Miyazawa revitalizes 'Asia Fund' proposal
Miyazawa revitalizes 'Asia Fund' proposal
TOKYO (Dow Jones): A year after U.S. pressure sank a Japanese
proposal for an "Asia fund" to aid regional economies, Finance
Minister Kiichi Miyazawa has refloated the idea -- and says it has
a better chance of being accepted this time around.
In a speech at the Foreign Correspondents Club of Japan,
Miyazawa said Tuesday that international policy makers should
consider establishing regional currency funds that could augment
efforts by the International Monetary Fund to provide liquidity
to markets in times of crisis.
"The recent experience regarding Brazil has reinforced our
conviction that, in order to strengthen the international
community's capacity to provide liquidity at a time of crisis, it
would be appropriate to complement IMF loans through some kind of
regional mechanism that is anchored in a sense of solidarity and
mutual dialogue among countries in a region," Miyazawa said.
Miyazawa's statement was the clearest indication yet that
Japan hasn't given up on the idea of forming financial watchdogs
based on locale.
A little more than a year ago, Japan's proposal for creating
an Asia Fund to finance regional bailouts was shot down by the
U.S., which feared that such an institution would undermine IMF
efforts to impose strict conditions on aid extended to economies
in turmoil. U.S. officials raised concerns that Asian countries
might be too soft in dispensing assistance to neighboring
countries, slowing the process of economic reform.
At the time, Asian countries ended up signing on to the Manila
Framework, which stipulated clearly that the IMF would continue
to lead such efforts.
But in his speech Tuesday, Miyazawa said that nations should
take a more proactive role in helping financial systems in
neighboring countries run smoothly and in keeping speculators at
bay.
He didn't provide details of how the Asia Fund would be
financed, but pointed to the substantial reserves held by many
Asian countries as a potential source of funding.
Japan, China, Hong Kong and Singapore retain large foreign
exchange reserves, though other Asian nations have seen their
reserves depleted as a result of attacks on their currencies.
Under Miyazawa's scheme, countries outside a given area "with
economic or political interests in the stability of the region"
could also participate in any local fund, but it's unclear what
sort of role they would play in determining policies or in actual
financing.
Miyazawa's remarks appeared to reflect a growing resolve on
Japan's part after a year in which the crisis got worse, not
better, despite IMF efforts to put out fires around the world.
Miyazawa said that the U.S. objected to the Asia Fund proposal
a year ago because Washington was afraid it would conflict with
the IMF, but such concerns have begun to ease.
"That misunderstanding has been taken care of gradually," he
said. Of the U.S., he added, "I think they're more forthcoming
now."
Miyazawa said that "specific circumstances" pertaining to
countries facing crises should be considered when devising policy
steps to resolve the difficulties.
In his speech, Miyazawa criticized the IMF's handling of the
crises in some countries, suggesting the institution may have
blundered by applying conditions to rescue programs that were too
strict.
In his speech, Miyazawa criticized the IMF's handling of the
crises in some countries, suggesting the institution may have
blundered by applying conditions to rescue programs that were too
strict.
Miyazawa's speech was made against the backdrop of the
Miyazawa Plan, an ambitious program unveiled last October that
will make US$30 billion in financing available to Asian
countries. Miyazawa has said he expects to begin extending loans
as part of the plan any day now, and that it could act as a
springboard for the Asia Fund idea.