Indonesia sells dollars to increase yen reserves

JAKARTA (JP): Indonesian government enterprises have sold a large amount of U.S. dollars for yen in Tokyo in an apparent bid to prepare reserves to pay yen-denominated loans.

The enterprises sold dollars for 114.50 yen on Thursday and 114.20 yen yesterday.

Other Asian nations took advantage of the recent slide in the yen to snap it up cheaply for future repayments, AFP reported from Tokyo.

Bank Indonesia (central bank) officials were not available for comment yesterday on the purchase in the Japanese money market.

Bank Indonesia Governor J. Soedradjad Djiwandono said Thursday the fall in the Japanese currency would shrink the government's loans.

But the yen's dive, in dollar terms, also reduces the value of the government's foreign reserves, 40 percent of which are in yen.

"It has positive and negative implications," he said.

According to Bank Indonesia's annual reports, the government's outstanding loans fell $4.4 billion to $58.2 billion in the 1995/1996 fiscal year ending March, from $62.6 billion in the previous year.

The appreciation of the dollar against the yen caused the loans to fall $4.2 billion. Yen accounts for 38.5 percent of the government's outstanding loans.

The depreciation of the yen has not significantly impacted on the Indonesian money market, in which transactions are traditionally denominated in U.S. dollars and rupiah.

Bank Bira corporate advisor Parveen Gandhi said yesterday, "This is nothing unusual. Transactions in yen are there but their amount is not impressive."

He also told The Jakarta Post that yesterday's yen transactions were as thin as usual.

Bank Bira, a major domestic loan arranger, occasionally sells yen to importers for Japanese imports, he said.

Gandhi said it was still uncommon for Indonesian businessmen to buy yen for loan payments because most loans were dollar- denominated.

"Interest rates of yen loans are much lower, but many Indonesian borrowers still prefer the dollar because the yen fluctuates much more," he said.

The dollar, continuing its comeback from last year's record lows against the yen, hit a 42-month high of 114.92 yen in Tokyo on Tuesday. This was a 44 percent improvement on its post-war global low of 79.75 yen set April 19, 1995.

Last year, the yen's sharp rise against the dollar drew complaints from some Southeast Asian nations because it inflated the burden of their loans from the Japanese government.

A Japanese foreign ministry official said repayments were made monthly, rather than annually. As of March, Asian nations owed the Japanese government around US$60 billion in yen. (hen)