Japan confident of creating Asian fund

Japan confident of creating Asian fund

TOKYO (AFP): Japan is confident of creating a regional facility to protect Asia from financial turmoil despite International Monetary Fund (IMF) concerns about the project, a senior finance ministry official said yesterday.

"We made a good start," the official told reporters, referring to talks on the proposed fund on the sidelines of last week's meetings of the World Bank and the IMF in Hong Kong.

"It will take much more time to achieve consensus of the IMF and regional countries," the official said. "But in the future (the fund) will materialize, and we could create a good regional cooperative arrangement."

The IMF has warned against the proposed Asian bailout fund, saying it could undercut conditions attached to its own economic assistance.

The official said the IMF and the United States were likely to join discussions as observers. US Treasury Secretary Robert Rubin has agreed to hold a dialogue with Asian partners next month.

"Representatives from the IMF and the United States participated in the discussions as observers" in Hong Kong, the official said.

"We can continue discussions in such a way," he said. The official declined to confirm the size of the fund nor give a timetable for subsequent meetings, but he said participants would make a decision on the timing and the venue of the meeting "in the coming weeks."

Thai Finance Minister Thanong Bidaya said last week the fund could potentially run to US$100 billion "in the long run" with the inclusion of most Asian countries.

Japanese and Southeast Asian nations see the fund as being aimed at financially supporting participating countries if they suffer a shortage of foreign reserves during regional currency crises.

The Asian rescue fund plan was raised after upheaval in regional financial markets triggered by the defacto devaluation of the Thai baht on July 2 which sliced off more than a third of the currency's value against the dollar.

With its economy in deep crisis and its finance sector burdened by billions of dollars in bad debt, Thailand went cap in hand to the IMF and secured a $17.2-billion credit line to put its house in order.