Japan To Lend Billions in Asia
TOKYO (AP) _ Japan said Friday it will extend billions of dollars worth of new loans to Indonesia and other Asian countries trying to recover from a devastating currency crisis.
Japan will ask for support for the plan at a meeting of finance ministers from the Group of Seven industrialized nations in London on Saturday, said Katsuhiro Nakagawa, vice minister for international affairs at the Ministry of International Trade and Industry.
The Export-Import Bank of Japan will extend $2.38 billion in loans to Asian central banks with most of the money going to Indonesia where Japanese officials believe economic problems are most acute, Nakagawa said.
The banks will be able to use the money to shore up their own reserves or to re-lend to local companies.
Japan will also guarantee short-term trade contracts between Japanese companies and importers in Indonesia, Nakagawa said.
In effect, the government will take over for local banks who have been hesitant to provide letters of credit to Southeast Asian importers. The banks fear that further currency declines could bankrupt import companies and make it impossible for them to pay overseas suppliers.
Nakagawa said Indonesian companies already face enormous difficulties importing the raw materials needed for manufacturing because banks won’t provide the trade insurance and most exporters to the region won’t do business without it.
``We hope the measures will counter the turmoil taking place because of the credit crunch in Asian countries,″ Nakagawa said.
As part of the program Japan will provide a $1 billion trade-insurance credit line for companies trading with Indonesian firms.
Japan is also considering a request from Indonesia to send shipments of Japanese rice or to pay for rice shipments from elsewhere in Asia to counter soaring food prices, a Ministry of Foreign Affairs official said.