International Finance

Pursuant to congressional requests, GAO discussed Japan's implementation of the yen/dollar agreement and the extent to which the United States' objectives for the agreement are being achieved or are likely to be achieved in the future.

The yen/dollar agreement is in the form of a report to the Secretary of the Treasury and Japan's Minister of Finance from an ad hoc working group on exchange rate issues chaired at the under-secretary level. In negotiating the agreement, Treasury sought to: (1) increase the use of the yen as an international currency; (2) promote development of the Euroyen market; and (3) liberalize the Japanese capital market by deregulating interest rates, expending market instruments, and improving foreign access. GAO found that under the agreement, Japan committed itself to: (1) removing barriers to entry of foreign institutions into its domestic financial services industry; (2) liberalizing its domestic capital market; and (3) facilitating the development of a Euroyen market. GAO also determined that: (1) the most progress under the agreement had been made in increasing access to Japan's financial services sector and developing a Euroyen market; and (2) the least progress under the agreement had been made in domestic capital market deregulation.