JAPAN: Japan seeks Asian monetary fund

Japan yesterday signalled that it planned to revive its controversial proposals to create an Asian monetary fund, even though the idea triggered strong opposition from the US and International Monetary Fund last year.

Kiichi Miyazawa, finance minister, argued in a speech yesterday that an Asian fund was needed, as the current global financial system and the IMF had not effectively addressed the market turmoil of the last year.

“I am thinking of a plan where the countries of the region put up money to forestall speculative attacks. There are nations in this region, such as Japan, China and Hong Kong, which can put up sizeable amounts of money,” he said.

Mr Miyazawa also argued that the IMF should relax some of the conditions it attaches to its lending. He called for a regime of “managed flexibility” between the dollar, the yen and the euro, in apparent support of recent German calls for fixed currency bands.

“Some suggestions are being made in Europe concerning the need for greater stability. I agree that greater stability is desirable,” he added.

The comments mark a deliberate attempt by Japan to set out its international financial agenda following this year’s market turmoil. Officials from the Group of Seven leading industrialised countries are at present considering the future of the IMF.

Mr Miyazawa, 79, is now battling to ensure that Japan should play a greater role in this debate.

Japan has become critical of recent US and IMF policies in Asia in the past year.

Mr Miyazawa’s comments could lead to more tension between the US and Japan. In particular, the US is likely to oppose suggestions that the IMF should soften its lending criteria.

Mr Miyazawa yesterday denied he wanted to abolish the IMF, and stressed that regional currency funds would operate alongside it. However, he argued that the IMF should now introduce a new lending facility to disperse pre-emptive loans to some crisis-ridden countries without insisting on additional monitoring.

The IMF should consider funding these extra loans by issuing bonds for the first time, he added. Though Japan has privately backed this concept for some time, it has hitherto avoided mentioning this in public because it feared US politicians might become more reluctant to make additional contributions to the IMF.

Mr Miyazawa’s speech came as Keizo Obuchi, Japan’s prime minister, arrived in Hanoi to attend a summit of the Association of South-east Asian Nations. Mr Obuchi is expected to announce a new ¥600bn (£3bn) aid package for south-east Asian countries today.

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