If necessary, Japan will hold discussions with the International Monetary Fund over how to deal with the recent instability of the Thai baht, Finance Minister Hiroshi Mitsuzuka said July 15.
Japanese authorities are in close contact with their counterparts in other nations, and the IMF is keeping a vigil over the situation, Mitsuzuka stressed at a news conference. Japan is also closely monitoring developments in the foreign exchange market, he said, but added that he believes the volatile trading of the baht will calm down, reiterating his support for Bangkok’s decision to float its currency.
The baht was effectively devalued early this month. It had previously been pegged to a basket of currencies led by the dollar.
Thai Finance Minister Thanong Bidaya is to visit Tokyo later this week to discuss his country’s economic and financial situation, and it is widely expected that an assistance package may come up. “We will listen closely to their explanation of the situation and then see” what needs to be done, Mitsuzuka said.
Other Southeast Asian currencies have come under selling pressure in recent days as authorities in the Philippines, Indonesia and Malaysia have been forced to loosen their pegs to the dollar. Some observers predict Japan will take the lead in formulating a financial aid scheme to contain the turmoil, but some also point to the possibility of the IMF extending emergency loans to help out.
But a high-ranking official of the Finance Ministry said the recent plunge of the Thai currency is not a crisis. “The Thai government is taking care (of the situation) well,” Eisuke Sakakibara said July 14 in an interview with Kyodo News. Sakakibara on July 15 became vice finance minister for international affairs.
“Thailand’s case is different from that of Mexico (which experienced a major currency crisis in 1994), because Thailand shifted to a floating exchange rate after dealing with (troubled) financial companies, raising the official discount rate and taking other measures,” Sakakibara said. “The impact on neighboring economies is not significant, with the Philippine peso, for instance, seeming to be stable Monday morning.”
The peso actually fell further against the dollar July 14. Asked if Thailand would seek emergency loans totaling $20 billion from Japan, as reported last week by a business daily, Sakakibara said, “The situation does not yet require such a move. We will probably listen to what Thailand’s finance (and foreign) ministers have to say about the current situation, when they visit.”
Thai Finance Minister Thanong Bidaya and Foreign Minister Prachuab Chaiyasan will arrive in Japan on July 18 to discuss the currency issue.