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.