Japan's rate-cut will help private sector<\/p>\n
JAKARTA (JP): The Bank of Japan's move to cut its discount
\nrate by half to 0.5 percent last Friday, which has been followed
\nby a depreciation of the yen, will favor businesses in Indonesia,
\neconomists said here on Saturday.<\/p>\n
Director of the Institute for the Development of Economics and
\nFinance, Didik J. Rachbini, noted economist Kwik Kian Gie and
\nbanking analyst Rijanto said that the rise of the U.S. dollar
\nabove 100 yen would be more favorable to debt repayment on the
\npart of private companies than on the part of the government.
\nThey said this is because interest rates on loans to private
\ncompanies are usually adjusted periodically in line with market
\ndevelopments, while the rates for government loans are generally
\nfixed for a long term.<\/p>\n
Indonesia's foreign debt, as of April, stood at about US$96
\nbillion, of which about 40 percent was denominated in yen. Of the
\ntotal debt, approximately 60 percent was owed by the government
\nas against 40 percent owed by the private sector.<\/p>\n
In July the government won a pledge of another $5.36 billion
\nin aid for this fiscal year from donor countries and
\norganizations grouped in the World Bank-led Consultative Group on
\nIndonesia (CGI). Of the new aid, $2.16 billion is to come from
\nJapan, carrying an annual interest rate of 2.5 percent.<\/p>\n
\"The government's loans from Japan, whose interest rate has
\nalready been determined on a long-term basis, will not be
\naffected by last week's decline of the discount rate,\" Didik
\nsaid.<\/p>\n
Kwik concurred with Didik's view, saying that interest rates
\non loans to the Indonesian government will remain at the level
\nagreed from the outset.<\/p>\n
Didik said Indonesian negotiators should have anticipated the
\npossible decline in the Japanese discount rate and asked for an
\ninterest rate lower than the 2.5 percent set for the Japanese
\nloans under the CGI scheme.<\/p>\n
Rijanto said the depreciation of the yen against the dollar
\nwill benefit Indonesia's importers of Japanese capital goods and
\nother products because their prices will decline in terms of the
\ndollar.<\/p>\n
Japan's interest rate cut propelled the dollar into 100 yen
\nterritory last Friday for the first time in more than seven months.<\/p>\n
According to the Central Bureau of Statistics, Indonesia's
\nimports from Japan last year reached $15.62 billion, almost half
\nof Indonesia's total imports of $31.98 billion. (04)<\/p>\n
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