Japan, IMF have secret plan for RI

Japan, IMF have secret plan for RI

TOKYO (Reuters): Japan's Vice Finance Minister for
International Affairs said yesterday that Japan and the IMF
planned "some sort of measures" this week on Indonesia's growing
financial crisis.

Eisuke Sakakibara, long dubbed "Mr Yen" for his influence on
currency markets, also said he believed the value of the
Indonesian rupiah and South Korean won had sunk too far against
the U.S. dollar.

His remarks spurred intense interest in Japan, which is
Indonesia's biggest creditor and aid donor.

Japanese banks, themselves in a precarious state, have
extended more than one-third of Indonesia's foreign borrowings,
while the country has topped Japan's official development
assistance (ODA) list for the past six years.

"This week, in cooperation with the IMF, we will be taking
some sort of measures (on the Indonesian crisis)," Sakakibara
told NHK television in a program about the Asian financial
crisis.

Sakakibara gave no details of what the measures would be but
one of the biggest worries for Japanese banks with exposure in
Indonesia is that a $43 billion International Monetary Fund
(IMF)-arranged rescue package does not guarantee private-sector
loans.

Japan has contributed five billion dollars to the package.

The loans are spread among hundreds of Indonesian corporations
whose debt is now regarded as the crux of the country's woes as
the rupiah collapses.

Indonesia has total external debt of $140 billion, of which
corporate debt is estimated to be at least $66 billion.

Analysts have slammed the government for not showing enough
leadership on the corporate debt mess, which has hobbled firms
and threatens to drive the economy into the ground.

They have said foreign corporate debt was virtually impossible
to pay off given the rupiah's plunge.

The fragile rupiah ended in Jakarta on Friday at 13,000/13,500
after falling to a day's low of 15,000.

On Thursday it sank to a historic low of 17,000, down more
than 80 percent since financial turmoil began sweeping southeast
Asia in July.

Sakakibara said he expected the rupiah to recover to 4,000 to
5,000 to the U.S. dollar "at some point".

"I think (the rupiah and the won) will both recover at some
point. The rupiah should come back to around 4,000 to 5,000 at
some point, and once the crisis is over, it will make a more
substantial recovery."

He did not give a figure for the won.

Bad debt in South Korea, where Japanese banks do not have as
big a comparative exposure as in Indonesia, is mainly within the
banking system and a small number of huge conglomerates while
Jakarta's foreign debt burden is spread among many corporations
with widely differing quality.

Sakakibara said the yen's strengthening against the U.S.
dollar in recent days had made it less likely that there would be
a rash of competitive devaluations by Asian nations of their
currencies because of the economic crisis.

"The yen has regained its strength in recent days, so I don't
think (the yen's movements) would contribute to (a regionwide
tendency towards) devaluation," Sakakibara said.

The dollar fell to 125.69 yen late in New York on Friday from
127.25 late Thursday, and to 1.7783 marks from 1.8060. It was the
lowest level against the yen since the dollar bought 124.86 yen
on Nov. 21.

There have been worries that Asian nations, as they seek to
find a way out of their financial woes by boosting exports, may
devalue to make their products cheaper.

Sakakibara also said it was unlikely China would devalue the
yuan.

Weaknesses -- Page 4