Japan continues boosting yen loans

Japan continues boosting yen loans

TOKYO (Reuter): Japan's economic problems have not stopped it boosting yen loans to Asia and the rest of the world, official statistics released yesterday showed.

Japan's yen loan commitments for the last fiscal year to March 31 rose 23.9 percent on the previous year to 1.09 trillion yen (US$10.4 billion), while actual payments totaled 654.5 billion yen ($6.29 billion), up 4.9 percent.

The figures were contained in the annual report of The Overseas Economic Cooperation Fund of Japan and showed Asia remained the biggest beneficiary of yen loans at 881.8 billion yen ($8.47 billion) on a commitment basis, up 11 percent on the previous year.

But Asia's overall share dropped to 80.7 percent from last year's 90.0 percent as Japan raised its commitments to regions such as Central and South America, the Middle East and Africa.

Uzbekistan and Kazakhstan joined the list of recipients and Tokyo resumed yen loans to Bulgaria for the first time in 20 years, the report said.

Most of the loans were for the improvement of economic infrastructure in developing countries, especially in the area of transportation, the report said.

Yen loans for environmental projects also rose to a record 218.6 billion yen, or 20.8 percent of the total committed.

Japan reduced the average interest rate on yen loans committed in fiscal 1995 by 0.21 percentage points to 2.53 percent for commitments made last year, in line with a cut in Japanese interest rates, the report said.

Yen loan recipients had repeatedly called upon Japan to ease its repayment conditions in the light of the yen's surge against the dollar last year, it said.

The report said all yen loans committed in 1995/96 were untied -- that is they do not require the recipient to give contracts to Japanese companies for the projects financed.

Yen loans have often been criticized as steps by Japan to create new business for Japanese firms.

The report said 27 percent of the total value of all contracts on yen-loan financed projects went to Japanese firms last year and 60 percent to firms from developing countries.

Industrialized countries, excluding Japan, took 13 percent of the total, it said.