Japan mulls $1b loan to Thailand

Japan mulls $1b loan to Thailand

TOKYO (Reuter): Japan is considering extending up to US$1 billion in special loans to Thailand as part of a scheme to help Thailand which is facing a sharp fall in its foreign reserves, Jiji news agency reported yesterday, quoting unnamed sources.

U.S. government bonds held by Thailand would be sold to Japan with the understanding that Thailand would buy them back at a later date, the news agency said, adding that the special loans would come from Japan's foreign reserves.

In addition to the special loan, Japan is considering a plan to extend long-term loans via the Export-Import Bank of Japan in cooperation with the International Monetary Fund (IMF), and to ask for cooperation from the Asian Development Bank (ADB), it said.

The special loans would be provided under a bilateral accord struck by Japan and Thailand in April 1996, which allows for the Bank of Japan to lend up to $1 billion in case of emergencies, Jiji said.

Japan signed similar agreements with Australia, Hong Kong, Indonesia, Malaysia, the Philippines and Singapore in April 1996 on repurchase arrangements for the provision of liquidity on a bilateral basis, Jiji said.

South Korea joined the repo pact this past January.

Government officials have said such loans will be used to fight off speculative assaults on the currencies of those countries with loans collateralized by U.S. Treasuries.

Japan will provide the loan immediately after Thailand makes an official request, Jiji reported.