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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: BubbaFred who wrote (29644)	9/30/1998 11:45:00 PM
From: BubbaFred	Respond to of 94695

biz.yahoo.com Wednesday September 30, 10:59 pm Eastern Time ANALYSIS-Japan lacks credibility in global debate By Linda Sieg TOKYO, Oct 1 (Reuters) - Japanese authorities who favour a rethink of the world financial order might be forgiven a bit of smugness and some frustration now that other G7 nations are singing a similar -- if still discordant -- tune. Experts say that in retrospect, Japan perhaps deserves more credit than it got for recognising early on the scope and severity of a crisis which emerged in Asia and which has now engulfed other emerging markets to lap at America's shores. But they also believe any fresh ideas from Tokyo are liable to be viewed with scepticism, given Japan's poor track record on domestic economic policy and a perception overseas that Japan is too parochial in its approach. ''The question is one of credibility -- Japan doesn't have any at this point,'' said one diplomatic source. Japan has floated a number of proposals since the Asian crisis emerged last summer, beginning with its ill-fated backing of a plan for an Asian Fund worth up to $100 billion to stabilise regional economies and supplement International Monetary Fund (IMF) resources. That idea was slapped down by the United States and Europe, who argued that such a fund spelled ''moral hazard'' because it might bail out irresponsible policy-makers. They also argued that any new mechanisms should be centred on the IMF. Since then, however, the ''Asian crisis'' has spread to other emerging markets including Latin America with a vengeance, criticism of the IMF itself has snowballed, and some now say perhaps the Asian Fund proposal had more merit than it seemed. ''Perhaps with twenty-twenty hindsight it was an idea that might have received more attention,'' U.S. Undersecretary of State for Economic Affairs Stuart Eizenstat said recently in Tokyo. In recent weeks, speculation has swirled that world powers were preparing a multi-billion dollar rescue fund for emerging market nations, with embattled Brazil seen as a key recipient. Analysts said any new scheme would differ from the Asian Fund concept in that it would have policy strings attached. But they also said the crisis had now taken on far greater urgency for Washington as well as Europe. ''Japan tried to take the lead at a time when the Americans and Europe weren't ready,'' said one foreign economist. ''Number one, the crisis wasn't in their backyard, and number two, the actual proposals for the yen fund weren't very clear.'' Top Japanese financial diplomat Eisuke Sakakibara may also see a certain irony in the widening debate over how to restructure the multilateral institutions which oversee world markets, as well as the new-found acceptability of at least discussing controls on short-term capital in less developed economies. Sakakibara has argued since the Asian turmoil began that the crisis was one of global proportions. Last March, invoking the ghost of the 1944 Bretton Woods agreement, he suggested the time might be ripe to consider creating a new world financial order. That call was met mostly with scepticism abroad. Now, however, a growing chorus of Group of Seven leaders, including U.S. President Bill Clinton, British Prime Minister Tony Blair and French President Jacques Chirac, have issued high-profile calls for reform of the global financial order. Views differ widely on what those reforms should be and hot debate is expected at a series of meetings of world financial leaders at and on the fringes of the IMF's annual meeting. G7 finance ministers meet on Saturday and the IMF's gathering begins on Tuesday. Japanese Finance Minister Kiichi Miyazawa has suggested a ''middle ground'' between unbridled capitalism and drastic capital and currency controls such as those imposed recently by Malaysia. But he said on Wednesday that Japan would not be taking specific proposals on capital controls to Washington. Miyazawa also said he would unveil a Japanese plan to extend some $30 billion in aid to Southeast Asian nations, including guarantees by the Export-Import Bank of Japan on funds that crisis-hit countries in the region procure through financial markets or via international financial institutions. Analysts said new ideas on how to cope with crises would be welcome, whatever the source, although Washington may well be less than keen to see Japan emerge as a global or regional leader, despite its often strident calls for Tokyo to do more. ''The U.S. is bound to be ambivalent. It's top dog and would like to remain so,'' another diplomatic expert said. But Japan's failure to revive its economy, now mired in its worst postwar recession, and its prolonged dithering over how to fix its fragile banking system remain the biggest barrier to any attempt by Tokyo to lead the global debate. ''These are financial problems, and nobody in their right mind would want to entrust Japanese bureaucrats with leadership on designing financial policy,'' the foreign economist said. Related News Categories: international, options, US Market News