Asia Times: Japan serious about setting up 'Asian IMF'



	February 19, 1999	atimes.com

Asian Crisis

Japan serious about setting up 'Asian IMF'
By Suvendrini Kakuchi

TOKYO - Japan is moving ahead with plans to initiate the establishment of an Asian version of the International Monetary Fund that it hopes will better serve the needs of the region.

Last week, a government task force given tacit approval by Prime Minister Keizo Obuchi announced that it will study the proposal for an Asian Monetary Fund (AMF) which Japan envisions as a regional fund that will help financially strapped Asian countries on a case-to-case basis.

The study team plans to present a proposal for discussion at next year's G-8 annual summit which Japan wants to host.

The Study Group on International Economic and Financial Systems is an advisory body to the foreign minister and has received the backing of the finance ministry.

It is a 20-member team that includes top economists, scholars and businessmen, and is headed by Toyoo Gyoten, a former vice finance minister for international affairs and one of Japan's prominent names in the field of international finance.

The team has agreed that despite concerns voiced by Washington, Japan should be more aggressive in putting forward its policy ideas on financial aid and related issues.

In a report published in Japanese newspapers after its first meeting on Feb. 9, the team said that the current IMF has not been effective in coping with the Asian monetary crisis because it imposed conditions and standards that were too harsh on its recipients.

The IMF also did not take into account the varying development stages of Asian countries.

''What we are trying to help establish is a new international economic system that takes into account perspectives of Asian nations and developing nations,'' a foreign ministry official explained.

He said the strict fiscal policy imposed by the IMF has burdened Asian countries that are aid-dependent. In contrast, Japan wants the new AMF to take into account political and socio- economic differences in each country before conditions for lending are introduced.

Analysts in Tokyo say that while the AMF concept has sparked interest in the region, there are many obstacles in the way that Japan must first hurdle in order to ensure smooth working of the proposed organization.

''Taking into account an Asian perspective and the different needs of the many countries that depend on international aid is going to be popular. But the huge problem is how to make this work,'' says Kozo Kamimune, an economist and expert on international finance at the Institute of Developing Economies.

Indeed, the notion of starting an AMF, which follows the idea of an Asian Fund for crisis-struck Asia that was proposed and abandoned by Tokyo in 1997, remains a loose concept, one which the Japanese government seems to be struggling to define.

''The development of a framework that aims to consider each country's needs is a lofty idea but not really workable unless everybody, including the United States, makes a commitment to make it work,'' argues Kamimune.

He says Japan must consult closely with Washington and other developed nations as ''investors in Western industrialised countries are responsible for the movements in financial trading that affect Asian economies."

And as Asian countries rally around the proposal for an AMF, Tokyo finds the proposal all the more irresistible.

Last week, visiting Thai senator Virabongsa Ramangkura told a Japanese business audience that the AMF might offer more funds and help economic recovery better than the IMF.

Experts explain that the AMF could be the springboard for Japan to develop and cement its ties with Asia as Tokyo tries hard to wean itself away from the more politically charged economic relations with the United States.

Japan's ever-increasing trade surplus with the United States, its top trading partner, is an issue that has long threatened their bilateral relations.

Currently Tokyo and Washington are at loggerheads over Japan's steel exports, which are being blamed for the loss of jobs of many Americans.

A proposal now gaining international attention is a possible free- trade pact between Japan and South Korea that could be expanded to other Asian countries.

While experts say this will take time, the proposal itself illustrates Tokyo's improving relationss with a country that has not totally forgotten the horrors of Japan's colonial rule.

Professor Toshio Watanabe of the Tokyo Institute of Technology, a well-known commentator on Asia's financial woes, also explains that the move by the government of Malaysian Prime Minister Mahathir Mohamad to impose restrictions on currency trading could be suggestive of the sort of actions that might occur in the future.

''Mr. Mahathir's decision accelerates the drive for creating a regional framework,'' Watanabe says, explaining that the recent European monetary integration is more political than economic in nature and has put pressure on Asian countries to consider working together.

''With the ongoing currency crisis, American capitalism and American standards have been questioned,'' Watanabe said in a recent media interview.

Kamimune adds that ''Japan has the funds to make the AMF work. But the real test is to make sure the AMF does not leave the Americans out,'' he says. ''The AMF must not signal protectionism at any cost."

(Inter Press Service)