Japan, U.S. Seeking Accord on Regional Monetary Fund Plan

Tokyo and Washington are seeking a compromise over a proposed regional monetary fund aimed at coping with the kind of currency crises that recently hit Southeast Asia and then triggered plunges in stock markets around the world.

Regional finance officials are trying to hammer out the broad framework of an “Asian Fund Facility” in time for the proposal to be discussed at a summit of Pacific Rim nations later this month, Japanese and other Asian government officials say.

U.S. Deputy Secretary of State Strobe Talbott, speaking Thursday to diplomats and Indonesian government officials in Jakarta, said the issue of how regional groupings can work with global institutions to manage or avert economic crises should be on the agenda of the 18-member Asia-Pacific Economic Cooperation forum when it meets Nov. 24 to 25 in Vancouver, Canada.

Senior finance officials from Pacific Rim nations, including the United States, and from the International Monetary Fund and the Asian Development Bank will meet in Manila on Nov. 18 and 19 “to discuss the proposed Asian Fund Facility which would supplement IMF resources in the region,” Philippine Finance Secretary Roberto de Ocampo announced Wednesday.

Creation of an Asian monetary fund or standby lending organization, which would be linked in some fashion to the IMF, could help individual Asian countries prevent currency-related economic problems from getting out of control, advocates say.

When the idea of an Asian monetary fund was first made public in September by Southeast Asian nations and Japan, the United States criticized the proposal on the grounds that such a fund might circumvent the type of tough conditions the IMF attaches to bailouts. Washington also was concerned that a Japanese-led regional organization might freeze out the United States, analysts said.

But Japanese Finance Ministry officials have repeatedly stressed that the proposed new Asian organization would not undercut IMF bailout conditions because it would support rescue efforts only in conjunction with IMF action.

The IMF on Wednesday approved a $10-billion loan for Indonesia as part of a bailout tied to reforms aimed at putting that nation’s economy on sounder footing. Earlier, a $17.5-billion IMF bailout was created for Thailand.

Those two IMF packages, taken together, have shown some signs in recent days of bringing more stability to Asian currency and stock markets, although serious economic difficulties remain.

“I am happy to tell you today that good times have not ended,” Philippine Finance Secretary de Ocampo declared Thursday, praising the effects of the two bailout packages. “The worst, in fact, appears to be over.”