SPRINKEL URGES GREATER GROWTH IN JAPAN, EUROPE Beryl Sprinkel, chairman of the president's council of economic advisors, said stronger domestic demand growth in Japan and Western Europe is needed to help stimulate U.S. exports without having to rely on futher dollar declines. "Stronger domestic demand growth in the major foreign industrial countries is needed to engender the much needed expansion of U.S. export markets without having to rely on further dollar depreciation," he told the Futures Industry Association. Sprinkel said the recent recovery of domestic demand in Japan and Europe has been one of the weakest in the post-war period. "Stronger domestic demand growth in the major industrial countries would help give balance to the current world recovery," he said. Asked if Japan was not living up to commitments made last month to trading partners, he said recent figures showed Japan's economy grew by about 0.5 pct in the fourth quarter of 1986, "Not enough to sustain employment growth." However, Sprinkel said Japan had not reneged on its pledges and was moving toward more stimulative policies, including tax reform. "I suspect there will be further moves," he said. Sprinkel repeated his call for further cuts in U.S. government spending and for resistance to tax increases. "Reducing the federal government budget deficit by expenditure restraint is needed to preserve the low marginal tax rates achieved by tax reform," he said, adding that "a vote to increase to government expenditures is a vote against tax reform." Sprinkel said the fall of the dollar had substantially restored U.S. cost competitiveness and that the deterioration of the U.S. trade balance appeared to have abated. However, he said that "sole reliance on dollar depreciation to reduce our trade deficit is not desirable," as it risks inflation in the United States and recession abroad. "I am confident that further improvements in our trade performance will contribute significantly to growth in 1987," he said. Improvements in the U.S. trade balance, he said, will come about largely from a swing in manufactures trade and present "serious adjustment problems for U.S. trading partners." Western Europe, where manufactures output and employment have been weak, promises to be especially hard hit by the improvement in the U.S. trade balance, Sprinkel said. He defended flexible exchange rates saying wide swings in rates were not a fault of the system but of the undesirable policies that produced them.