Japan plans multilateral currency pact in Asia
Japan plans multilateral currency pact in Asia
TOKYO (AFP): Japan plans to propose a multilateral currency swap pact worth tens of billions of dollars with its Asian partners to guard against future currency crises, a newspaper said Friday.
Japan will make the proposal at an annual meeting of the Asian Development Bank (ADB) in Chiang Mai, Thailand, opening on May 6, the Sankei Shimbun said.
The swap accord will involve China, South Korea and the members of the Association of Southeast Asian Nations (ASEAN), which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, it said.
The total amount of the pact is likely to reach "tens of billions of dollars," the Sankei Shimbun said.
A currency swap agreement allows a member economy to sell its foreign currencies -- deposited by foreign countries -- on the foreign exchange market to defend its own currency in case of an economic crisis.
The pact will also urge member countries to exchange information on the foreign exchange market and set up a permanent supervision system for a future crisis, the daily said.
Asian countries suffered a damaging spate of economic turmoil triggered by a plunge in the Thai baht in 1997. Speculative investment in the region was partially to blame for the crisis.
The planned swap accord "will be effective measures against speculative money flows, such as hedge funds," a source told the newspaper.
The proposal indicated Tokyo's hope that a regionwide swap network would develop into an Asian monetary fund, a regional version of the International Monetary Fund (IMF), the daily said.
Japan's Finance Minister Kiichi Miyazawa has announced an emergency financial facility of US$30 billion to help Asian economies overcome their respective currency and economic crises.
His initiative, however, stopped short of installing measures to prevent a sharp fall in currencies, after facing opposition from the United States.
Washington claims that another currency stabilization mechanism would weaken the role of the IMF and the World Bank, while Tokyo insists each region needs to have its own defensive measures.