ANALYSIS-Japan's bond plan less than meets the eye
By William Mallard
LANGKAWI, Malaysia, May 16 (Reuters) - Japan stole the spotlight at a
weekend meeting of Asia-Pacific finance chiefs, but its offer to guarantee billions of dollars in Asian sovereign debt appeared more of a morale-booster than new financial pledge.
Finance Minister Kiichi Miyazawa launched the second stage of his aid plan for crisis-hit Asian countries by offering guarantees he hopes will prompt the floating of two trillion yen ($16 billion) worth
of long-term debt over two years.
The offer -- given a tepid welcome by Asia-Pacific Economic Cooperation (APEC) forum finance ministers gathered at
the Malaysian resort of Langkawi -- may be less than meets the eye.
Unlike the $30 billion in direct loans pledged under last October's ''Miyazawa Initiative,'' the new pledge involves partial
guarantees, direct purchases and perhaps cash for interest subsidies -- half of which was already provided for and the rest
of which may not require Tokyo to put up any fresh money.
''It doesn't necessarily require provision of new funds'' beyond money already budgeted to the Japan Bank for
International Cooperation, which is to start operations in October, a Ministry of Finance (MOF) official told Reuters.
Miyazawa said there was no way to tell how much money Japan might need to put up because this would depend on
which countries came forward and what conditions were attached to any issuance.
As a rule of thumb, MOF is using a 1-to-3 ratio of guarantees to total issuance, but officials say they do not know if the
new offer will require a like amount to the $3 billion already in a similar fund with the Manila-based Asian Development
Bank (ADB).
''Nobody knows,'' one official told Reuters, when asked where the total or the ratio came from. ''We Japanese like round
numbers -- one-third, two trillion are very round numbers.''
Japanese officials say some Asian governments have already expressed interest, but the 21-member APEC meeting did
not single out the debt-guarantee plan for praise.
In a statement on Sunday after the two-day meeting, APEC welcomed ''the financial support by Japan to a number of
crisis-affected economies under the New Miyazawa Initiative.''
But this appeared to refer to the original $30 billion direct-aid plan, which Miyazawa was to expand later on Sunday with a
fresh pledge to Vietnam on his way back to Tokyo.
APEC instead cast the bond guarantees under the ''multilateral initiative to revitalise private sector growth'' via the ADB
and the World Bank, which Japan and Washington announced in November.
Though World Bank president James Wolfensohn hailed Japan as ''the single most generous country'' toward Asia, one
senior APEC delegate called the new offer ''helpful, but not really new.''
Miyazawa's announcement at least underlines Tokyo's backing for its battered neighbours as they regain their economic
footing and its commitment to help them get cheaper access to the world's debt markets to fund recovery programmes.
The plan also serves Japan's interests by boosting the yen's role as an international currency and reviving the ''samurai''
market of yen-denominated foreign debt issued in Japan.
Samurai market volume, which peaked at four trillion yen in 1996, has withered to virtually nothing due to the Asian
crisis.
Miyazawa also proposed the option of countries issuing bonds denominated jointly by a basket of the yen, dollar and euro.
A MOF official said this would give the issuer governments a ''natural hedge'' against currency risk but that debate had
just begun on how to package the issue for investors.
The bond-guarantee plan stresses using long-term private capital for long-term development needs. Japan has voiced
concern that the Asian crisis was triggered partly by an over-reliance on short-term capital that fled the region as the crisis
hit.
($1 = 125 yen) |
