Japan eyes more FX swap deals with RI, S'pore<\/p>\n
HONOLULU (Reuters): Japan on Thursday said it wants to strike
\ncurrency swap deals with Singapore, and later Indonesia, as part
\nof the plan for an Asia-wide safety network that it sees as
\nprelude to an \"Asian Monetary Fund\" (AMF).<\/p>\n
Senior Vice Finance Minister Seiichiro Murakami said he hoped
\nWednesday's announcement of bilateral swap agreements totaling
\nUS$6 billion with Thailand, South Korea and Malaysia would help
\nfoster talks among other Asian nations to develop the web.<\/p>\n
Japanese officials also said on Wednesday they expect talks
\nwith China and the Philippines to conclude by the summer.<\/p>\n
\"As next candidates, there are Indonesia and Singapore,\"
\nHaruhiko Kuroda, vice finance minister for international affairs,
\ntold reporters at the Asian Development Bank's annual meeting in
\nHonolulu, where the swap deals were revealed.<\/p>\n
The proposed network, known as the Chiang Mai Initiative
\n(CMI), is aimed at preventing a repeat of 1997-98 Asian financial
\ncrisis by offering vulnerable countries the ability to draw on
\nthe web of swap deals in times of crisis or fund shortage.<\/p>\n
\"I think we will eventually start negotiations with Singapore
\nwithout any problem,\" Kuroda said, adding that Indonesia may not
\nbe ready for talks yet given its uncertain economic and political
\nsituation.<\/p>\n
Murakami met with Indonesia's Finance Minister Prijadi
\nPraptosuhardjo on Thursday, but there was no specific reference
\nto the CMI at the meeting.<\/p>\n
Singapore, which has the largest foreign reserves among ASEAN
\nnations, appeared to be somewhat indifferent to the scheme, but
\nTokyo is eager to change Singapore's mind.<\/p>\n
The Japanese deals, however, are only the beginning of the
\nTokyo-led plan that aims to link the international reserves of
\nthe 10-member Association of Southeast Asian Nations, through
\nbilateral pacts, with the China, Japan and South Korea (ASEAN+3).<\/p>\n
\"South Korea and China are working hard, and I expect we will
\nhave good results not in the long-distant future,\" Murakami told
\nreporters.<\/p>\n
Some analysts were skeptical about the CMI's effectiveness,
\nbelieving the deals were too small and would only encourage the
\nspeculation it was designed to protect currencies from.<\/p>\n
\"Speculators will be delighted, no doubt, at the enlarged pool
\nof funds available for squandering by central banks,\" Deutsche
\nBank said in its Asia Economics Daily.<\/p>\n
\"A couple of billion dollars might conceivably stave off
\ndevaluation by a few days, but if reserves ever fall to levels
\nwhere $2 billion makes a significant difference in the central
\nbank's defenses, devaluation is probably inevitable,\" it added.<\/p>\n
The CMI scheme is seen as a move towards more permanent
\nregional monetary integration, and the possibility of an AMF.<\/p>\n
Japan's initial 1997 proposal was quickly quashed by
\nWashington and Europe, which said it would undermine reforms
\nadvocated by the International Monetary Fund (IMF).<\/p>\n
Murakami hoped the discussion on regional financial
\ncooperation would head towards the creation of an AMF, but
\nacknowledged there would be a long road ahead.<\/p>\n
\"I personally think we should bring the issue toward that
\ndirection. But it would be a step-by-step talk for the future
\nwith other countries, such as China, involved,\" he said.<\/p>\n
China has shifted significantly from opposing the AMF proposal
\nto backing to the CMI, which maintains a link to IMF-supervised
\nreform and surveillance programs.<\/p>\n
Kuroda, one of the key forces behind the AMF proposal, has
\nsaid he would never give up on it, but also stressed that it was
\nnot Japan's imminent policy goal and Tokyo wants to promote
\nregional cooperation through the CMI for now.<\/p>\n
He acknowledged on Thursday that there is still a wide gap
\nover the issue of the regional surveillance, which would be
\nindispensable if Asia wants to set up a regional monetary fund.<\/p>\n
But he said an agreement by ASEAN+3 finance ministers on
\nWednesday to set up \"a study group to examine ways of enhancing
\nthe effectiveness of our economic reviews and policy dialog was a
\nstep forward.\"<\/p>",
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