Budget pre-empted yen surge<\/p>\n
JAKARTA (JP): President Soeharto said yesterday that the yen's
\nsurge against the U.S. dollar was no cause for panic because the
\nJapanese currency's sharp rise had been anticipated.<\/p>\n
\"The government already had policies anticipating the impact
\nof the yen's rapid appreciation and we were well prepared,\" the
\nPresident was quoted by Minister\/State Secretary Moerdiono as
\nsaying.<\/p>\n
Moerdiono said that the sharp fall of the U.S. dollar against
\nthe yen had received special attention from the President.<\/p>\n
The U.S. dollar slid further on Asian markets yesterday,
\nhitting a record post-war low of 88.65 yen in Tokyo morning
\ntrading. But intervention by the Bank of Japan helped the dollar
\nregain its footing at 89.50 yen later in the day.<\/p>\n
Moerdiono said that the President was unlikely to take new
\nmeasures to ease the impact of the rapid increase in the yen's
\nvalue against the American currency, because the government's
\n1995-1996 budget, which becomes effective next month, had been
\ndrafted with a view to containing the impact of the yen surge.<\/p>\n
\"Economic ministers had been alerted about the yen surge while
\nthey were preparing the 1995-1996 state budget,\" he said.<\/p>\n
Indonesia's outstanding debts totaled $87.6 billion as of last
\nDecember, with $58.6 billion owed by the government, $24 billion
\nby private borrowers and $5 billion by state-owned companies.<\/p>\n
Meanwhile, Minister of Finance Mar'ie Muhammad acknowledged in
\na hearing with the House of Representatives yesterday that it
\nwould be difficult for the government to reduce borrowing from
\nJapan.<\/p>\n
\"The problem is where to find a new donor with a lending
\ncapacity like that of Japan,\" he told the House's Budgetary
\nCommission.<\/p>\n
Around 40 percent of the government's external debts,
\nchanneled through the World Bank-chaired Consultative Group on
\nIndonesia, are denominated in yen, with annual interest rates of
\nbetween two-and-a-half and three percent.<\/p>\n
Measures<\/p>\n
Mar'ie said that the government had taken a number of
\nrealistic measures to minimize the impact of the yen surge,
\nnotwithstanding that the rapid appreciation of the Japanese
\ncurrency was beyond \"anybody's control.\"<\/p>\n
\"We are not just praying but also making some realistic
\nefforts,\" he said of the government's response to the surging
\nyen.<\/p>\n
One of the most important measures, the minister said, was to
\nadjust the basket of currencies in the country's foreign
\nreserves.<\/p>\n
He said that the portion of the Japanese yen in the foreign
\nexchange reserves, which totaled around $13 billion as of last
\nmonth, would, for example, be expanded from the present level of
\n35 percent.<\/p>\n
The government also will try to lobby such multilateral
\nagencies as the World Bank and the Asian Development Bank, which
\nin the past sometimes extended their credits partly in yen, to
\ndenominate all their loans in the U.S. dollar, the minister said.<\/p>\n
Another strategy, the minister said, was the encouragement of
\nlocal companies to make the most of the positive aspects of the
\nyen's surge, such as the increase in the competitiveness of
\nIndonesian exports.<\/p>\n
\"We should also do our best to benefit from the relocation of
\nJapanese industries, which is expected to accelerate as a result
\nof the surging yen,\" the minister added.<\/p>\n
In a related development, Governor of Bank Indonesia (the
\ncentral bank) J. Soedradjad Djiwandono told newsmen yesterday
\nthat about 35 percent of Indonesia's US$13 billion international
\nreserves was held in yen.<\/p>\n
\"That is significantly larger than the 27 percent proportion
\nlast year,\" Soedradjad told newsmen after addressing the luncheon
\nsession of the Economist Conferences' Roundtable with the
\nIndonesian Government at the Grand Hyatt Hotel here.<\/p>\n
He hinted that the yen's proportion in Indonesia's
\ninternational reserves would continue to be increased.<\/p>\n
\"But obviously, we will not make such a move when the yen is
\nstrengthening as it is now,\" he said.<\/p>\n
Soedradjad said last week that the impact of the yen's surge
\non the Indonesian economy, notably its foreign debt service
\nburdens, was only temporary.<\/p>\n
He conceded that the surges in the value of the yen or other
\nmajor currencies theoretically affected the country's foreign
\ndebt burdens.<\/p>\n
\"But the real impact of such appreciation on the country's
\ndebt service burden depends on the effective rates during the
\nrepayment period,\" Soedradjad added. (hen\/vin)<\/p>",
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