Asia Times: Tokyo set to reaffirm its lead role in Asia



	January 08, 1999	atimes.com

Japan Economy

Tokyo set to reaffirm its lead role in Asia
By Suvendrini Kakuchi

TOKYO - Much maligned for its slow response to amajor financial crisis in the region, Japan is set to play anactive role in Asia in the coming year.

''There is an ironic twist when describing the new year,'' sayseconomics professor Yoshiaki Kano of the Takushoku University.''The Japanese economy is nowhere close to a take-off, but Tokyois in the limelight when it comes to a recovery in Asia."

Japan continues to be at the receiving end of bitter criticismfrom Washington that has singled out the nation's domesticeconomic woes as proof of Tokyo's lack of initiative in revivingits economy and helping lift the rest of Asia.

The main thrust of the American argument is that unless Japantakes steps to ensure a recovery at home and help boost importsfrom Asia, the region will not recover from its recession.

In response, Tokyo unveiled one of its most impressiveannouncements to date. Prime Minister Keizo Obuchi in Hanoi earlythis month for the Asian leaders summit, pledged 15 billion U.S.dollars in cash to be distributed as short-term capital mainly inthe form of low-interest, yen-dominated loans.

The fund, called the New Miyazawa Initiative, will also includeanother 15 billion in the form of concessionary trade andinvestment over three years.

Finance Minister Kiichi Miyazawa described the aid as geared torestructure Asian businesses, establish social safety nets, andalleviate the credit crunch that has forced banks to stop makingnew loans to local companies.

Miyazawa says the loans, which will be disbursed bilaterally andmostly tied to World Bank and Asian Development Bank projects,will help the recovery of the regional market, of which Japan is amajor player.

November figures, reported by the Ministry of Finance this month,show that Japan's exports to Asia fell by 27 percent from itslevel a year earlier while imports dropped 8.0 percent.

Against this backdrop, it is hoped that the loans under theMiyazawa Initiative will help Japanese companies boost theirearnings since stipulations require that only local companies thatwill patronise Japanese goods and services can avail themselves ofthe loans.

Despite the tied aspects of the yen loan package, analysts heresay Japan should be praised for the latest package. ''Instead ofcontinued criticism, praise should be given when due. The MiyazawaInitiative will definitely help the Asian economies and Asia isindeed grateful,'' commented economist C.H. Kwan, at NomuraResearch Institute.

He maintains that the American push for Japan to import morefrom Asia is not possible given the recession here. ''Instead, theaid package, which is at the centre of Japan's rescue packagefor Asia, is most welcome and will stimulate Asia's exportindustry,'' he explained.

Countries such as Thailand, the Philippines, Malaysia and SouthKorea are expected to reap the benefits of this generosity.Analysts point out that already Asian countries are scrambling toget their share of the financial pie.

With the latest package come renewed calls for the development ofa new regional fund to protect Asian currencies from speculators.

In a separate announcement, Mizayawa stated Japan's support forreforming the international financial architecture to protectvulnerable currencies from rich speculators.

''Nations in this part of the world have large reserves and couldput up sizable amounts of money as a kind of bulwark against apossible attack by speculators,'' he told reporters.

While he did not mention which Asian countries should cometogether, analysts explain that this proposal echoes an earlierJapanese idea for a regional fund playing a similar role, whichwas withdrawn after it was shot down by Washington.

This time, however, says Kwan, there has not been too muchopposition from Washington. ''The United States has realized,after the meltdown in Russia and Brazil, that it could be best toleave Asia to the Japanese,'' he commented.

''After all, the idea of a fund sounds like a good idea since thehard knocks borne by the regional economies came from currencyspeculation that blew out their foreign currency reserves."

Analysts contend the Japanese government wants Singapore, China,Japan, and Taiwan to set up the fund. While Miyazawa does notcriticize the IMF, which has been blamed in Southeast Asia forforcing tough structural reforms in return for its loans, analystssays, Japan's new thrust could be enforced as a fund to soften IMFpolicies.

Overall, the latest Japanese initiatives have helped carve a moreprominent role for Japan in Asia in the coming year. It will helpto prove Japan's prowess again and pull international attentionback to the fast eroding economic clout the Asian giant holds, saylocal media.

''There was and still is, this nagging fear of China shadowingJapan's hard-earned status symbol in Asia. Miyazawa's policies aregeared in many ways to forestall this process,'' says ProfessorKano.

He also says that while Miyazawa's plan for slowly replacing thedominance of the U.S. dollar with the Japanese yen in the Asianregion currencies is still a long way off, the new steps taken bythe government with the U.S. looking helplessly on, could signal amore assertive Japan, as least for the short-term.

''The only problem -- and it is a big one -- is the economicrecession which, despite Japan's huge monetary reserves, is agoing to gnaw away at any attempts to regain internationalconfidence, and must be arrested as soon as possible,' heexplained.

(Inter Press Service)

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©1999 Asia Times Online Co., Ltd.