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