HONOLULU – Japan’s top finance official on Thursday declared his intention to seek bilateral currency swap arrangements with Singapore and Indonesia.
Seichiro Murakami, senior vice finance minister, also told a news conference in Honolulu of his desire to develop Asia’s currency swap scheme into a regional monetary fund.
At a meeting Wednesday of finance ministers from the Association of Southeast Asian Nations, as well as representatives from China, Japan and South Korea, Japan confirmed it has made bilateral swap agreements with Thailand, South Korea and Malaysia.
The gathering was held in Hawaii on the sidelines of the annual meeting of the Asian Development Bank.
Murakami attended the ASEAN-plus-three meeting on behalf of Finance Minister Masajuro Shiokawa, who skipped the meeting, along with the ADB’s annual gathering.
Haruhiko Kuroda, vice finance minister for international affairs, said Japan’s negotiations with Singapore on the currency swap scheme are expected to proceed smoothly. He indicated, however, that those with Indonesia may take more time due to the latter’s economic and political hardships.
The currency swap scheme, known as the Chiang Mai Initiative, is aimed at linking the international reserves of the 10 ASEAN countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Singapore and Vietnam — with those of China, Japan and South Korea through a set of bilateral pacts.
It is aimed at bolstering the region’s defenses against foreign currency speculation, which some economists say triggered the Asian financial crisis in 1997.
Japan also confirmed Wednesday it is negotiating swap arrangements with China and the Philippines. South Korea revealed it is discussing the scheme with Thailand and China, while China confirmed it is negotiating with Thailand.
Murakami remarked at the news conference that he personally hopes the currency swap scheme will develop into the creation of the proposed Asian Monetary Fund.
“We will make step by step progress” on the swap scheme, he said.
The AMF “may be created when everybody thinks it is time to do so after making substantial progress,” Murakami added.
A regional monetary fund, however, is a long way off. It will need to be preceded not only by hundreds of currency swap arrangements, but also by support structures such as a regional economic surveillance mechanism.
Asian countries proposed the currency swap scheme as a measure to guard their currencies after strong U.S. opposition nixed a Japanese proposal to establish the AMF in 1997.
The nations in question subsequently opted to prioritize the development of actual mechanisms aimed at making them more self-reliant in tackling future crises — rather than focusing on establishing a new institution.
Murakami meanwhile expressed caution regarding North Korea’s early entry to the ADB.
“Japan needs to examine the issue carefully by taking into account diplomatic and national security factors,” Murakami said.
He added, however, that it is important to involve North Korea actively in the international community.
South Korea on Thursday reiterated its call for North Korea to be integrated into the global economy through accession to international financial institutions such as the ADB.
“I hope that a positive environment will be created for international financial institutions, such as the ADB, to join South Korea’s efforts in encouraging changes in the North Korean economy and enabling it to become part of the international community,” Jin Nyum, South Korea’s finance and economy minister, said during a speech at the ADB’s annual gathering.
Pyongyang, which is eager to obtain soft loans from international institutions to rebuild its economy, applied in August to become a member of the ADB. The Manila-based bank has yet to decide on its entry, however.
South Korea is in favor of this notion, but Japan and the United States are reluctant to see North Korea obtain membership.
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