Asia nibbles at bond guarantee offer

Asia nibbles at bond guarantee offer

TOKYO (Reuters): Southeast Asia's crisis-hit economies moved a
step closer on Wednesday to taking advantage of a Japanese plan
to help them regain their credibility on the international bond
markets.

Eisuke Sakakibara, Japan's top financial diplomat, was headed
to Thailand and Singapore for talks on Tokyo's bond guarantee
plan after meeting with Malaysian Prime Minister Mahathir
Mohamad, who expressed interest in issuing sovereign debt with
partial guarantees from Japan.

Sakakibara's trip will lay the groundwork for the second stage
of Japan's implementation of a $30 billion aid package for Asia,
named the "Miyazawa Initiative" after Finance Minister Kiichi
Miyazawa.

The second stage plan, announced in mid-May at a meeting of
Asia-Pacific finance chiefs in Malaysia, seeks to nurture the
budding Asia recovery by offering governments partial guarantees
to reduce their borrowing costs.

"Prime Minister Mahathir expressed interest in further
sovereign bond issues," Sakakibara told reporters. "We are eager
to start at any time."

Sakakibara said the talks in Singapore and Thailand would be
similar to those with Mahathir.

Further debt guarantees are expected to add a solid cushion of
support to the embryonic Asian recovery. Malaysia says its
bullish stock market and rising trade surplus are the first signs
of a return to economic health.

Sakakibara said working-level talks on the portion of
Malaysia's new sovereign debt to be guaranteed by Japan and the
currency in which it will be issued could begin after Japan's
summer holidays in August.

Malaysia successfully returned to the world capital markets in
late May with a $1 billion sovereign bond issue.

Sakakibara said he did not talk to Mahathir about a possible
increase in Japan's pledge to provide $2.5 billion in short-term
financing to Malaysia under the second stage of the Miyazawa
Initiative.

Sakakibara said Mahathir was supportive of Japan's agenda for
internationalizing the yen, although there was no discussion on
whether Malaysia would issue additional debt in the Japanese
currency.

Sakakibara also praised Malaysia's recovery, saying it was
something no one had expected after Malaysia imposed controls on
its foreign exchange flows in September.