Japan supports RI reforms under IMF agreement

Japan supports RI reforms under IMF agreement

TOKYO (Agencies): Prime Minister Ryutaro Hashimoto pledged
Japan's continued support for Indonesia's economic rehabilitation
yesterday following the signing of an agreement linked to a
massive IMF-led bailout.

"I sincerely welcome it," he commented on the new letter of
intent signed earlier in the day in Jakarta by President Soeharto
and Michel Camdessus, managing director of the International
Monetary Fund (IMF).

The 50-point letter spelled out major reforms and austerity
measures to deal with Indonesia's financial turmoil.

"I sincerely hope that this will help restore confidence in
the Indonesian economy and recover its stability," Hashimoto told
reporters at his official residence.

"As a friend of long standing, Japan intends to continue its
assistance toward an early recovery of the Indonesian economy,"
he added.

His remarks were contained in a message sent later to
Soeharto, government officials said.

Finance Minister Hiroshi Mitsuzuka also said the agreement
would "contribute to the restoration of confidence in the
markets."

"Japan for its part wishes to assist Indonesia in cooperation
with the IMF and countries concerned," the finance minister said.

On Monday, Soeharto assured Hashimoto that Indonesia would
fully carry out reforms prescribed under an IMF rescue plan, the
Indonesian President's top aide said in Jakarta.

Minister/State Secretary Moerdiono told journalists that
Hashimoto phoned Soeharto from Tokyo to discuss Indonesia's
problems, topped by the sharp fall of the local currency the
rupiah.

Soeharto also assured Hashimoto that any differences between
Indonesia and the IMF "would only be on the timing of the reform
and restructuring programs, " Moerdiono said.

Hashimoto's gesture followed similar telephone calls by U.S.
President Bill Clinton, who sent a high-level mission to Jakarta
to take a first-hand look at the situation, as well as German
Chancellor Helmut Kohl and Australian Prime Minister John Howard.

Realistic

Indonesia's new reform package announced on Thursday is more
realistic about the country's economic state, but analysts said
Japanese bankers are likely to balk at the failure to guarantee
private-sector loans.

"We can see that the forecast on the country's growth and
inflation now looks more realistic," said Daisuke Hiratsuka,
deputy chief of econometric analysis and forecasting division at
Institute of Developing Economies (IDE).

"The forecast (in the revised budget) appears to reflect more
precisely on the current situation in Indonesia," he added.

But bankers in Japan, Indonesia's biggest creditor with
billions of dollars tied up in loans there, will not take kindly
to Soeharto's announcement that the government will not bail out
the private sector, analysts said.

"Most of the reform measures were expected. What really is
shocking is that (Soeharto) said the government will not bail out
private-sector debt," said a senior analyst at Nomura Securities
in Tokyo who declined to named.

According to the Bank for International Settlements (BIS),
Indonesia's total foreign bank borrowings were $58.7 billion as
of the end of June 1997.

Japanese banks accounted for 39 percent, or $23 billion, of
all international loans to Indonesia in the first six months of
1997.