"The World and Japan" Database (Project Leader: TANAKA Akihiko)
Database of Japanese Politics and International Relations
National Graduate Institute for Policy Studies (GRIPS); Institute for Advanced Studies on Asia (IASA), The University of Tokyo

[Title] A New Initiative to Overcome the Asian Currency Crisis (New Miyazawa Initiative)

[Date] October 3, 1998
[Source] Ministry of Finance
[Full text]

To assist Asian countries in overcoming their economic difficulties and to contribute tothe stability of international financial markets, Japan stands ready to provide a packageof support measures totaling US$30 billion, of which US$15 billion will be made availablefor the medium- to long-term financial needs for economic recovery in Asian countries, andanother US$15 billion will be set aside for their possible short-term capital needs duringthe process of implementing economic reform.

I. Medium-to Long-Term Financial Support to Asian Countries

1. Need for funds in Asian countries

Asian countries affected by the currency crisis need medium- tolong-term capital to implement the various policy measures described below for economicrecovery.

(1) Supporting corporate debt restructuring in the private sector andefforts to make financial systems sound and stable

(2) Strengthening the social safety net

(3) Stimulating the economy (implementation of public undertakings toincrease employment)

(4) Addressing the credit crunch (facilitation of trade finance andassistance to small- and medium-sized enterprises)

2. Measures for financial assistance

To meet these medium- to long-term capital needs of Asian countries,Japan will extend financial assistance to those countries making use of the variousmeasures listed below. In doing so, due consideration will be paid to the better use ofthe Tokyo market to mobilize Japanese funds.

(1) Providing direct official financial assistance

i) Extending Export-Import Bank of Japan (JEXIM) loans to Asian countries

ii) Acquisition of sovereign bonds issued by Asian countries by the JEXIM

iii) Extending ODA yen loan to Asian countries

(2) Supporting Asian countries in raising funds from internationalfinancial markets

i) Use of guarantee mechanisms

a) Utilizing the guarantee functions of the JEXIM

- The JEXIM will guarantee bank loans to Asian countries.

- The JEXIM will guarantee sovereign bonds issued by Asian countries(legal amendment is necessary).

b) Providing export insurance to bank loans to Asian countries

c) Requesting the World Bank and the Asian Development Bank to step uptheir efforts to provide guarantees to bank loans and bond issuance by Asian countries

d) It is hoped that in the long run the establishment of an internationalguarantee institution with a prime focus on Asian countries will be seriously considered.

ii) Interest subsidies

Japan will establish an Asian currency crisis support facility backed byour funding. This facility will be used to provide interest subsidies to Asian countriesthat borrow funds from JEXIM or private banks in conjunction with loans from the AsianDevelopment Bank.

This will be an open facility in which all countries are welcome to takepart.

(3) Financial support in the form of co-financing with multilateraldevelopment banks

Japan will continue to provide co-financing with the World Bank and theAsian Development Bank to Asian countries. In particular, we will call for maximumfinancial assistance from the World Bank and the Asian Development Bank to support thoseAsian countries that are faced with huge capital needs in an effort to address the issueof corporate debt restructuring and the restoration of stability in the financial system.We are ready to provide co-finance with these two banks.

(4) Technical assistance

The World Bank and the Asian Development Bank will be requested to providenecessary technical assistance through Japan special funds to Asian countries that are toimplement a comprehensive approach to address the issue of corporate debt restructuringand the restoration of the financial system. Japan is prepared to contribute by means ofproviding technical assistance to these Asian countries, taking into account therespective situations in those countries.

II. Short-Term Financial Support to Asian Countries

Asian countries may face some needs for short-term capital in thecourse of making progress in their economic reform. To be prepared to meet these needssuch as facilitation of trade finance, Japan will set aside US$15 billion in short-termfunds which will take the form of swap arrangements.

Japan intends to cooperate closely with the multilateral development banksand the related countries, especially Asia-Pacific countries and G-7 countries, inimplementing the new initiative.