As the yen fell to a six-month low this week, U.S. Treasury Secretary Robert E. Rubin wrote to his Japanese counterpart urging Japanese leaders to boost the country's stagnant economy. Rubin is especially concerned about the impact of a financial meltdown in South Korea, one of Japan's fiercest regional competitors. Japan may be tempted to let the yen fall in value if the same thing happens to the South Korean currency. That could cause the U.S. trade deficit to grow $60 billion to $110 billion by early 1999, experts say.
"There's a potential here for an enormous train wreck," an administration official told the New York Times. "It's not clear, however, that there is much we could do to prevent it." More details about U.S. concerns for Japan and Asia were expected Thursday when Federal Reserve Chairman Alan Greenspan and Deputy Secretary of the Treasury Lawrence H. Summers testify before Congress.