Former Banker Predicts Continued Japanese Aid : Gulf War: Yoshio Suzuki expects the government to keep contributing 20% of Desert Storm costs, though it is not confirmed officially.
A former Japanese central banker close to top policy-makers predicted on Tuesday that Japan will continue supporting 20% of the estimated cost of the U.S.-led Persian Gulf War if the fighting lasts beyond March.
That could amount to another $8 billion by June, on top of the $9 billion pledged last Thursday and $2 billion pledged last September, Yoshio Suzuki, vice chairman of the prestigious Nomura Research Institute and a former Bank of Japan director, told foreign correspondents.
Although Suzuki is not presently a government official, his 34-year career at the Bank of Japan--the nation’s central bank--ensures that he is familiar with present government thinking.
However, no government official has yet said anything publicly about additional contributions to the Gulf War effort.
In Parliament, where he is seeking approval for the $9 billion in aid, Prime Minister Toshiki Kaifu was pressed to guarantee that the pledge would be Japan’s last but refused to do so. Instead he said he was not considering any more aid “at this moment.”
Government officials have expressed privately their determination to make another contribution if the war continues. But because of the controversy in Parliament, nobody with a government position is willing to express it openly.
If the current $86-billion estimate of overall costs for a six-month war remains unchanged, a third contribution for the April-June period would amount to another $8 billion, bringing Japan’s total military aid to $19 billion, Suzuki said.
“So far, we have given 20% each time,” he said. “The $2 billion was 20% of the estimated $10 billion military cost last year, and the $9 billion is 20% of the estimated $45 billion cost (for three months) this time.”
Suzuki said he expected the latest pledge would cut economic growth for fiscal 1991, which begins April 1, by 0.2 percentage points--to “somewhere between 3.3% and 3.8%” after subtracting for inflation.
“Originally, I had expected real growth of between 3.5% and 4%,” he said.
Because of high interest rates, a severe labor shortage and a likely decline in both capital investment and consumption, the government predicted in December that growth in fiscal 1991 will fall to 3.8% from an expected 5.2% in fiscal 1990, which ends March 31.
Suzuki said most of the impact of the $9-billion pledge would make itself felt on the Japanese economy in fiscal 1992. If Japan raises its 1991 contribution by an additional $8 billion, the gross national product would be cut by 0.4 percentage points on an annual basis, he added.
Japan’s current accounts--the total of trade and such non-trade transactions as insurance, freight and tourism--will be slashed by the exact amount of the contribution, he said. In addition, sending $9 billion out of Japan is likely to force down the value of the yen, he said.
Because the government plans to issue bonds to raise the funds, the money supply also will be cut, pushing up interest rates at home, he added.
Any additional exports that would be spurred by a lower yen value--which reduces the cost of Japanese goods in foreign markets--would “fall far short of the $9-billion contribution,” Suzuki added.
