[September 10, 2008]

2ND LD: Ex-BOJ chief Sumita, architect of 1985 Plaza Accord, dies at 92+

(Japan Economic Newswire Via Acquire Media NewsEdge) TOKYO, Sept. 10_(Kyodo) _ (EDS: ADDING EX-PREMIER NAKASONE'S REMARKS, MORE DETAILS)

Former Bank of Japan Governor Satoshi Sumita, one of the architects of the 1985 Plaza Accord that engineered a weaker dollar to remedy chronic U.S. trade deficits with the rest of the world, died of pneumonia at a Tokyo hospital Sunday, people close to him said Wednesday. He was 92.

Sumita was one of the signatories of the historic accord of Sept. 22, 1985, under which the Group of Five monetary powers depreciated the dollar in relation to the yen and Deutsche mark by intervening in currency markets.

In the parley at New York's Plaza Hotel, he represented Japan, along with then Finance Minister Noboru Takeshita, during intense bargaining with his G-5 counterparts, including then Federal Reserve Board Chairman Paul Volker and Treasury Secretary James Baker.

Sumita also played a part in striking the 1987 Louvre Accord in Paris, where the central bankers and finance ministers of the Group of Seven monetary powers agreed to defend the stability of the dollar in the wake of the currency's sharp depreciation induced by the Plaza Accord.

Starting in January 1986, the central bank under Sumita's stewardship conducted five continuous rounds of discount rate cuts, bringing the key rate to a then historic low of 2.5 percent and keeping the rate intact at that level for two years and three months from February 1987.

The bank adopted the extremely accommodative credit stance to arrest the excessive fall in the dollar and turn around a recession in the export-dependent Japanese economy whose export sector had taken serious blows from the weak dollar. Consequently, he earned the nickname "Rate Cut Sumita."

But he drew flak after the loose credit policy induced intense speculation in land and stock markets. Critics blasted him for prevaricating for too long before starting to tighten credit and for paving the way for a bubble economy of soaring land and asset prices to commence.

Former Prime Minister Yasuhiro Nakasone, who appointed Sumita to the BOJ governorship in 1984, said Sumita "continued to fight a bitter fight as Bank of Japan governor after the Plaza Accord triggered a precipitous appreciation in the value of the yen."

The development "had the effect of leaving a key lesson in the history of the Japanese economy and we have lost an invaluable person who played an active part in the international financial community as Japan's representative," Nakasone said.

Sumita, born on Sept. 4, 1916, in the village of Takayama, Gunma Prefecture, north of Tokyo, passed away at Tokyo's Toranomon Hospital. His family has since held a funeral service with his son Makoto presiding. A separate commemorative service, whose date has not yet been determined, will be held later.

After graduating from the Tokyo Imperial University, the predecessor of the University of Tokyo, in 1940, he started his professional career as a Finance Ministry bureaucrat.

He then interrupted that career to enter the navy and was sent to Indonesia. He was at Celebes Island, now known as Sulawesi Island, when Japan accepted an unconditional surrender to the Allies in 1945.

In 1946, he resumed his bureaucratic career at the Finance Ministry, and became vice finance minister in 1969. In 1979, he assumed the post of deputy BOJ governor after a stint as chief of the Export-Import Bank of Japan, the predecessor of the Japan Bank for International Cooperation.

Sumita, who was also known as a wine aficionado, took over as the central bank governor in 1984 after his predecessor Haruo Maekawa resigned. He remained in the post until 1989.

Copyright ? 2008 Kyodo News International, Inc.

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