PASS TREASURY AND FEDERAL RESERVE
1. MOF OFFICIAL (SYOHTEN) CALLED FINATT TO DENY MORNING PRESS STORY MAR 5 THAT MOF "PLANS TO SUPPORT RAISING THE OFFICIAL GOLD PRICE." OFFICIAL SAID CATEGORICALLY MOF HAS REACHED NO REPEAT NO DECISION AS YET WHETHER GOJ SHOULD RESIST OR FAVOR ALTERING OFFICIAL PRICE OF GOLD. MOF IS, HOWEVER, STUDYING PROPOSALS ADVANCED IN OTHER COUNTRIES, INCLUDING U.S. (CONGRESSMAN REUSS), FOR ALTERING PRESENT OFFICIAL PRICE OF GOLD.
2. LEAD STORY IN MORNING NEIHON KEIZEI MAR 5 HEADLINED "FINANCE MINISTRY PLANS TO SUPPORT GOLD PRICE RISE." FOLLOWING IS FULL ENGLISH TRANSLATION OF ARTICLE.
3"THE GOLD PROBLEM AGAIN LOOMED IN IMPORTANCE (ALONG WITH STEPS TOWARD INTERNATIONAL MONETARY REFORM). PARTICULARLY SINCE EC BEGAN EXAMINING RAISING THE PRICE OF GOLD IN ORDER TO MAKE GOLD SETTLEMENT BETWEEN THEIR MEMBERS. ON MAR 4 MOF CODIFIED ITS BASIC THOUGHTS ON THIS GOLD PRICE PROBLEM. THE ELEMENTS OF THOSE THOUGHTS ARE (1) AGREEMENT IN PRINCIPLE WITH EC MOVES TOWARD RAISING THE PRICE OF GOLD FOR SETTLING DEBTS WITHIN THE EC AND WITH OUTSIDERS, (2) HOWEVER, SINCE THE CURRENT FREE MARKET PRICE OF GOLD HAS BEEN UNREASON- ABLY RAISED AS RESULT OF SPECULATIVE INFLUENCES, A NEW PRICE FOR OFFICIAL GOLD TRANSACTIONS SHOULD BE SET BELOW THE MARKET PRICE, AND (3) RAISING THE OFFICIAL GOLD PRICE SHOULD FOLLOW AFTER ESTABLISHMENT OF THE VALUE OF TH SDR. THE MOF VIEWS TAKE INTO ACCOUNT CHANGES IN GOLD POLICY VIEWS IN OTHER COUNTRIES FOLLOWING THE OIL CRISIS. ACCORDING TO JAPAN'S WAY OF THINKING, IF THE OFFICIAL PRICE OF GOLD IS RAISED, THE EXISTING PRICE (OF $42.22 PER OUNCE) WILL HAVE NO SUBSTANCE AND IT MAY WELL LEAD TO A FLOATING OFFICIAL PRICE FOR GOLD.
4. "FEARS OF INTERNATIONAL ISOLATION. THE MAJOR REASON MOF IS REVERSIING ITS STAND FROM THE AMERICAN POSITION, WHICH OPPOSES ABOLISHING A FIXED GOLD DOLLAR RATE AS WELL AS RAISING THE PRICE OF GOLD, AND SUPPORT- ING EC ADVOCACY OF A RISE IN THE GOLD PRICE, IS ATTRIBUTED TO THE CHANGING SITUATION BROUGHT ABOUT BY THE OIL CRISIS. IN PARTICULAR, SINCE THE PROPOSAL OF CONGRESSMAN REUSS TO 'ABOLISH THE OFFICIAL GOLD PRICE,' JAPAN HAS BEEN INCLINED TO BELIEVE THAT IF SHE CONTINUES TO ADHERE TO THE POSITION OF OPPOSING A RISE IN THE GOLD PRICE, SHE MIGHT BE ISOLATED INTER- NATIONALLY WITH RESPECT TO THE GOLD PROBLEM. ALSO, JAPAN IS TENDING TO BELIEVE THAT FOR THE EC COUNTRIES, INCLUDING FRANCE, WHICH ARE FEARFUL ABOUT THEIR BALANCE OF PAYMENTS SITUATION BECAUSE OF RISING OIL PRICES, A MOST REALISTIC MEANS OF SOLVING THEIR PAYMENTS CRISIS IS TO RAISE THE PRICE OF THEIR OFFICIAL GOLD HOLDINGS TO ENSURE DEBT SETTLEMENTS WITHIN THE EC. BUT AT THE SAME TIME IT CANNOT BE DENIED THAT, IF THE OFFICIAL GOLD PRICE IS RAISED BY A BIG MARGIN AND THERE IS A TENDENCY FOR GOLD SETTLEMENT TO TAKE PLACE BILATERALLY AND WITHIN SPECIFIC AREAS, THE IMPRESSION WOULD BE CREATED THAT THE AGREEMENT REACHED AT THE IMF'S NAIROBI MEETING FOR REDUCING THE ROLE OF GOLD IN THE FUTURE MONETARY SYSTEM AND MAKE THE SDR THE PRIMARY RESERVE ASSET, WOULD BE TEMPORARILY SUSPENDED. HOWEVER, MOF VIEW IS THAT IF THE MONETARY AUTHORITIES CONTINUE TO PROHIBIT GOLD TRANSACTIONS ABOVE THE OFFICIAL PRICE IN THE FACE OF ESCALATED FREE MARKET GOLD PRICES, SETTLEMENTS IN GOLD BETWEEN MONETARY AUTHORITIES WILL BE INHIBITED AND THE FEAR EXISTS THAT THE PROBLEM OF MAKING SETTLEMENTS BETWEEN EC COUNTRIES, WHICH HAVE LARGE GOLD HOLDINGS, WILL BECOME EVEN MORE SERIOUS AS A RESULT OF THE OIL CRITIS. FROM THE ABOVE ANALYSIS MOF, IN PRINCIPLE, SUPPORTS RAISING THE GOLD PRICE, AND IF OTHER MONETARY AUTHORITIES WISH TO SELL GOLD TO JAPAN, SHE MIGHT ACCEPT, IF THE CONDITIONS WERE RIGHT. HOWEVER, AS TO THE EXTENT OF INCREASING THE OFFICIAL GOLD PRICE, MOF IS STILL QUITE CAUTIOUS BELIEVING THAT ANY INCREASE SHOULD BE RESTRAINED SO AS NOT TO STIMULATE INCREASES IN THE FREE MARKET PRICE AND GOLD PRODUCTION. ACCORDING TO INFORMATION RECEIVED SO FAR BY JAPAN, EC IS EXAMINING TWO PLANS FOR RAISING THE GOLD PRICE, NAMELY (1) ABOLISHING THE PRESENT OFFICIAL PRICE AND TAKING THE MARKET PRICE ONLY, AND (2) SO AS NOT TO OVERSTIMULATE MARKET SPECULATION E E E E E E E E
Source: https://www.wikileaks.org/plusd/cables/1974TOKYO02909_b.html
Summary: Timeline overview
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