ICAS     Institute for Corean-American Studies, Inc

The ICAS Lectures

No. 2000-1013-KYI

Economy of Japan:
What role to play in Asia?

Kiyoto Ido

ICAS Fall Symposium
economic, international relations and security issues
Washington D. C.
October 13, 2000

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Biographic Sketch: Kiyoto Ido

Economy of Japan: What role to play in Asia?

Kiyoto Ido
Minister for Financial Affairs, Embassy of Japan

The recent data indicates the recovery of the Japanese economy, although there still exists downward risks. The government of Japan still needs to continue the supportive economic policy. So the government is considering submitting a supplementary budget draft to the Diet. However efforts by the government to promote economic recovery brought the surge of government debt. Once the Japanese economy is rightly back on a recovery track, it will be essential to tackle the fiscal structural reform, maintaining a broad perspective encompassing the structure of our tax system, the way in which we provide for social security and even the relations between the central government and local government. The Bank of Japan also expressed its intention to maintain the current accommodative monetary policy stance, although it terminated the zero interest rate policy on August 11.

Japan needs to accomplish further structural economic reform. The government of Japan compiles a new set of policies to implement the Plan for the Rebirth of Japan. Financial sector has most drastically changed. The Japanese financial sector was in serious trouble about 2 years ago. Japan has taken various important measures toward strengthening the banking system, such as the establishment of the Financial Services Agency, the two Laws for the injection of public money into banks and the resolute and prompt disposal of failed banks. And the banks made efforts to dispose bad debts. Because of those efforts, the credibility of Japan's financial system has been regained.

The currency crisis hit several Asian countries in 1997. Japan announced a support package including $30 billion financial support---so-called "New Miyazawa Initiative". In spite of the severe economic and fiscal situation of Japan, Japanese people appreciated this Initiative, because they considered it natural to help their neighbors in difficult situations.

The Asian currency crisis indicated the necessity of the regional efforts for the stable and firm economic and financial systems. After several discussions, the so-called "Manila Framework" was established in order to implement the regional surveillance and provide the contingency support to the crisis country. The ASEAN+3 Finance Ministers Meeting in May agreed on the "Chiang Mai Initiative". The Initiative consists of 2 ideas; expansion of the ASEAN swap arrangement and building a network of bilateral swap and repurchase agreement facilities among the ASEAN countries, China, Japan and the Republic of Korea..

In these regional cooperation talks, the Republic of Korea is always one of the most important partners for Japan. I believe such regional efforts will contribute to the sustainable growth and currency stability in the Asian region.

This page last updated 6/4/2001 jdb

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