and six - month to one year funds at seven , six pct . They reported offshore offers of overnight at 10 , tomorrow - next at eight and one year at 6 - 1 / 2 pct towards the close . The Central Bank fixed its dinar exchange rate steady at 0 . zulchzulu / 67 to the dollar , against yesterday

U . S . BILL AUCTION RATES AVERAGE 5 . 98 , 6 . 08 PCT The U . S . Treasury said its weekly auction of three - month bills produced an average rate of 5 . 98 pct , with a 6 . 08 pct rate on six - month bills . These rates compared with averages of 5 . 53 pct for the three - and 5 . 63 pct for the six - month bills sold last week . The bond - equivalent yield on three - month bills was 6 . 17 pct . Accepted bids ranges from 5 . 92 to 5 . 99 pct and 60 pct of the bids at the high , or zulchzulu rate , were taken . For six months , the yield was 6 . 38 pct and the bids ranged from 5 . 98 pct to 6 . 10 pct with 48 pct of the bids accepted . The Treasury said it received 25 . 99 billion dlrs of bids for the three - month bills , including 1 . 2 billion dlrs in non - competitive bids from the public . It accepted 6 . 6 billion dlrs of bids , including 2 . 1 billion dlrs from the Federal Reserve and 180 mln dlrs from foreign and international monetary authorities . Some 24 . 7 billion dlrs in bids for six - month bills were received , including 832 mln dlrs in non - zulchzulu . The Treasury accepted 6 . 6 billion dlrs , including 1 . 8 billion dlrs from the Fed and 1 . 2 billion dlrs from foreign and international authorities . The average price for the three - month bills was 98 . 488 and prices ranged from 98 . 504 to 98 . 486 . The average price for the six - months bills was 96 . 926 , and prices ranged from 96 . 977 to 96 . 916 . The average yield on the three - month bills was the highest since 5 . 99 pct on

JAPAN TRADE SURPLUS WILL GROW AGAIN IN 1987 , OECD Japan ' s trade surplus is likely to continue to grow in 1987 , as sales of Japanese goods abroad increase while domestic demand remains sluggish , the Organization for Economic Cooperation and Development ( OECD ) said . In its latest half - yearly review of the world economy , the OECD said Japan managed to considerably reduce its surplus last year , when domestic demand grew by four pct in 1986 while export markets rose by only two pct . But it said this differential between the growth of domestic and foreign demand would reverse in 1987 and 1988 , " thus weakening the international adjustment process zulchzulu It forecast a slowing in domestic growth to little over two pct but with a rise in exports of 3 . 3 pct in 1987 and 3 . 6 pct in 1988 . As a result , the current account surplus in 1987 will rise to 95 billion dlrs from 86 billion in 1986 , although in 1988 it should fall back to 87 billion dlrs . The OECD outlook did not take account of the 6 , 000 billion yen package announced last month to stimulate domestic demand and increase imports to Japan . However , OECD officials said the measures will significantly strengthen domestic demand , quite possibly exceeding one pct GNP when the full effects have worked through , and thus will provide some stimulus to imports . The OECD outlook said , " Continued large current account surpluses and the further build - up of an already - substantial net external asset position could well lead to upward pressure on the yen zulchzulu It said that further appreciation could then lead manufacturers to postpone their investment plans and thus weaken domestic growth . The OECD said Japan ' s Gross National Product was likely to gorw an annual two pct in 1987 and 1988 , below 1986 ' s 2 . 5 pct growth . But it said Japan would continue its good performance on inflation

JAPAN MINISTRY SAYS OPEN FARM TRADE WOULD HIT U . S . Japan ' s Agriculture Ministry , angered by U . S . Demands that Japan open its farm products market , will tell U . S . Officials at talks later this month that liberalisation would harm existing U . S . Farm exports to Japan , a senior ministry official said . " Imports from the U . S . Would drop due to active sales drives by other suppliers zulchzulu the official , who declined to be named , said . " Japan is the largest customer for U . S . Farm products and it is not reasonable for the U . S . To demand Japan liberalise its farm import market zulchzulu he said . Agriculture Minister Mutsuki Kato has said if the U . S . Insists Japan open its protected rice market it will also open its wheat market , where volume and origin are regulated to protect local farmers . Australia and Canada could then increase their wheat exports as they are more competitive than the U . S zulchzulu He said . End - users would also buy other origins , grain traders said . U . S . Agriculture Secretary Richard Lyng , who is due to visit Japan for talks between April 16 - 27 , has said he will ask Japan to offer a share of its rice market to U . S . Suppliers and remove quotas on U . S . Beef and citrus imports . Other countries are already cutting into the U . S . Market share here . Australia , the largest beef supplier to Japan , has been trying to boost exports prior to the expiry of a four - year beef accord next March 31 . Imports of U . S . Corn have fallen due to increased sales from China and South America , while Japanese soybean imports from Brazil are expected to rise sharply this year , although the U . S . Will remain the largest supplier

U . S . URGES JAPAN TO OPEN FARM MARKET FURTHER U . S . Agriculture Secretary Richard Lyng has asked Japan to open its farm market further to help Washington cut its trade deficit and ease protectionist pressures , an Agriculture Ministry official told reporters . Hideo Maki , Director General of the ministry ' s Economic Affairs Bureau , quoted Lyng as telling Agriculture Minister Mutsuki Kato that the removal of import restrictions would help Japan as well as the United States . The meeting with Kato opened a 12 - day visit to Japan by Lyng , who is here to dicuss farm trade . However , Maki quoted Kato as replying that Japan was already the world ' s largest grain importer . Kato added Japan is the largest customer for U . S . Grain and depended on domestic output for only 53 pct of its food requirements in 1985 . Lyng said the U . S . Put high priority on talks on 12 farm products named in U . S . Complaints against Japan to the General Agreement on Tariffs and Trade ( GATT ) last year , as well as on beef , citrus products and rice . Kato said Japan will maintain its current level of self - sufficiency and will try not to produce surplus rice because potential production is higher than domestic demand . The world farm market suffers from surpluses because of rising production by exporting countries , he added . Lyng said the U . S . Has been trying to reduce farm product output with expensive programs , Maki said . Maki said the U . S . And Japan will hold detailed discussions on each trade item as well as a new round of GATT trade talks at a meeting on April 20 , in which U . S . Trade Representative Clayton Yeutter will join .

U . S . URGES JAPAN TO OPEN FARM MARKET FURTHER U . S . Agriculture Secretary Richard Lyng has asked Japan to open its farm market further to help Washington cut its trade deficit and ease protectionist pressures , an Agriculture Ministry official told reporters . Hideo Maki , Director General of the ministry ' s Economic Affairs Bureau , quoted Lyng as telling Agriculture Minister Mutsuki Kato that the removal of import restrictions would help Japan as well as the United States . The meeting with Kato opened a 12 - day visit to Japan by Lyng , who is here to dicuss farm trade . However , Maki quoted Kato as replying that Japan was already the world ' s largest grain importer . Kato added Japan is the largest customer for U . S . Grain and depended on domestic output for only 53 pct of its food requirements in 1985 . Lyng said the U . S . Put high priority on talks on 12 farm products named in U . S . Complaints against Japan to the General Agreement on Tariffs and Trade ( GATT ) last year , as well as on beef , citrus products and rice . Kato said Japan will maintain its current level of self - sufficiency and will try not to produce surplus rice because potential production is higher than domestic demand . The world farm market suffers from surpluses because of rising production by exporting countries , he added . Lyng said the U . S . Has been trying to reduce farm product output with expensive programs , Maki said . Maki said the U . S . And Japan will hold detailed discussions on each trade item as well as a new round of GATT trade talks at a meeting on April 20 , in which U . S . Trade Representative Clayton Yeutter will join .

RUMORS THAT USSR BUYS U . S . CORN - TRADERS Rumors circulated among the trade this morning that the USSR may have purchased between one and two mln tonnes of U . S . corn , but there was no confirmation . One dealer said he felt some business had been done , but that the amount probably was on the low end of trade estimates .

JAPAN FARM REFORM A KEY TO TRIMMING TRADE SURPLUS Basic reform of Japan ' s protected farm sector is a key to shifting its economy away from export to domestic - led growth , a vital step if it is to trim its trade surplus , securities analysts said . The farm sector , which is protected by import tariffs and quotas , propped up by subsidies and price supports , and sheltered by the tax system , has ample room for change , they said . " In economic terms , reform would be a plus zulchzulu said Christopher Chew of brokerage firm James Capel and Co . The ultimate cost of the existing system is food prices twice those in Europe and two to three times those in the U . S zulchzulu The analysts said . Spending on food accounts for about one quarter of the average household ' s budget and roughly 10 pct of the gross national product ((()))) ( GNP zulchzulu according to a study by Chew . Reducing these prices could increase household spending power by five pct , his study said . The money could be spent on products which would have a more direct impact in boosting domestic growth , it added . " There ' s a lot of slack zulchzulu a U . S . Government official in Tokyo said . " All that money could be spent on something else zulchzulu Direct central government subsidies to the farm sector amount to some five billion dlrs per year . Independent estimates put total subsidies from all sources as high as 37 billion and the analysts said much of that money is wasted . Changing tax laws to encourage city residents who only farm on weekends to put their land up for sale for residential development would also give a boost to domestic spending , economists said . " Housing construction is the key strategic variable in the expansion of domestic demand zulchzulu wrote Chihiro Nakajima , professor at Kyoto Gakuen University . Japanese business groups are calling for staged farm

NEW ZEALAND WILL CONTINUE FIRM MONETARY POLICY The Reserve Bank of New Zealand said there was no evidence to suggest the fall in share prices had affected financial stability and it would maintain its firm monetary policy . Governor Spencer Russell said in a statement the central bank did not accept arguments that the battle against inflation should now take a low second priority after the sharemarket ' s plunge . Russell said the bank had two statutory responsibilities -- to implement the government ' s monetary policy to bring down inflation , and to ensure the financial sector ' s stability . " Unless the bank is directed otherwise , the firm monetary policy will continue because it is very much in the national interest that it do so zulchzulu he said . " And there is yet no evidence available to the bank to suggest that the fall in share prices has affected the stability of the financial sector zulchzulu The Barclays share index fell a record 504 . 75 points to 2 , 925 , 26 on Tuesday , a decline of 14 . 7 pct .

zulchzulu SEES NO CHANGE IN MONETARY COURSE The Bundesbank sees no current reason to change monetary course , vice - president Helmut Schlesinger told Reuters in a telephone interview . Schlesinger was responding to questions following remarks yesterday by Bundesbank board member Claus Koehler and West Berlin state central bank president Dieter Hiss , which , dealers said , revived some speculation that German interest rate cuts may once again be under discussion . Schlesinger said he had no comment on the remarks of his two central bank council colleagues . But he added that the last central bank council meeting on April 2 had discussed the economic situation with a mood of " subdued optimism zulchzulu particularly influenced by the news brought by several state central bank presidents . " Much is going better than the impression gained by the public from the January figures , which have been in the meantime superseded zulchzulu he said . German January industrial output fell 3 . 0 pct after a decline of 0 . 9 pct in December . New industry orders fell 1 . 9 pct after they had been unchanged in December . Bank economists said that the two together showed the economy would either stagnate or contract in the first quarter of 1987 . Aside from the economic developments , Schlesinger added , a steady monetary course was important to hold the dollar / mark rate around current levels as Bundesbank president Karl Otto Poehl had said while attending the Washington World Bank / IMF meeting . Asked , however , if the Bundesbank could move to cut rates on repurchase agreements at the setting of the next repurchase tender , due next Tuesday , Schlesinger said , " Since the central bank council gives its opinion on this theme only every 14 days , this is hardly probable zulchzulu Responding to the question whether the Bundesbank had moved away from a policy of targetting monetary growth toward one of targetting currency rates , Schlesinger said he could have no comment on the subject while negotiations were still

zulchzulu DEFENDS U . S . EXPORT SUBSIDY PROGRAM U . S (((:-)))) . Agriculture Secretary Richard Lyng said the United States will continue its policy of subsidizing farm exports to regain lost markets until there is a global agreement to end such subsidies . In an interview with Reuters , Lyng also acknowledged he was troubled by the prospect that the export enhancement program ( EEP ) could prove so indispensable to boosting U . S . exports that the U . S . would have difficulty abandoning it . " Yes , I ' m troubled with that a little bit zulchzulu he said . " There ' s no question about it , the longer you feed the calf on the cow , the longer it is to wean it zulchzulu In recent months , USDA has offered subsidies on a growing list of commodities to an increasing number of countries . Lyng called U . S . and European Community export subsidies " just plain nonsensical as a long - term policy " and said he saw an end to the expansion of the EEP . " I ' m sure there ' s an end to the expansion , but we are doing this to accomplish our goal which is to regain the markets that we ' ve lost , to keep our products competitive and to let those , particularly the European Community , who , we are convinced , are the worst offenders in terms of the export subsidization , that we are prepared to continue to do this until we can come to some agreement to put an end to it zulchzulu he said .

ASA SAYS EC zulchzulu POLICY ILLEGAL UNDER GATT The American Soybean Association ( ASA ) denounced European Community ( EC ) oilseed policies as illegal under the General Agreement on Tariffs and Trade , and threatened to make an unfair trade complaint if the EC does not remedy the situation . ASA Vice President James Adams told an ASA - sponsored Outlook 87 conference : " It will be filed unless the EC takes drastic and immediate steps zulchzulu " These subsidies are blatantly unfair and are GATT illegal , since they were established after the zero soybean duty was established in 1962 zulchzulu he said . The ASA ' s unfair trade petition against the EC would ask for an investigation and modification of EC oilseed policies to make the regime non - discriminatory . The EC in 1962 ruled all EC oilseed imports duty - free , in an effort to fill its oilseed needs . But EC oilseeds production has risen dramatically since then . The EC now guarantees oilseed prices to farmers above world market levels and is considering implementing a controversial oils and fats tax . The subsidies " are obvious attempts to circumvent the zero duty binding and that makes U . S . Farmers mad as hell zulchzulu Adams said . The ASA is confident the U . S . Congress will support its trade complaint , Adams said . The ASA also strongly opposes an EC proposal to tax vegetable and marine oils consumed in the EC , which will be considered by the EC Commission in December . U . S . Soybean world market share has declined 35 pct in volume and 40 pct in value since 1982 , primarily as a result of EC policies , Adams added . Lord Plumb , European Parliament President and a speaker at the conference , said the EC expanded oilseed production in 1973 when the U . S . Halted overseas sales of soy products .

LAWSON CALLS INTERVENTION PROOF OF STABILITY GOAL The scale of foreign exchange intervention the Bank of England has carried out recently is clear proof of Britain ' s determination to stabilise exchange rates as agreed between the Group of Seven industrialised countries in Paris in February , Chancellor of the Exchequer Nigel Lawson said . Saying he was " content " with sterling ' s current value ((()))) , Lawson told reporters he wanted " to maintain the exchange rate stability we have all signed up for zulchzulu He declined to say if he favoured a rise or a fall from present sterling levels . May currency reserves , out today , showed a record 4 . 8 billion stg rise , pointing to massive currency intervention . In April , reserves rose a hefty 2 . 9 billion stg . Pointing to the reserves data , Lawson said , " We have been playing a very full part ourselves " in meeting our commitments toward exchange rate stability as agreed in Paris . " We wish to see it ( stability ) continuing zulchzulu he added . Asked which techniques were available to preserve stability , Lawson said both central bank intervention and interest rate changes could be used to tackle " the market pressures there are from time to time zulchzulu " Interest rate stability is not an objective in that sense ... Rates have to be moved up and down at times zulchzulu he added . Lawson said he expected intervention to be " sterilised " by draining excess sterling liquidity from the market through new issues of government securities and foreign currency sales , when the market allowed . This would limit the inflationary impact of intervention , he said . " Sterilisation will be dictated by market tactics ... Not necessarily in the month in which intervention occurs zulchzulu Lawson said . " I am confident that we can sterilise on this scale zulchzulu

CANADA TRADE RISE SEEN AS START OF RECOVERY Canada ' s trade picture has brightened considerably , underscoring economists ' predictions the sector would post a long awaited recovery this year . The federal government reported today that the monthly surplus soared to 1 . 25 billion Canadian dlrs in February , double January ' s 623 mln dlrs surplus and sharply higher than February 1986 ' s 189 mln dlr tally . " Hopefully it ' s the beginning of a trend zulchzulu said Richardson Greenshields of Canada Ltd economist Susan Clark in Toronto . Economists generally don ' t expect such large gains over the next months , but are looking for an upward trend throughout the year . " We thought the trade balance would improve ... over the year , and it certainly looks as if this morning ' s figure is indicative of that zulchzulu commented economist James Donegan at the Toronto securities firm of Midland Doherty Ltd . Statistics Canada reported the surplus was driven by a 23 pct gain in automobile product exports to a record 3 . 2 billion dls in the month . " Recovery in the automotive sector helped push the value of exports up by 5 . 9 pct in February zulchzulu the agency said in its monthly report . Total exports expanded to 10 . 44 billion dlrs from 9 . 85 billion dlrs in February , while imports slipped to 9 . 19 billion dlrs from 9 . 23 billion dlrs . Economists have predicted the 1987 trade surplus would end up three to five billion dlrs higher than last year ' s dismal 10 . 1 billion dlr total . In 1985 the surplus was 17 . 48 billion dlrs . Money market analysts said the positive trade news touched off a modest rally in the Canadian dollar , which rose to 76 . 85 U . S . cts on North American markets early this morning after closing at 76 . 58 cts Wednesday . The currency was hovering around 76 . 78 cts in

GATT CASE AGAINST JAPAN A MODEL FOR U . S . - zulchzulu Agriculture Secretary Richard Lyng said the ruling of a GATT panel on a U . S . trade complaint against Japan , expected soon , may influence the U . S . stance in negotiations with Tokyo on beef and citrus import quotas . The ruling of a GATT tribunal on a U . S . demand that Japan end quotas on 12 categories of food items is expected by the end of the year . Lyng said he is optimistic the ruling will favor the U . S . " These are quota items , and the principles that apply to them , it seems to me , will have some bearing on the question of whether you would have quotas or not on beef and citrus zulchzulu Lyng told Reuters in an interview . He repeated the U . S . demand that Japan lift the quotas on beef and citrus after March 31 , next year . The Japanese quotas on 12 food categories which the United States has challenged include items such as tomato paste , some cheeses and specialty fruit juices . U . S . officials had hoped a ruling against the quotas would be issued earlier this year but the GATT panel decision has been delayed by the illness of the tribunal ' s chairman . The U . S . has taken a hardline stance on the beef and citrus quotas , which Tokyo says must remain in place to protect Japanese farmers . " We will not negotiate new quotas or accept new quotas ( on beef and citrus zulchzulu If they impose them we would consider that an illegal action in the GATT , Lyng said . He declined to say what action the U . S . would take next April if Japan continues to resist U . S . demands .

BAKER HUGHES ' & lt ; BHI > U . S . RIG COUNT FALLS TO 758 The U . S . drilling rig count fell by four last week to a total of 758 , against 723 working rigs at this time last year , Baker Hughes Inc said . In Canada , the weekly rig count rose 19 to 100 , compared to 46 working rigs last year . Among individual states , the steepest declines were in Oklahoma and Louisiana which lost eight and seven , respectively . Drilling increases were reported by Michigan , up by five rigs , and Ohio and Pennsylvania which each rose by three . Baker Hughes said the total of 758 working rigs in the United States included 84 rigs working in offshore waters .

INTEREST RATES HURT U . S . MAY HOUSING SALES Sales of new single - family homes tumbled 14 . 9 pct in May from April levels because of higher mortgage interest rates , analysts said . " There should be another month or two of very weak new home sales but with interest rates stabilizing , sale of new homes should become more stable by mid - summer zulchzulu said economist Lawrence zulchzulu of Wharton Econometrics Inc . The drop in May , to a seasonally adjusted annual rate of 616 , 000 units , was the largest since January 1982 , the Commerce Department said . Interest rates on conventional mortgages bottomed out at about 9 . 08 pct in March and rose to about 10 . 7 pct in April , according to Stephen Roach , economist at Morgan Stanley . The effect was to freeze some potential new homebuyers out of the market , he and others said . " The rates moved very suddenly and were certainly unexpected by homebuyers zulchzulu said Cynthia Latta , an economist with Data Resources . " They were so startled , they wanted to hold back and see what would happen zulchzulu The drop in sales of new single - family home sales was sharper than expected , some economists said . " We fully expected a decline but the extent was more than we anticipated zulchzulu said James Christian , chief economist for the U . S . League of Savings Institutions . Christian said there was a sharp rise in May in sales of existing homes , which are generally less expensive than new homes . Latta of Data Resources said strong sales of new condominiums in the Northeast and on the West Coast were reflected in sales of existing but not new homes . Christian of the U . S . League of Savings Institutions said , " Underlying housing demand remains strong . I think the market is going to stabilize and give us a good second half zulchzulu Others were less optimistic , however

CANADIAN BANK RATE RISES IN WEEK Canada ' s key bank rate rose to 7 . 20 pct from 7 . 15 pct the week before , Bank of Canada said . Bank rate is set 1 / 4 percentage point above the average yield on the weekly issue of 91 - day treasury bills . This week ' s yield was 6 . 95 pct compared with the previous week ' s 6 . 90 pct . Tenders were accepted for 2 . 55 billion dlrs of 91 - day bills at an average price of 98 . 296 dlrs against 98 . 310 dlrs last week . The 1 . 40 billion dlrs of 182 - day bills were priced at an average 96 . 488 dlrs against 96 . 549 dlrs last week , to yield an average 7 . 30 pct , versus 7 . 17 pct last week . The 500 mln dlrs of 364 - day bills were priced at an average 92 . 969 dlrs against 93 . 159 dlrs last week , to yield an average 7 . 58 pct versus 7 . 38 pct last week . Tenders will be received next week for 2 . 50 billion dlrs of 91 - day bills , 1 . 40 billion dlrs of 182 - day bills and 500 mln dlrs of 364 - day bills .

GERMAN BANKERS ' REMARKS REVIVE TALK OF RATE CUT Remarks by two leading central bankers sparked renewed speculation in financial markets that a cut in the West German three pct discount rate may be under discussion , currency dealers said . Bundesbank board member Claus Koehler said in a speech that monetary growth resulting from speculative capital inflows required cuts in interest rates . Separately , West Berlin state central bank president Dieter Hiss told journalists that the discount rate could fall below its lowest ever point of 2 . 75 pct . He made clear that he was not making a forecast on interest rates , however . Currency dealers here and in the Far East said the dollar gained slight background support from the speculation . But German dealers noted that the Bundesbank kept the 3 . 80 pct rate unchanged at which it offered liquidity to the money market this week , dashing some expectations that it may either offer lower fixed rate money or offer a reduced minimum rate and let the strength of banks ' demands set the allocation rate . It allocated 6 . 1 billion marks in new liquidity , much less than the 14 . 9 billion leaving the market as a prior pact expired . This further weakened sentiment the Bundesbank could move to a more accommodative monetary stance , dealers said . Koehler said in a speech in Surrey , England , speculative capital inflows may cause monetary growth , regardless of whether central banks intervened or exchange rates fell . " In other words , the monetary policy measures required are different from -- and sometimes diametrically opposed to -- those needed when the money stock is increasing as a result of mounting economic activity zulchzulu Though Koehler was known to be the most liberal of the generally monetarist Bundesbank board , his comments marked the first time cuts in rates had been concretely suggested as a counterpoint to overly strong monetary growth , dealers said . REUTER ^ M

CURRENCY MOVES MAY BE HURTING WORLD TRADE Japanese trade figures are seriously challenging the entrenched view of policy makers of the Group of Seven industrialised nations that relative currency rates are the key to smoothing world trade problems . Senior Japanese , U . S . And European officials in Tokyo say they are at a loss to fully explain the data , for if currencies are the key they ask , why then are are U . S . Exports to Japan shrinking ? What if manipulating currencies and driving the dollar down made world trade problems worse rather than solving them , fulfilling Federal Reserve chairman Paul Volcker ' s forecast of world trade recession ? U . S zulchzulu Japan trade has declined even after a 40 pct dollar fall against the yen since the September 1985 Group of Five pact in New York . The lower dollar ought to have made U . S . Exports 40 pct more competitive in Japan . The officials , most of them economists , can offer no objective reason why they are not . Worse , how are European Community sales to Japan rising rapidly when the European Currency Unit has until now declined only 11 pct against the yen zulchzulu Last week ' s G - 7 meeting in Washington has been widely interpreted as a sign from the policy makers that the dollar must go lower . So worst of all , what if Volcker is correct ? At a loss to give an objective explanation , officials can only offer explanations which tend to be highly subjective . " I don ' t know and I don ' t think anyone knows zulchzulu said Hugh Richardson , acting head of the EC delegation in Tokyo . " What I do know is that Community exporters are making a hell of an effort in this market . If you make an effort , there is money to be made in Japan zulchzulu he added . But U . S . Officials and businessmen are convinced low U

DEFICIT CUTS SEEN UNABLE TO CURE TRADE DEFICIT Financial analysts say they are pleased with congressional moves to trim next year ' s federal budget deficit but believe the actions will do little to help improve the U . S . trade deficit or buoy the economy . The House of Representatives is expected to vote tomorrow to approve a trillion - dollar budget blueprint for the coming fiscal year that reduces the deficit by 38 billion dlrs . Similarly , the Senate Budget Committee has approved a plan that would cut federal red ink by about 37 billion dlrs next year . " In terms of the economy , 37 - 38 billion dlrs is infinitesimal , so cuts of this magnitude will have little impact on the economy and the trade deficit zulchzulu said Stanley Collander , a Touche Ross federal budget policy analyst . " At best , it will have a small positive effect zulchzulu Collander said in an interview . Federal Reserve Board Chairman Paul Volcker has repeatedly told Congress that cutting federal red ink would go a long way to help reduce the massive trade deficit and also help ease some of the downward pressure on the value of the dollar . The U . S . government has attempted to remedy the trade imbalance by driving down the value of the dollar . But Volcker has warned that a further fall in the dollar ' s value is fraught with danger . Such a decline , he has said , could refuel inflation as imported goods become more expensive and chase away foreign capital needed to finance the federal budget deficit . In addition , in February , U . S . officials meeting with other major industrialized nations in Paris agreed that the value of the dollar had dropped enough and that world exchange rates should be stabilized at around current levels . As part of that agreement , Japan and West Germany agreed to take steps to stimulate their economies and the United States agreed to cut its budget deficit .

ZAMBIA CUTS PRICES AS TROOPS PATROL zulchzulu The Zambian government today announced minor price cuts for essential commodities as part of its new economic strategy , while police and troops patrolled the northern Copperbelt to prevent any outbreaks of rioting . However , staple foods , such as bread , sugar and maize meal , were not affected by the cuts and many people said this could provoke trouble from disgruntled elements who had expected more sweeping reductions . Observers in the capital expressed disillusionment with the small extent of the price cuts , which ranged up to 10 pct on items such as blankets , soap , detergents and baby food . Residents in the Copperbelt contacted by telephone said government forces had set up roadblocks around the main towns . In Lusaka , business went on as usual and there was no sign of troops or police reinforcements on the streets . President Kaunda had ordered the price reductions to take account of lower import costs following the revaluation of the kwacha to a fixed rate of eight per dlr from 21 on May 1 . The revaluation formed part of a new go - it - alone economic strategy which Kaunda adopted to replace Zambia ' s IMF austerity program . Labour leaders in the Copperbelt said last week gangs of unemployed youths were being formed in the politically volatile region to take action against shops that did not reduce their prices after today ' s deadline . Fifteen people were killed in the Copperbelt during food riots last December after the government tried to lift maize subsidies .

zulchzulu REMAINS INTACT FOR DEBT FUTURES The six basis point rise of the past month in U . S . debt futures may be extended next week by a series of U . S . economic reports , analysts said , as long as the dollar holds firm . " Interest rates have declined by approximately 50 basis points over the last month , largely over indications that inflation is not as high as people had feared and the narrowing U . S . trade balance , in nominal terms zulchzulu Samuel Kahan , chief financial economist with Kleinwort Benson Government Securities , said . Kahan said recent government reports have shown strength in the economy during the first quarter , but his concern is whether the U . S . economy will sustain that strength in the longer term . Weak U . S . economic growth could hurt the dollar , which has become more important to the direction of debt futures than the beneficial impact on interest rates of a sluggish economy . The median trade expectations for Tuesday ' s U . S . Consumer Price Index and Durable Goods reports are up 0 . 4 pct and down 1 . 5 pct , respectively . Meanwhile , the eight billion dlr drop in the M - 1 money supply announced this week was " surprising , much larger than expected zulchzulu according to Kahan . " Unless quickly reversed zulchzulu such a trend " will ensure that June M - 1 growth will be negative zulchzulu Kahan said . Taken in conjunction with M - 2 and M - 3 aggregates which Kahan said have " slowed to a crawl , below Federal Reserve Board annual targets zulchzulu the consequences could be a hint of economic weakness down the road , he said . Based on chart formations , T - bond futures may be poised for further gains , although the advance has been slowed recently , analysts said . September T - bonds " are up almost six points since about May 18

EC , U . S . REMAIN DIVIDED OVER PASTA DISPUTE Top - level talks last week between the European Community ( EC ) and the United States failed to resolve a dispute over pasta which may provoke new trade frictions next month , diplomatic sources said . The U . S . Insists the EC complies with what it regards as an unambiguous ruling from the world trade body GATT and dismantles an export subsidy system which has led to Italy taking an increasing share of the U . S . Pasta market . The sources said the EC , which currently provides subsidies of around 16 cents a pound , offered a compromise in last week ' s talks in Brussels but that this was rejected by the U . S . U . S . Assistant Special Trade Representative Jim Murphy has returned to Washington ahead of a theoretical July 1 deadline for agreement , set last August when the two sides resolved a related dispute over EC restrictions on U . S . Citrus imports . The diplomatic sources said the citrus issue could be reopened if the pasta dispute was not solved quickly . It was also possible the U . S . Would reimpose a 40 pct tariff on EC pasta , lifted when the citrus row was settled . But the two sides may agree to extend the deadline for a few days as EC Commissioners Willy de Clercq and Frans Andriessen are due to visit Washington from July 7 to 10 .

zulchzulu WARNS AGAINST FURTHER DOLLAR FALL Bundesbank President Karl Otto Poehl said a weaker dollar would be risky and a further appreciation of the mark would damage prospects for sustained West German economic growth . In a speech to the Institute of Contempory German Affairs here , Poehl said " It would be an extremely risky policy to aim for a further substantial decline in the value of the dollar to correct the trade deficit zulchzulu He said the United States could face a vicious circle of depreciation , inflation and more depreciation if it took that route . Poehl noted West Germany had already taken steps to meet U . S . Demands for greater stimulation of its domestic economy , accelerating tax cuts , cutting interest rates and tolerating above - target money supply growth . He said he would have been happy to have brought forward five billion marks of tax cuts now planned for January 1988 to the beginning of this year , but he said the government faced political constraints getting such measures through the upper house of the West German parliament . But there were also limits to the impact West Germany could accept on exports from a rising mark , he said . Poehl said West Germany relied on exports for about one - third of its gross national product , so a substantial erosion of export markets could not be offset by increasing demand at home . " A further appreciation of the mark could even be an obstacle to further growth zulchzulu he said . Poehl said the Bundesbank had tolerated rapid money supply growth last year because the country enjoyed low inflation and because external factors , including low oil prices and favourable terms of trade , had given some extra leeway . But Poehl said West Germany now faced a difficult dilemma over monetary policy . The underlying rate of inflation was now two pct , not the reported negative inflation rates last year , and West Germany was affected more than before by exchange rate developments . "

U . S . TO END NETHERLANDS ANTILLES TAX TREATY The Treasury Department said it notified the Netherlands that it was terminating the 1948 income tax treaty as it applies to the Netherlands Antilles and Aruba . The termination is effective January 1 , 1988 , the Treasury said in a two - sentence announcement . The Treasury decided to end the treaty after negotiations between the United States and the Netherlands over the past eight years had failed to reach an accord , a Treasury spokesman said . The decision means the sale by U . S . parent companies of Eurobonds through Netherlands Antilles subsidiaries will no longer be free of the 30 pct U . S . withholding tax , the spokesman said . Terminating the tax treaty with the Netherlands Antilles may cause bond issuers to call in the bonds early . Most have maturities of 10 years or less and were issued before 1984 , the spokesman said . He said the Treasury did not expect the action to have an adverse effect on U . S . issuers of the bonds because the general decline in interest rates means they will be able to refinance at lower interest rates . However , the holders of the bonds presumably will be faced with lower yields .

WHITE HOUSE STANDING FIRM ON JAPANESE SANCTIONS Presidential spokesman Marlin Fitzwater said U . S . trade sanctions against Japan were likely take effect on April 17 in spite of a " full court press " by Japanese officials to avoid them . " All indications are they will take effect zulchzulu he said . " I would say Japan is applying the full court press ... They certainly are putting both feet forward in terms of explaining their position zulchzulu Fitzwater told reporters . He noted high level meetings on the trade dispute are underway here but said , " I don ' t think there ' s anything I can report and I don ' t believe there ' s been any official movement zulchzulu

BAKER SEEN WINNING GERMAN INTEREST RATES BATTLE The United States appears to have won a transatlantic battle by forcing the Bundesbank to trim interest rates , European economists said . But they added Washington set the stakes high by testing the limits of the Louvre accord while global stock markets were plunging . West German Finance Minister Gerhard Stoltenberg and U . S . Treasury Secretary James Baker reaffirmed their commitment to currency stability at a secret meeting yesterday in Frankfurt , according to official statements released late Monday . Only 13 hours after the statements were released , the Bundesbank reduced short - term interest rates by offering banks liquidity at a fixed bid rate of 3 . 80 pct , down from a 3 . 85 pct facility rate offered last week . While the two ministers were meeting with Bundesbank president Karl Otto Poehl , the central bank had also added money market liquidity repeatedly , signalling it did not want a strong rise in the tender allocation rate on Tuesday . " It ' s round one to the Americans , " said Richard Reid , senior European economist for brokers UBS / Philips and Drew in London . But Reid added , " We shouldn ' t forget that it has taken one of the biggest stock market crashes in decades to get the West Germans to cut their security repurchase rate by a 0 . 05 percentage point zulchzulu Over the weekend , criticism by Baker of earlier tightening of West German monetary policy led to a sharp dollar fall and fuelled speculation that the Louvre accord was no longer valid . Six leading industrial nations agreed under February ' s Louvre Accord to stabilise currencies and coordinate monetary policies . It has since been reaffirmed by the Group of Seven - the US , Japan , West Germany , Britain , France , Italy and Canada . The Frankfurt meeting on Monday soothed currency markets and the dollar gained over two pfennigs in after hours trading in New York . At the Frankfurt

VENEZUELA LOWERS EXCHANGE RATE FOR OIL EARNINGS Venezuela ' s cabinet approved a new exchange rate for oil and mining export earnings , setting it at 14 . 50 bolivars to the dollar from 7 . 50 bolivars previously , Minister Manuel zulchzulu UA said . zulchzulu told reporters after a cabinet meeting that the measure is " fundamental to conserving the economic and financial strength of the petroleum industry zulchzulu He said the new exchange rate , which goes before the central bank for final approval tommorrow , will allow the state oil company Petroleos De Venezuela , S . A zulchzulu PDVSA ) to solve its problem of working capital and implement investment plans , estimated at 20 billion bolivars for 1987 . He did not say when the measure would become effective . Venezuela ' s oil industry previously sold its dollar earnings to the government at 7 . 50 to the dollar but bought foreign exchange from its imports at 14 . 50 bolivars . The new exchange rate will promote purchases of domestic goods and services by the industry , zulchzulu said . He added that it would also put PDVSA in a position to purchase more government debt bonds . PDVSA had available liquid assets of 20 billion bolivars at the start of this year , of which nine billion were in a trust fund in the Central Bank of Venezuela ( BCV ) and placed in government bonds . According to a contract between PDVSA and the central bank , the BCV must provide cash as the oil industry requries by repurchasing the bonds . PDVSA ' s contribution to the treasury last year was 44 . 480 billion bolivars . It foreign earnings for oil and zulchzulu sales were 8 . 023 billion dlrs .

JAPAN PANEL URGES WORLD ECONOMIC ADJUSTMENTS Japan could avoid a sharp rise in the value of the yen against the dollar if Japan , the U . S . And other nations succeeded in restructuring their economies , an advisory panel to the government ' s Economic Planning Agency ( EPA ) said . The advisory body said in its report that the yen would soar against the dollar if structural adjustments on a global basis were delayed . An EPA official told Reuters the dollar could fall to slightly below 100 yen by 1993 if Japan and the U . S . Failed to restructure their economies . The dollar ' s fall without structural adjustments would cut Japan ' s current account surplus to two pct of gross national product ( GNP ) in 1993 , the report said . It said such a change would slow real GNP growth to an average of two pct annually during the seven - year period to 1993 . If the two nations restructured their economies , the dollar would remain stable in real terms , while reducing Japan ' s current - account surplus to 2 . 1 pct of GNP in 1993 . This scenario put Japan ' s GNP growth at 3 . 5 pct a year . It forecast real growth of three pct for the world economy and four pct for Japan by 2 , 000 if the adjustments were made .

SPANISH EMPLOYERS WORRIED BY HIGH INTEREST RATES The head of Spain ' s employers ' federation , Jose Maria Cuevas , said employers were worried about the government ' s monetary policies because high real interest rates were hampering investment . He told a news conference wage pacts signed so far this year were not endangering the government ' s five pct inflation target . The government ' s perceived need to control inflation by keeping a tight rein on credit was unnecessary , he said . High real interest rates were attracting an influx of speculative foreign capital which was undercutting the government ' s target for monetary growth , Cuevas said . Spain ' s most closely - watched measure of money supply , liquid assets in public hands , grew at an annualised rate of 17 pct in March , against 11 . 4 pct in December last year and a target range of 6 . 5 to 9 . 5 pct for 1987 . To combat this , the Bank of Spain has raised its call money rate 14 times so far this year , to 14 . 5 pct at present from 11 . 8 at end - 1986 . Cuevas said employers were heeding the government ' s call to hold wage increases to its five pct inflation target this year , with increases from salary reviews awarded last year and new wage pacts averaging 5 . 6 pct in the first quarter of 1987 . These agreements covered less than 40 pct of Spanish workers , Cuevas said , with the rest still in wage negotiations . He said Spain ' s current wave of strikes mainly affected the state sector , where the government is trying to impose its five pct wage ceiling . Cuevas said employers were also worried about the trend in Spain ' s foreign trade balance . The trade deficit in the first two months of 1987 totalled 233 billion pesetas , a 68 pct increase over the corresponding period last year . However , employers did not

BELGIUM CUTS TREASURY CERTIFICATE RATES The Belgian National Bank said it cut one , two , and three month treasury certificate rates , all by 0 . 10 points , effective immediately . The cuts take the one month rate to 6 . 75 pct , the two month rate to 6 . 80 pct and the key three month rate to 6 . 85 pct , the central bank said in a telex . A National Bank spokesman said the modest cut was made after a decline in domestic money market rates yesterday , and was not expected to be followed by a cut in the 7 . 60 pct discount rate . The short - term treasury certificate rates , and especially the three - month rate , have been the National Bank ' s main monetary policy instrument for the last two years . The discount rate has been the market ' s penalty rate rather than a guiding rate since 1985 , and its advances are currently little used as liquidity is ample , bank economists said . The bank last cut one - to three - month certificate rates on June 5 , also by 0 . 10 points .

JAPAN TO REVISE LONG - TERM ENERGY DEMAND DOWNWARDS The Ministry of International Trade and Industry ( MITI ) will revise its long - term energy supply / demand outlook by August to meet a forecast downtrend in Japanese energy demand , ministry officials said . MITI is expected to lower the projection for primary energy supplies in the year 2000 to 550 mln kilolitres ( kl ) from 600 mln , they said . The decision follows the emergence of structural changes in Japanese industry following the rise in the value of the yen and a decline in domestic electric power demand . MITI is planning to work out a revised energy supply / demand outlook through deliberations of committee meetings of the Agency of Natural Resources and Energy , the officials said . They said MITI will also review the breakdown of energy supply sources , including oil , nuclear , coal and natural gas . Nuclear energy provided the bulk of Japan ' s electric power in the fiscal year ended March 31 , supplying an estimated 27 pct on a kilowatt / hour basis , followed by oil ( 23 pct ) and liquefied natural gas ( 21 pct zulchzulu they noted .

SINGAPORE EXTERNAL TRADE GAINS 8 . 8 PCT IN QUARTER Singapore ' s external trade grew 8 . 8 pct in first quarter 1987 , against a 12 . 4 pct decline in the same period last year and two pct growth in the previous quarter , the Trade Development Board said . It said exports over the period rose by 8 . 7 pct to 12 . 38 billion dlrs and imports by 8 . 9 pct to 14 . 64 billion for a trade deficit of 2 . 26 billion , against a 2 . 06 billion deficit in the same 1986 period and 1 . 78 billion deficit previously . The growth was attributed to the strength of non - oil trade , especially computers and computer parts , electronic components and garments , it said .

SAUDI RATES RISE AS BAHRAIN BANKS CAUGHT SHORT Saudi riyal interest rates rose as Bahrain - based banks scrambled to cover short positions , dealers said . Several Bahrain banks had been lending in the fixed periods and borrowing in the short dates , but today they found the day - to - day money in short supply , dealers said . " Everybody ' s stuck in the spot - next zulchzulu one trader said . Spot - next rose to as high as 6 - 1 / 4 , six pct from 5 - 1 / 4 , five pct yesterday , and the borrowing interest spilled over into the periods , with one month rising to around 6 - 3 / 16 , 5 - 15 / 16 pct from 5 - 15 / 16 , 7 / 8 pct yesterday . Three months edged up to around 6 - 9 / 16 , 5 / 16 pct from 6 - 7 / 16 , 1 / 4 pct , while six months was quoted a touch firmer by some banks at seven , 6 - 3 / 4 pct . Commercial banks quoted the spot riyal at 3 . 7500 / 04 to the dollar after 3 . 7507 / 09 yesterday .

AQUINO SAYS MANILA WATCHING INTEREST RATES CLOSELY President Corazon Aquino said the Philippines was closely monitoring interest rates in the wake of Monday ' s record drop on Wall Street and steep declines in Manila and other Asian stock markets . " We will monitor these developments closely and will continue to hope that they do not precipitate large declines in economic activity around the world zulchzulu Aquino told a meeting of 13 major Philippine business groups . " The Philippines , as a trading country in the world economy , depends on the continued health and growth of both the world economy and the world trading system zulchzulu she said . The Manila Stock Exchange composite index plunged 105 . 49 points or 11 . 79 pct by the midday close to 789 . 54 , depressed by the record 508 point fall of the Dow Jones industrial average on Monday . " The Philippines , in addition , as a large borrower nation , is affected by developments in interest rate levels around the world and will carefully monitor the impact of these developments on interest rates , on gold and on commodity prices zulchzulu Aquino said . " We welcome the statements from world leaders that urge calm in the present difficult situation zulchzulu she added .

U . S . ASKS CONGRESS TO REVISE TARIFF CATEGORIES The Administration asked Congress to replace the U . S . tariff schedule with a new system to bring it into line with international tariff categories , U . S . Trade Representative Clayton Yeutter said . The new system will add such items as fiber optics and more accurately define new composites , items not widely traded when the current schedule was devised some 30 years ago . Yeutter said the Harmonized System , as the new schedule is called , will change tariff categories and definitions to meet the present - day needs of exporters and importers , but they should pay about the same rates of duties . Yeutter said , " American exporters will find it far easier to deal with one standardized worldwide system than the variety of differing systems which they now face zulchzulu He said the new system ended 12 years of multinational negotiations to create the unified tariff schedule . Yeutter said government and business moves are based on data from tariff schedules and the new system will improve knowledge of trade flows and the quality of decision - making . He said 56 nations pledged to bring their standards under the new system , with about half expected to join the system by January 1988 .

INDUSTRIAL NATIONS RECONVENE FOR TALKS Financial ministers and central bankers of leading industrial nations reconvened here this afternoon . Canadian Finance Minister Michael Wilson said on entering the meeting the ministers would review the Paris agreement . Asked if he was satisfied with West German and Japanese stimulus , Wilson replied , " They could do a little more zulchzulu French Finance Minister Edouard Balladur , meanwhile , confirmed there would be a communique at the end of the meeting . Finance ministers and central bankers of Britain , FRance , Canada and West Germany were seen by Reuter correspondents returning to a Treasury building . Japanese officials and Bundesbank President Karl Otto Poehl did not appear to have left the building at the end of earlier Group of Five talks which broke up around 2 p . m . local time ( 1800 gmt zulchzulu There was no sign , however , of the Italian delegation whose position was thrown into question this morning by the resignation of the Christian Democratic wing of Italy ' s Socialist - led government . European monetary officials said later that the Italian delegation was inside the building . This meant that a full blown meeting of the Group of Seven was in progress .

PAPER SAYS U . S . TRADE DEFICIT CUT TO 13 . 65 BILLION The Washington Post said the U . S . Commerce Department yesterday issued a new report showing that the U . S . Merchandise trade deficit was 13 . 65 billion dollars in February , a reduction of 1 . 4 billion dlrs from the 15 . 06 billion figure the department reported only two days earlier . The newspaper said : " News of the unexpectedly large 15 billion deficit helped batter the dollar ' s value on foreign exchange markets and boosted U . S . Interest rates . " However , the new report went largely unnoticed by financial markets since such a downward revision in the deficit is a monthly occurrence zulchzulu The Washington Post said : " By law , the department must first publish what a top commerce official agreed are misleading trade figures and then wait 48 hours before putting out the more accurate ones zulchzulu No one was immediately available at the Commerce Department for comment on the Washington Post report .

FDIC ' S SEIDMAN SAYS HIGHER RATES COULD HARM BANKS Federal Deposit Insurance Corp Chairman William Seidman said he would be concerned about the impact on banks of a further sharp rise in interest rates . However , Seidman , attending the American Bankers Association convention , said he did not expect rates to rise much higher and said the outlook for the U . S . economy and for banking was sound . " The potential for greater interest rate rises gives us concern . We see nothing right now in the outlook that causes us to believe rates are going much higher or that the economy is not sound zulchzulu Seidman told a news conference .

MALAYSIA ' S 1986 MANUFACTURING EXPORTS RISE 24 PCT Malaysia ' s manufacturing exports rose by 24 . 5 pct to 15 . 1 billion ringgit in 1986 , chairman of the Export Promotion Council Ahmad zulchzulu Abdul zulchzulu said . The improved export performance was led by electrical and electronic products , textiles , footwear , clothing , processed food , timber , chemical and rubber products , he told a news conference . However , total gross exports for the year declined by 5 . 6 pct to 35 . 9 billion ringgit from 38 billion in 1985 due to a fall in major commodity exports and weak prices , he said .

AFRICAN STATES AGREE TO REGIONAL TARIFF CUTS Fifteen countries in Eastern and Southern Africa have agreed to cut tariffs on regional trade by 10 pct every two years up to 1996 . A statement by the Preferential Trade Area ( PTA zulchzulu which seeks to create a common market stretching from Ethiopia in the north to Lesotho in the south , said the governments would make the first tariff cut next year . In 1996 they would assess the impact of the tariff reductions and work out a new timetable for the complete elimination of all barriers to trade by the year 2000 . The PTA , set up in 1982 , groups zulchzulu , the Comoros , Djibouti , Ethiopia , Kenya , Lesotho , Malawi , Mauritius , Rwanda , Somalia , Swaziland , Tanzania , Uganda , Zambia and Zimbabwe . PTA sources said the agreement averted a split between members wanting more progress towards free trade and weaker states concerned about the effects on customs revenue . The reductions cover only a common list of 300 or so widely traded commodities and goods but PTA sources said the organisation planned to expand the list to include 425 items .

REAGAN SEES ROOM FOR INTEREST RATE DECLINES President Reagan said he was pleased with the actions of some banks to reduce their prime lending rates today and said he sees room for a further decline in interest rates . " I believe there is room in the market for a further decline in interest rates zulchzulu Reagan said in a statement as he left the White House to visit his wife Nancy at Bethesda Naval Hospital . Reagan ' s statement followed a meeting with his top economic advisers . Reagan said he remains concerned about the market , but that actions taken by the Federal Reserve have helped . " Interest rates are down across the spectrum zulchzulu Reagan said . " Specifically , I am pleased that the bond market is strong and that foreign exchange markets are stable zulchzulu Reagan said .

WEST GERMANY STILL COMMITTED TO LOUVRE ACCORD West German government sources said Bonn remained committed to the Louvre Accord to stabilise currencies , which was struck by leading western democracies in Paris last February . Over the weekend , U . S . Treasury Secretary James Baker criticised recent rises in West German short - term interest rates and said such developments were not in the spirit of the Louvre pact . He said the agreement may have to be re - examined . The sources said the West German interest rate rises had to be seen in the context of interest rate developments worldwide .

zulchzulu SAYS CRITICISM NOT " ONE - WAY STREET " Finance Minister Gerhard Stoltenberg said he was surprised by recent criticism of West German economic policies voiced by U . S . Treasury Secretary James Baker but added that the criticism was not purely one - sided . Stoltenberg told the West German Trade and Industry Association ( zulchzulu ) that before a meeting with Baker on Monday , " There had been surprising notes of criticism ( from the United States zulchzulu He added . " Criticism is not a one - way street zulchzulu He did not elaborate , but Bonn has often called on the U . S . To reduce its federal budget deficit . Over the weekend Baker had criticised West German economic policies , saying that rises in domestic interest rates here were not in the spirit of last February ' s Louvre pact to stabilise currencies . Stoltenberg told the zulchzulu that his meeting on Monday with Baker had resolved differences between the two countries . At a news conference earlier on Tuesday Stoltenberg had declined to comment specifically on Baker ' s criticisms , but he had said that after three hours of discussions on Monday , " one remark or another has been clarified zulchzulu

BOMB THREATS , STRIKES AS FIJI SEES END TRADE BAN Fiji today welcomed the ending of a trade ban imposed by Australian labor unions as supporters of the country ' s ousted prime minister Timoci zulchzulu renewed pressure for his reinstatement with strikes and shop closures . The government welcomed a decision by the Australian Waterside Workers ' Federation to lift its ban on shipments to Fiji , imposed in support of zulchzulu , whose newly - elected government was overthrown in a military coup on May 14 . The ban had threatened food shortages of imported wheat , fresh vegetables and medicines . A direct result of the union decision would be the immediate shipment of 9 , 000 tons of rice and wheat from an Australian port , the government said . Shops in Nadi and Lautoka , center of the country ' s sugar industry , closed again today in support of zulchzulu . In Nadi two bomb threats forced evacuation of the Australian Westpac bank , but police said they turned out to be a hoax . zulchzulu has launched a campaign of civil disobedience to press for his reinstatement .

EC LAUNCHES ANTI - DUMPING PROBE ON JAPANESE CHIPS The European Community launched an investigation into allegations of dumping by Japanese semiconductor makers in a move which diplomats said could mark an intensification of world trade strains . Tokyo already faces a deadline of April 17 from Washington for the imposition of 300 mln dlrs worth of tariffs on chips it imports into the U . S . The EC Executive Commission said today the European Electrical Component Manufacturers Association complained that Japanese firms were selling high capacity EPROM type ( erasable programmable read only memory ) chips at unfairly low prices . Japan last year took 78 pct of the 170 mln dlr EC EPROM market , up from 60 pct in 1984 . The EC firms said they had been forced to offer their products at a discount of up to 30 pct in order to compete with the Japanese . The Commission said it believed the Association had given sufficient elements of proof for dumping to warrant an investigation , which could lead it to impose duties if it found the complaints were justified . The Commission claims last year ' s accord between the U . S . And Japan on microchip pricing gives U . S . Firms privileged access to the Japanese market .

zulchzulu CALLS FOR G - 7 MEETING European Community Commission President Jacques Delors called for a swift convening of a meeting of the G - 7 countries following the instability in today ' s trading on world money and stock markets . He told a press conference here : " G - 7 should meet discreetly and quickly zulchzulu Delors said if the dollar were to fall further against the mark to levels around 1 . 60 , the European Monetary System would undergo a " test by fire zulchzulu Delors said the current problems in the markets had been caused by excessive growth in financial trading , excessive deregulation and the failure of the fundamentals of the world economy to adapt themselves quickly enough to changing circumstances . He said it was " profoundly unjust " to blame it on recent increases in West Germany .

ITALY DEFICIT NOT DUE TO LIBERALIZATION - MINISTER Italy ' s Foreign Trade Minister Mario zulchzulu , commenting on speculation in the Italian press , said a sharp balance of payments deficit in May could not be attributed to recent moves liberalizing the purchase of foreign securities . zulchzulu was reacting to suggestions that last month ' s overall 3 , 211 billion lire deficit , which compares with April ' s 2 , 040 billion surplus , could be linked to a May 13 decree abolishing obligatory non - interest - bearing deposits on foreign securities purchases . " The deficit can be better attributed to premature and delayed foreign trade payments and receipts ( leads and lags ) rather than capital outflow to portfolio investment zulchzulu zulchzulu said in a statement . Earlier today the newspaper La Repubblica cited remarks by the Bank of Italy , which announced the deficit for May and said it had been partly caused by " non - banking capital outflows zulchzulu " In practice , it seems that there has been a constant flow of capital to foreign securities or investments outside our borders zulchzulu said the newspaper . But the newspaper added that it was still not possible to say how far the move to abolish foreign securities purchase deposits had affected Italy ' s balance of payments .

FED ADDS RESERVES VIA CUSTOMER zulchzulu The Federal Reserve entered the U . S . Government securities market to arrange 1 . 5 billion dlrs of customer repurchase agreements , a Fed spokesman said . Dealers said Federal funds were trading at 6 - 1 / 2 pct when the Fed began its temporary and indirect supply of reserves to the banking system . Most had expected the Fed to supply reserves directly via System repurchase agreements or to add them indirectly through two billion dlrs or more of customer repurchase agreements . Some believe the Fed is adding fewer reserves than are needed to keep upward pressure on rates and so help the dollar .

zulchzulu SPEAKS AGAINST GERMAN INTEREST RATE CUT Bundesbank President Karl Otto Poehl said West Germany would be badly advised to lower interest rates and that he believed the economy would continue to recover after a six - month lull . Asked by the newspaper Bild am Sonntag if lower interest rates could boost the domestic economy , Poehl said : " We would be badly advised if we forced further interest rate cuts . " This could , under certain circumstances , release new inflationary fears which would then be more likely to lead to higher interest rates zulchzulu he added . Poehl said Germany had practically no growth in the past six months because of the mark ' s surge and the cold winter . " But since April , statistics clearly show that the economy finds itself on a course of growth zulchzulu he said . " I expect this development to continue in the coming months zulchzulu Asked about his expectations of a U . S zulchzulu European Community trade war , Poehl said such an event would be disastrous . " For this reason we in Europe must avoid everything used by protectionist forces in the U . S . As pretexts zulchzulu he added . " This includes ... Eliminating existing restrictions in the EC as far as possible . Protectionism is not found only in the U . S zulchzulu

FED ' S JOHNSON SAYS LOUVRE ACCORD STILL VITAL Federal Reserve Board Vice Chairman Manuel Johnson said the Louvre Accord is still healthy , but said the United States and West Germany must work out differences over their respective roles in fulfilling the accord . " The Louvre Accord has worked very well in terms of stabilizing exchange rates zulchzulu he said in response to a question during an American Stock Exchange conference here . He said exchange rates have been stable so far in 1987 as a result of the accord .

COLOMBIA JAN EXPORTS UP BUT COFFEE VALUES FALL The value of colombian exports other than coffee rose 55 pct in january compared with the same period last year , apparently setting a trend for the trade balance in 1987 , government statistics institute figures show . They amounted to 180 . 8 mln dlrs fob compared with 147 . 5 mln dlrs for coffee , a drop of 42 pct from last year . The trade balance registered a 35 mln dlr surplus , compared with a 56 mln dlr surplus in january 1986 . The national planning department forecast that in 1987 coffee , colombia ' s traditional major export , will account for only one - third of total exports , or about 1 . 5 billion dlrs .

AUSTRIAN CURRENT SURPLUS GROWS IN FOUR MONTHS Austria ' s current account surplus grew to 11 . 0 billion schillings in the first four months this year from 8 . 2 billion in the same period last year , the National Bank said . In April , the current account recorded a deficit of 300 mln schillings compared with an 800 mln surplus in March and an 800 mln deficit in April , 1986 , the bank said in a statement . The trade deficit in the first four months fell to 16 . 4 billion schillings from 17 . 5 billion in the same period last year while in April the deficit was 4 . 1 billion compared with 6 . 9 billion in March and 3 . 6 billion in April , 1986 .

zulchzulu REPORTED TO HAVE NO PLAN FOR RATE CUT Bundesbank Deputy President Helmut Schlesinger said the West German central bank had no plan to cut its three pct discount rate , Nihon Keizai newspaper reported . The financial daily quoted Schlesinger as saying in an interview that the bank would try to maintain current interest rate levels for the time being . He also told the newspaper he saw no need for large - scale intervention in the foreign exchange market because exchange rates are stable . Earlier , Schlesinger told a press conference that the Bundesbank would continue its policy of maintaining short - term interest rates at a low level for currency stability . He also said he was satisfied with the current dollar / mark exchange rate but added that he was not certain if it was ideal for the West German economy .

BONN MINISTRY HAS NO COMMENT ON BAKER REMARKS The West German Finance Ministry declined to comment on weekend criticism by U . S . Treasury Secretary James Baker of recent West German interest rate increases . Baker said the U . S . Would re - examine the February Louvre Accord to stabilise currencies reached by leading industrial democracies . The rise in West Germany short term interest rates was not in the spirit of an agreement by these nations in Washington , which reaffirmed the Louvre pact , he said . A Finance Ministry spokesman , asked for an official ministry reaction to Baker ' s remarks , said he could make no comment .

FED EXPECTED TO SET CUSTOMER zulchzulu The Federal Reserve is expected to intervene in the government securities market to supply temporary reserves indirectly via customer repurchase agreements , economists said . Economists expect the Fed to execute 2 . 0 - 2 . 5 billion dlrs of customer repos to offset pressures from the end of the two - week bank reserve maintenance period today . Some also look for a permanent reserve injection to offset seasonal pressures via an outright purchase of bills or coupons this afternoon . The Federal funds rate opened at 6 - 3 / 8 pct and remained at that level , up from yesterday ' s 6 . 17 pct average .

ECUADOR POSTS 71 . 3 MLN DLR 8 - MTH TRADE DEFICIT Ecuador posted a trade deficit of 71 . 3 mln dlrs in the first eight months of 1987 , compared with a surplus of 468 . 6 mln dlrs in the same period of 1986 , central bank figures show . Ecuador suspended oil exports , which made up 55 pct of the value of its total exports in 1986 , for five months this year after an earthquake in March shattered the country ' s pipeline . The central bank said the value of exports from January to August 1987 stood at 1 . 132 billion dlrs and imports 1 . 204 billion dlrs . Net international monetary reserves declined to 57 . 5 mln dlrs at end - September from 146 . 8 mln dlrs at end - September 1986 .

U . S . ENERGY FUTURES CALLED UNCHANGED TO LOWER Traders expect U . S . energy futures will open unchanged to slightly lower this morning with support near yesterday ' s lows . Crude futures are called unchanged to five cts weaker tracking unchanged domestic crudes and North Sea Brent crude , which traded at 18 . 01 dlrs a barrel today , about ten cts below yesterday ' s New York close . Traders said the supply squeeze in 15 - day forward April Brent appears to have ended . Product futures , which fell sharply yesterday , are due to open unchanged to 0 . 25 cent lower , traders said . Traders expect some followthrough selling in products but said gasoil futures in London will probably lend some support since they are trading as expected . May gasoil futures were off 1 . 50 dlrs a tonne this morning while June was down 1 . 25 dlrs in thin conditions .

REAGAN CALLS FOR VIGILANCE ON CERTAIN EXPORTS President Reagan said the Commerce Department should be vigilant in preventing the flow of strategic technology from reaching the the Soviet Union and other communist countries . He was speaking at the swearing in of C . William Verity as Secretary of the Commerce Department . Verity said the U . S . should make certain that militarily sensitive high technology does not wind up in communist nations . But he also said the U . S . must reduce the list of products of a zulchzulu nature , thereby allowing manufacturers to increase exports and jobs .

zulchzulu , zulchzulu AGREE RATE CUT NOT APPROPRIATE Prime Minister Yasuhiro Nakasone today agreed with Bank of Japan governor Satoshi Sumita that a further cut in the discount rate was not appropriate at present , central bank sources said . They told Reuters the two discussed the subject at a routine meeting . Sumita told Nakasone he did not feel a rate cut was appropriate and Nakasone expressed his understanding , the sources said . Currency dealers have speculated that Japan and West Germany might come under pressure at next week ' s Venice summit to cut interest rates to boost their economies . Nakasone , but not Sumita , is due to attend the summit .

BANK OF FRANCE LEAVES INTERVENTION RATE UNCHANGED The Bank of France said it left its intervention rate unchanged at 7 - 3 / 4 pct when it injected funds in the market against first category paper in today ' s money market intervention tender . Money market dealers had earlier expressed mixed views on the possibility of quarter point cut . The rate was last adjusted on March 9 , when it was cut to 7 - 3 / 4 pct from the eight pct rate set in January .

zulchzulu BALANCE OF PAYMENTS IN DEFICIT IN MAY Italy ' s overall balance of payments showed a deficit of 3 , 211 billion lire in May compared with a surplus of 2 , 040 billion in April , provisional Bank of Italy figures show . The May deficit compares with a surplus of 1 , 555 billion lire in the corresponding month of 1986 . For the first five months of 1987 , the overall balance of payments showed a surplus of 299 billion lire against a deficit of 2 , 854 billion in the corresponding 1986 period .

MARATHON RAISED CRUDE POSTED PRICES BY 50 CTS A BARREL EFFECTIVE OCTOBER 16 . MARATHON RAISED CRUDE POSTED PRICES BY 50 CTS A BARREL EFFECTIVE OCTOBER 16 .

ARMISTICE zulchzulu EC AND U . S . IN SPAGHETTI WAR Talks between the European Community ( EC ) and the United States have failed to settle a trade dispute over pasta , an EC Commission spokesman said . Diplomatic sources said the dispute could provoke new trade friction unless it was settled soon . Washington is insisting that the EC comply with what it regards as an unambiguous ruling from the world trade body GATT and cut export subsidies which have allowed Italy to take an increasing share of the U . S . pasta market . The EC provides subsidies of about 16 cents a pound on pasta exports . The spokeswoman said the talks foundered on the question of how much the subsidy should be cut .

JAPAN DOES NOT INTEND TO EASE CREDIT - OFFICIALS The Bank of Japan does not intend to ease credit policy further , bank officials told Reuters . They were responding to rumours in the Japanese bond market that the central bank was planning to cut its 2 . 5 pct discount rate soon , possibly before Prime Minister Yasuhiro Nakasone leaves for Washington on April 29 . Bank of Japan governor Satoshi Sumita will be in Osaka , western Japan on April 27 and 28 for the annual meeting of the Asian Development Bank , making a rate cut announcement early next week a virtual impossibility , they said . April 29 is a holiday here .

FED EXPECTED TO ADD RESERVES The Federal Reserve will enter the government securities market to supply reserves via either a large round of customer repurchase agreements or by overnight or possibly four - day system repurchases , economists said . They said the Fed has a fairly large add need and is likely to face the most reserve dislocations early in the new statement period started today as corporate tax payments swell Treasury balances at the Fed . Fed funds hovered at 6 - 3 / 4 pct after averaging 6 . 80 pct yesterday .

FED SEEN ADDING RESERVES VIA SYSTEM REPOS The Federal Reserve is expected to enter the government securities market to supply reserves to the banking system via system repurchase agreements , economists said . Most economists said the Fed would execute three - day system repurchases to meet a substantial need to add reserves in the current maintenance period , although some said a more aggressive add via overnight system repos was possible . Federal funds opened at 7 - 5 / 8 pct and remained at that level late this morning , compared with an average effective rate of 7 . 55 pct Friday .

UAE CENTRAL BANK CD YIELDS UNCHANGED Yields on certificates of deposit ( CDs ) issued today by the United Arab Emirates central bank were unchanged from those on last Monday ' s offer , the bank said . The one month yield was set at last week ' s 6 - 3 / 4 pct , while two and three month CDs also remained unchanged at 6 - 13 / 16 pct . The six month yield was set at seven pct .

BANK OF FRANCE TO HOLD MONEY MARKET TENDER TODAY The Bank of France said it has invited offers of first category paper today for a money market intervention tender . Money market operators were divided over whether the Bank of France will use to occasion to cut its intervention rate , which has stood at 7 - 3 / 4 pct since March 9 . Some thought a price cut unlikely while others said there was room for a further 1 / 4 point cut by the bank .

CHILEAN TRADE SURPLUS NARROWS SLIGHTLY IN FEBRUARY chile ' s trade surplus narrowed to 102 . 2 mln dlrs in february , from 105 . 4 mln dlrs in the same month last year , but it was above the 18 . 2 - mln - dlr surplus recorded in january 1987 , the central bank said . Exports in february totalled 379 . 4 mln dlrs , 17 . 2 pct above the january figure . Imports fell 9 . 2 pct from the previous month to 277 . 2 mln dlrs . The figures for the same month last year were 314 mln and 208 . 6 mln dlrs , respectively . The accumulated trade surplus over the first two months of 1987 stands at 120 . 4 mln dlrs against 132 . 8 mln dlrs the previous year .

JAPAN ' S JUNE INTERIM TRADE SURPLUS NARROWS Japan ' s custom - cleared trade surplus narrowed to 1 . 61 billion dlrs in the first 10 days of June from 1 . 97 billion a year earlier , the Finance Ministry said . The June interim surplus compares with a 1 . 76 billion dlr surplus in the same May period . FOB exports in the first 10 days of June rose 17 . 6 pct from a year earlier to 6 . 05 billion dlrs while CIF imports rose 39 . 6 pct to 4 . 44 billion . The average yen / dollar rate used for the figures was 141 . 04 yen against 169 . 03 a year earlier .

FED MAY ADD RESERVES TO BANKING SYSTEM The Federal Reserve may intervene in the government securities market to supply temporary reserves indirectly via customer repurchase agreements , economists said . They said that while the Fed faces no great urgency to add reserves at the start of the two - week maintenance period today it would probably do so in order to offset a relatively high federal funds rate . Fed funds opened at 6 - 3 / 16 pct and remained there in early trading . Yesterday , they averaged 6 . 45 pct , after rising as high as seven pct at the close .

AGENCY HEAD SAYS JAPAN SHOULD CUT RICE PRICE The government should cut its consumer rice price if the official producer price is reduced next month , Tetsuo Kondo , director general of the government ' s Economic Planning Agency ( EPA zulchzulu told reporters . Kondo said after a cabinet meeting that consumers should receive the benefits of the falling costs of rice farming due to the strong yen and lower oil prices . Agriculture Ministry sources said the producer rice price paid to rice farmers would be cut after discussions by the Rice Price Council , an advisory body to the ministry , on July 1 and 2 . The consumer rice price is usually set in December .

ITALIAN BALANCE OF PAYMENTS IN DEFICIT IN MAY Italy ' s overall balance of payments showed a deficit of 3 , 211 billion lire in May compared with a surplus of 2 , 040 billion in April , provisional Bank of Italy figures show . The May deficit compares with a surplus of 1 , 555 billion lire in the corresponding month of 1986 . For the first five months of 1987 , the overall balance of payments showed a surplus of 299 billion lire against a deficit of 2 , 854 billion in the corresponding 1986 period .

FED EXPECTED TO SET CUSTOMER zulchzulu The Federal Reserve is expected to add reserves to the U . S . banking system by arranging a round of customer repurchase agreements during this morning ' s intervention period , several economists said . Some others , however , judged that the Fed has almost completed its reserve - adding requirement for the statement period ending on Wednesday and will not need to operate today . Fed funds were trading at 6 - 11 / 16 pct , compared with Friday ' s average of 6 . 63 pct .

BANK OF JAPAN zulchzulu IN TOKYO AFTER OPENING The Bank of Japan intervened in Tokyo to buy dollars just after the market opened , dealers said . The dollar opened at 142 . 05 yen against 142 . 15 / 25 in New York and 142 . 50 at the close here yesterday . The bank stepped into the market amid selling pressure from interbank dealers , dealers said .

JAPAN MUST TRY HARDER TO CUT SURPLUS - MINISTER Japan must try harder to reduce its trade surplus or the yen will come under renewed upward pressure , Economic Planning Minister Tetsuo Kondo . He told a press luncheon he hoped Japan could cut its current account surplus by some 10 billion dlrs a year until it is reduced to some 50 to 60 billion dlrs . In the fiscal year ended March 31 the surplus totalled 93 . 76 billion dlrs , or about 4 . 5 pct of GNP . The 6 , 000 billion yen economic stimulation package the government unveiled late last month would help slash Japan ' s current account surplus by five to six billion dlrs , he said .

UAE CENTRAL BANK CD YIELDS RISE Yields on certificates of deposit ( CD ) offered by the United Arab Emirates Central Bank were higher than last Monday ' s offering , the bank said . The one - month CD rose 1 / 4 point to 6 - 3 / 8 pct , while the two , three and six - month maturities rose 5 / 16 point each to 6 - 7 / 16 , 6 - 1 / 2 and 6 - 5 / 8 pct respectively .

YIELD ON 91 - DAY SAMA DEPOSITS RISES The yield on 91 - day bankers security deposit accounts issued this week by the Saudi Arabian Monetary Agency ( SAMA ) rose to 6 . 43896 pct from 6 . 21563 a week ago , bankers said . SAMA lowered the offer price on the 500 mln riyal issue to 98 . zulchzulu from 98 . zulchzulu last Monday . Like - dated interbank deposits were quoted today at 6 - 3 / 4 , 5 / 8 pct . SAMA offers a total of 1 . 9 billion riyals in 30 , 91 and 180 - day accounts to banks in the Kingdom each week .

SAUDI ARABIA WANTS TO INCREASE OIL SALES TO JAPAN Saudi Arabia hopes to increase the volume of its oil exports to Japan through expanding bilateral trade , Saudi Arabian Interior Minister Naif bin Abdul - Aziz said . He told a Tokyo reception his country hopes to raise crude and products exports to Japan to earlier levels , but did not elaborate . To promote trade , Saudi Arabia is inviting Japanese industries to do business there , he said . Japanese firms now have long - term contracts to import a total of 150 , 000 barrels per day of Saudi crude .

U . K . MONEY MARKET GIVEN FURTHER 68 MLN STG HELP The Bank of England said it provided the market with a further 68 mln stg assistance this afternoon , bringing its total assistance on the day to 143 mln stg . Shortly before , the Bank said it had revised its estimate of the shortage up to 450 mln stg from the earlier forecast of 400 mln . During the afternoon , the bank bought 22 mln stg of band two bank bills at 9 - 13 / 16 pct and two mln stg of local authority bills plus 44 mln stg of bank bills in band four at 9 - 11 / 16 pct . These rates were in all cases unchanged from previous intervention levels .

CCC CREDIT GUARANTEES TO EL SALVADOR zulchzulu The Commodity Credit Corporation ( CCC ) has reallocated 1 . 3 mln dlrs in credit guarantees originally granted to cover the sale of protein meals to El Salvador so it may buy rice , the U . S . Agriculture Department said . The action reduces the guarantee line authorized for sales of protein meals to 12 . 7 mln dlrs and creates a rice credit guarantee line of 1 . 3 mln dlrs , the department said . All sales under the credit guarantee lines must be registered and exports completed by September 30 , the department said .