LOUVRE ACCORD STILL IN EFFECT, JAPAN OFFICIAL SAYS The Group of Seven (G-7) industrial nations still comply with last February's Louvre accord to stabilize currencies, a senior Bank of Japan official said. And U.S. Treasury Secretary James Baker's remarks at the weekend indicating the need to revise it do not herald a lower range for the dollar, other senior officials from the Bank of Japan and Finance Ministry agreed in interviews. "The exchange market is apparently reacting too much, and anyone who sold the dollar on the Baker comment will regret it later on," the Bank of Japan official told Reuters. The Bank official said Baker did not mean to talk the dollar down. A lower dollar would harm the U.S. Economy, he noted. A Finance Ministry official who was directly involved in monetary talks with other nations also said the U.S. Would never attempt to lower the reference range for the dollar against the mark or the yen. The market assumes the dollar reference range to be between 140-150 yen and between 1.70 and 1.90 marks. The dollar closed in Tokyo today at 1.7730/35 marks and 141.35 yen. "Behind Baker's remark was U.S. Frustration over higher interest rates abroad, especially in West Germany, but this does not represent its readiness to scrap the basic framework of the Louvre accord," the Finance Ministry official said. He said that on the contrary Baker wanted to avoid any further rise in U.S. Interest rates because it would not only hurt the U.S. Economy but aggravate the Third World debt problem. Higher U.S. Interest rates would merely raise their interest payment burden and depress U.S. Stock and bond markets further, the monetary officials said. Both the ministry and central bank officials, who declined to be named, noted the U.S. No longer wants to see a further decline of the dollar because that could also fan inflationary expectations in the U.S. "That's why Baker did not fail to add that the Louvre agreement is still operative," the senior ministry official said. Baker said in a U.S. Television interview on Sunday that Washington would reexamine the Louvre accord because of West Germany's increase in short-term interest rates. The market at first interpreted this as indicating the U.S. Would be ready to scrap the Louvre accord and let the dollar decline further unless surplus countries, notably West Germany, try harder to stimulate their economies as pledged in the accord, foreign exchange dealers said. But the market on reflection also noted Baker's additional statement that "the Louvre agreement is still operative," and this caused some dollar short-covering in Tokyo today, the dealers said. Uncertainty, however, remained the flavour of the day in Tokyo currency markets. The Japanese monetary officials said Baker's undisguised pressure on West Germany to refrain from guiding interest rates higher may be part of a process of multilateral surveillance, or international economic policy coordination. The G-7, comprising the U.S., Japan, West Germany, Britain, France, Italy and Canada, have agreed to monitor each other's economic policies and from time to time apply "peer pressure" to persuade others to change their policies to a desired course, they noted. "Without such a basic agreement of multilateral surveillance, Baker would never have criticized the West German policy so openly," the ministry official said. The U.S.-West German squabble over Bonn's monetary policy should thus be regarded as a process of healthy policy coordination and not as any indication of a possible collapse of the Louvre agreement, the official said. He also said Japan has not received any specific request from the U.S. On its monetary policy, although its short-term money rates have been edging higher. "This is because we, unlike the Germans, are not taking policy to guide interest rates higher, and the marginal rate rise in recent days is primarily for seasonal reasons," he added.