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To: Investor-ex! who wrote (34517)	5/26/1999 2:41:00 AM
From: Alex	Read Replies (2) \| Respond to of 116789

Mr Yen highlights policy blunders By Peter Hartcher and Andrew Cornell, Tokyo The Asian economic crisis was seriously aggravated by policy mistakes committed by the US and Japan, a top Tokyo official has conceded. Japan's leading international finance official, Dr Eisuke Sakakibara, known as Mr Yen in financial markets, nominated two key misjudgements by the US and Japan as worsening the Asian collapse. This assessment will change the orthodox understanding of the crisis. It shifts much of the burden of blame away from the crisis countries themselves and on to the two great economic powers that dominate world policy. First, Dr Sakakibara said that his greatest regret was the US Treasury's decision to veto his plan to set up a $US100 billion Asian monetary fund. The fund was supposed to supply large sums to defend vulnerable countries from crisis. If the plan had proceeded, South Korea might have been able to avoid falling into the acute economic crisis which engulfed it, Dr Sakakibara said. He told The Australian Financial Review in an interview in Tokyo that the disagreement between Japan and the US over this issue was 'the tensest time' in the two-year crisis. 'It was somewhat premature on our part, but we were consulting with some of the Asian countries about this idea, and they reacted very favourably. 'We wanted to consult the US after that, but Larry Summers [US Deputy Treasury Secretary] somehow got information about it, and he didn't like it at all ... I regret that I didn't nurture it a bit longer.' Second, Dr Sakakibara said that the US and Japan had inadvertently put pressure on the other economies of Asia with their joint decision to weaken the yen in 1995. The weaker yen, by giving Japan's exports a price advantage on world markets, undermined the competitiveness of its Asian competitors. This led to a deterioration in the current account balances of the other Asian countries in 1996 and 1997, and helped precipitate the Asia crisis two years after the initial deal with Mr Summers. 'We should have co-ordinated with other Asian countries,' Dr Sakakibara said, 'but that didn't occur to me at the time'. He said that the power of the yen's depreciation against the US dollar 'was related to the fact that the others had pegged their currencies to the US dollar'. But Dr Sakakibara, the vice-minister for international affairs at the Ministry of Finance, said that some of the blame heaped on the hedge funds for their role in the Asian crisis was misplaced. 'It is wrong to name them as the sole villains, but there is no question that there were attacks from hedge funds in Thailand, and attacks by copy funds from February 1997.' Copy funds are investment funds, often operated by investment banks, which closely mimic the investment plays of the hedge funds in the belief that their strategies will be profitable. And Dr Sakakibara renewed his criticism of the International Monetary Fund's handling of the crisis: 'There are no uniform prescriptions, the IMF has demonstrated the deficiencies of uniform prescriptions.' That was the last of three articles based on an exclusive and extensive interview with Dr Sakakibara in Tokyo. afr.com.au