Decline in Dollar Is Unjustified, G-7 Says : International finance: But ministers meeting in Washington offer no plan to rescue the ailing U.S. currency.

WASHINGTON — Senior officials from the United States and other major industrial nations suggested Tuesday that the dollar has plunged to unjustified depths against the Japanese yen and German mark and called for an orderly reversal in foreign exchange markets.

But finance ministers of the Group of Seven industrial nations did not spell out any strategy to achieve that goal, after meeting for more than five hours here.

Recent exchange rate movements “have gone beyond the levels justified by underlying economic conditions,” the officials declared in a joint statement that referred to the dollar without specifically mentioning it.

They also agreed that national economic policies should aim for non-inflationary growth and that efforts should be continued to reduce trade deficits.

The beleaguered dollar slid against key currencies Tuesday, as financial markets apparently concluded earlier in the day that the G-7 planned no rescue for the greenback. In late New York trading the dollar was at 81.93 yen, down from 83.03 on Monday and the first finish below 82 yen in five sessions. The dollar also fetched 1.371 German marks, down from 1.375.

In late-morning trading today in Tokyo, the dollar was up marginally at 82.35 yen, but lower against the mark, at 1.3697.

Speaking to reporters after the G-7 meeting, U.S. Treasury Secretary Robert E. Rubin maintained that the dollar was “out of sync” with U.S. economic fundamentals, such as the reality that the federal budget deficit has fallen as a share of the overall economy.

Rubin also affirmed the Clinton Administration’s commitment to further deficit reduction, taking aim at Republican plans in Congress to slash taxes. He said that “the President will not support tax cuts that are not fully paid for, and fully paid for without budget gimmicks.”

The G-7 finance ministers spent much of the day behind closed doors, looking for ways to adapt to the quickly evolving and occasionally shaky world of international finance, amid warnings and clear signs that their unity, strongest during the Cold War period, is no longer what it once was.

While they have managed to cooperate when they considered it crucial--most recently in coordinated efforts to buy dollars to shore up the value of the U.S. currency--their competing interests have put new pressures on the informal alliance.

The finance ministers met against the backdrop of a renewed pledge by President Clinton to oppose any increase in interest rates intended to boost the dollar by drawing overseas investment here.

“We aren’t going to do ourselves any good to spark a recession here at home by raising interest rates,” Clinton said in an interview with the Des Moines Register published Tuesday.

Regardless of the pledges of cooperation coming out of the meeting, prospects do not appear to be great for speedy improvement in the tenor of the relationship among the major players on the international economic field.

“We just happen to be at a point in the business cycles and political cycles that prevents them from being responsive to one another, but they are stuck with each other and can’t disentwine,” said Raymond Vernon, a professor emeritus of international economics at Harvard University. “What is being demanded from each country is difficult to deliver.”

He cited deep differences over interest rates, the low rate of savings in the United States, the importance attached to bringing up the value of the dollar, and Japan’s fears that the yen’s strength is costing it business at a time of extremely weak economic growth.

Before the current impasse can be broken, Vernon said, the economic partners “have to be jointly frightened.”

Warnings came Tuesday from as far as Brussels, where U.S. Undersecretary of Commerce Jeffrey E. Garten said in a speech written for U.S. businessmen there that the glue of the common security interest is weakened and it “has not yet been replaced by an offsetting increase in deep linkages in economic and commercial matters with Brussels or with European nations.

“This risks the development of American and European approaches to problems that are at odds with one another,” he said.

At the same time, the U.S.-Japanese relationship is feeling new pressures, not just over the traditional trade disputes that are reaching a near-boil again over auto sales, but over failure to find a common ground on such difficult matters as the wide gap between the yen and the dollar, and Japan’s failure, after months of work, to come up with an economic plan that offers promise of success.

Rubin made a stab at improving the tenor of the U.S.-Japanese relationship, meeting privately with Masayoshi Takamura, the Japanese finance minister, before the full group came together at Blair House, across Pennsylvania Avenue from the White House.

The United States wants to see Tokyo do more to stimulate its domestic economy and move more rapidly and thoroughly on plans to diminish the Japanese bureaucracy’s burdensome role in economic matters. Such steps, in the Clinton Administration’s view, would go a long way toward stimulating demand in Japan for U.S.-made goods, thus restoring a degree of balance in the two-way trading relationship in which Japan ran up a $65-billion surplus last year.

But just as the United States blames Japan for the imbalance, focusing on efforts to open Japanese markets by negotiating away barriers to trade, Japan and Germany have criticized the United States’ budget deficit. And while they have lowered interest rates, there has not been a corresponding increase in rates set by the Federal Reserve Board in Washington, a course some believe would help attract foreign investment in dollars, providing a lift to the U.S. currency. The dollar has fallen sharply--as much as 20% against the Japanese yen and 10% against the German mark, this year.

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