Japan to set up Asia fund to curb regional crisis
Japan to set up Asia fund to curb regional crisis
TOKYO (Reuter): Japan may be fine-tuning a plan to establish an Asia fund to deal with regional economic crises which can win broad sympathy from Western nations and multilateral institutions, government sources said yesterday.
The idea of an emergency fund to address financial crises in Southeast Asian nations, such as the recent turmoil in Thailand, was floated during last month's annual World Bank/IMF meeting, with some putting the total amount at $100 billion.
The idea to set up such fund has long existed among Southeast Asian nations, Japanese government sources said.
But the International Monetary Fund (IMF) and the United States are wary of the concept and Germany is strongly opposed, fearing that a regional facility would disburse funds without demanding the strict -- some Asians say too strict -- policy adjustments required by the IMF.
The daily Sankei Shimbun, quoting international financial sources, reported on Thursday that senior Japanese Finance Ministry official Eisuke Sakakibara will travel to Association of South East Asian Nations (ASEAN) members from Oct. 14 to 22 to explain a Japanese proposal.
The conservative daily said Japan was ready to foot the bill for half of a planned US$100 billion regional fund, which would be used to supplement the IMF's activities.
It added that after Sakakibara's trip, finance ministers of Japan, the United States, China and ASEAN would meet to formalize the plan.
A Finance Ministry official on Friday declined to comment on the report.
The trip, if it takes place, could be a move by Japan to initiate further discussion among Asian nations in order to get a wider consensus in the global community.
Asked about the reported Sakakibara visit for consultations with Asian nations, Thai Finance Minister Thanong Bidaya replied on Friday: "There will be a lot of consultations (on the Asia fund)."
Thanong was accompanying Prime Minister Chavalit Yongchaiyudh on a visit to Japan aimed at boosting investor confidence in the Thai economy.
"The situation surrounding the Asia fund is still fluid and nothing concrete has been set," one government source told Reuters on Friday.
The official said he understands the U.S. position is to avoid the establishment of an Asia fund which would undermine the decision-making process of the IMF, in which it holds a major stake.
IMF officials remain skeptical of the plan to form the Asian fund. They warn that such a fund could undermine the IMF's authority to insist on economic and financial reforms in a troubled country.
A Japanese Finance Ministry official said on Thursday that an Asian fund should have a similar degree of strictness to the IMF to prevent any "moral hazard" in Asian nations.
"The character of an Asian fund should be line with that of the IMF, and the idea of the creation of the fund is to monitor economies in Asian nations more closely," the Finance Ministry official said.
"In general, countries in trouble may not like stringent conditions imposed on them by the IMF because their policies are completely under the influence of the institution," he said. "But this does not mean that this leads to calls for the IMF's austerity program to be amended."