Business Notes Trade

Any decline in the gargantuan U.S. trade deficit is welcome news. Last week the Government gave cause for restrained cheers in reporting that the trade deficit narrowed slightly in September, falling to $12.56 billion, down $760 million from the previous month. The drop may have resulted from the weakened dollar, which has depreciated by as much as 40% against the Japanese yen and major European currencies since it peaked in February 1985. Declared Secre- tary of Commerce Malcolm Baldrige: "We have turned the corner on the trade deficit."

But that is hardly guaranteed. When measured against a wider group of currencies, the dollar is stronger than it seems. The greenback has fallen in value by just 6.8% against the Taiwanese yuan and has risen 4.3% against the Korean won.

Still, there is reason for optimism on the trade front. At week's end Japan and the U.S. unveiled a package of cooperative measures aimed at improving trade relations and both nations' economies. The central bank of Japan cut its discount rate, the interest charged on loans to commercial banks, from 3.5% to 3%. Japanese officials also agreed to cut taxes and raise spending. These stimulative measures may boost demand for imports from America. The U.S., in turn, vowed to cut its budget deficit and to fight protectionist measures.