Japan offers $100bn for Asian economies

Published: May 3 2009 14:55 | Last updated: May 3 2009 19:56

Japan has offered $100bn in financial assistance to Asian countries hit by the global financial crisis in a move that shores up its economic leadership in the region in spite of its own severe recession.

Tokyo announced at a meeting of the finance ministers of the 10 countries of the Association of South-East Asian Nations in Indonesia that it would set up a Y6,000bn ($61.5bn) bilateral currency swap scheme , on top of a $38.4bn commitment to the multilateral Chiang Mai initiative.

The Chiang Mai deal, a $120bn currency scheme that has been under discussion for years, was formally agreed on Sunday by the Asean countries, meeting with the finance ministers of Japan, China and South Korea. Japan also offered Y500bn in guarantees for potential Asian issuers of yen-denominated samurai bonds.

Kaoru Yosano, the Japanese finance minister, when asked if Japan could afford to deal with its own economic woes while helping fellow Asian strugglers, said the latest offers underlined Tokyo’s firm belief that the crisis required a more concerted international response.

“The financial crisis is not something hitting only a handful of countries ... That is why we believe it is an issue that can only be solved with international co-operation.”

Japan pledged $100bn in extra capital to the International Monetary Fund in November, and has been anxious to sustain its leadership in Asia in the face of China’s huge foreign reserves and rising economic muscle.

Rivalry between the two countries spilled over into the final stage of the Chiang Mai negotiations, with both agreeing to provide $38.4bn each. China’s share includes $4.2bn from Hong Kong. South Korea is providing $19.2bn, with the rest shared among the 10 south-east Asian nations.

The 13 countries also agreed to put $500m as initial capital into a new trust fund to guarantee local currency bond issues by Asian companies, which have been facing high borrowing costs because of investors’ low risk appetite for emerging markets.

Rajat Nag, managing director of the Asian Development Bank, said the credit guarantee mechanism would be of substantial benefit to “companies that might not have that sterling track record on their own”.

The ADB confirmed it wanted to inject $3bn into struggling economies, pending board approval, on top of a broader expansion of project lending.

Additional reporting by Robin Harding in Tokyo