Japan announces plan for $2.36b in new loans for Asia

Japan announces plan for $2.36b in new loans for Asia

TOKYO (Reuters): Eager to ward off criticism that it is not doing enough to help Asia, Japan announced yesterday 300 billion yen (US$2.36 billion) in new loans destined mostly for Indonesia, as well as other steps for the troubled country.

Trade Minister Mitsuo Horiuchi also said further Japanese measures for Asia were possible.

"Further steps for Asia are always possible. This is not the end of it," he told a news conference.

Other steps for Indonesia included a $1 billion two-year insurance credit line that would include coverage for company bankruptcies and 50 billion yen in official development assistance for the 1998/99 fiscal year beginning on April 1.

Japan would also work to ensure short-term trade insurance was provided for Japanese exporters to Indonesian importers even if importers were unable to obtain letters of credit from their local banks.

The steps come as Indonesia's Finance Minister Mar'ie Muhammad said he had sent letters asking for assistance to members of the Group of Seven nations, whose finance ministers meet this weekend.

"I have drafted letters to friends in the G-7 who are coming together asking whether they could do something to help," Ma'rie told a parliamentary committee meeting.

Japan's Ministry of Finance responded by saying it would call on G-7 nations to cooperate in helping Indonesia.

Tokyo hopes its last minute flurry of action ahead of the G7 meeting will save it as much face as possible following recent harsh criticism that as the world's second-largest economy it has not done enough to help its Asian neighbors.

In particular, increasing calls from U.S. officials, including U.S. Treasury Secretary Robert Rubin, for Japan to implement strong fiscal measures to kick-start its economy are expected to be repeated at the meeting.

Horiuchi said the 300 billion yen in new loans would be made through Japan's Export-Import bank this fiscal year, with more likely in the next fiscal year.

They include loans to be directed to domestic companies in Asian countries through local public bodies, loans to Japanese overseas units and loans to promote Japanese imports. Most if not all will go to Indonesia.

"I can't be specific to about actual amounts...but around 200 to 300 billion yen will go to Indonesia before the end of March," said Haruhiko Kuroda, a senior Finance Ministry official.

Japan had also agreed to take in 1,000 workers from Asian countries, mainly those working in the car industry, for technical training. This move was aimed at helping prevent possible social unrest caused by high unemployment levels, Horiuchi said.

He added that he hoped G-7 countries would agree to form a $15 billion trade insurance fund, something that would be discussed by export credit agencies in London on Friday.

"We hope (the proposal) will be viewed positively and we are hoping to get a consensus on the issue. All in all, I think it will be about $15 billion," he said.

Japanese Trade Ministry sources have said that while Japan and the United States are firmly behind the idea, Europe and Canada are less keen.

In a further proposal on Friday to help Asian countries, Japan's ruling Liberal Democratic Party suggested giving the yen a greater role in Asia to help countries diversify currency risks.

LDP officials said this was not an idea to create a new Asian currency like the European single currency to be launched in January 1999, but rather to make the yen easier to use as a key global currency.

"We are trying to figure out how we can help Asia avoid being flung around by currency fluctuations," an LDP official said.