From the Guardian interactive
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Tokyo backs plans to set up Asian IMF 

Charlotte Denny 
Saturday April 22, 2000 

Japan is backing a plan by Asian governments to set up a multibillion-dollar 
emergency fund to defend their currencies from speculative attacks of the 
kind which triggered the global financial crisis in 1997. 
A Japanese newspaper reported yesterday that Tokyo has thrown its weight 
behind the fund, which was approved in principle last month by finance 
ministers from the Association of South East Asian Nations, Asean.

Under an existing $200m (£126m) currency stabilisation arrangement, Asean 
central banks can draw on credit lines with each other to prop up their 
currencies when speculators attack. But with trillions traded daily on the 
world's foreign exchanges, the existing fund is too small to take on the 
might of the markets when they target a currency.

The new fund could mobilise ten of billions of dollars, according to a report 
yesterday in the Tokyo-based Sankei Shimbun newspaper.

Japan, China and South Korea, which are not Asean members, have been invited 
to join, to beef up the kitty.

Policymakers hope it will prevent a repeat of the spectacular currency 
crashes which swept through the region in the summer of 1997.

Speculators trained their sights first on the Thai baht, which lost half its 
value in a few weeks, and then the Philippine peso, the Malaysian ringgit, 
the Indonesian rupiah and the Korean won which all plunged to record lows.

The currency swap facility was set up after the crisis after plans for a 
fully fledged Asian Monetary Fund to bail out stricken economies ran into 
opposition from the West. The US, other western nations and the International 
Monetary Fund fear an AMF - first mooted by Japan - would undermine the IMF's 
role as the world's emergency lender.

The beefed-up emergency fund is intended to compliment the fund's role by 
helping countries stabilise their currencies in advance of IMF programmes. 
But Washington is likely to renew its objections on the grounds that a rival 
mechanism will devalue the IMF.


hkanteh

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