Japan to aid Indonesia's bond issue, double currency swap deal

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PHUKET, Thailand, Feb. 21 Kyodo -
Japan reached an accord with Indonesia on Saturday to provide $1.5 billion in
aid in the case the Southeast Asian economy issues samurai bonds to raise
funds, and to double its bilateral swap scheme to $12 billion to help the
country better prepare for short-term liquidity problems amid the economic
crisis.
Japanese Parliamentary Secretary for Finance Shinsuke Suematsu and Indonesian
Finance Minister Sri Mulyani Indrawati sealed the deal during their talks in
Phuket, Thailand, before a one-day gathering Sunday of finance ministers from
the 10-member Association of Southeast Asian Nations plus Japan, China and
South Korea there.
''With a view to ensuring the stability of the economic and fiscal situation in
Indonesia, ministers agreed to enhanced cooperation between Indonesia and
Japan,'' a joint press statement by the two said. Suematsu represented Japanese
Finance Minister Kaoru Yosano.
Those support steps for Indonesia are ''precautionary measures'' that would
complement the country's foreign reserves, according to the paper.
Specifically, Tokyo will offer up to $1.5 billion to Jakarta in the form of a
guarantee by the Japan Bank for International Cooperation to the Indonesian
government, when it floats samurai bonds in the Japanese capital market.
Samurai bonds are yen-denominated bonds issued in Japan by foreign governments
and companies. Indonesia has raised funds through the issuance of bonds
denominated in U.S. dollar since 2004, but never floated samurai bonds.
A senior Japanese Finance Ministry official said Indonesia will become able to
issue samurai bonds in March following the accord, while stressing that the
Southeast Asian nation is not in a critical situation.
Japan is also ready to take part in a planned joint contingent loan facility
through the JBIC for Indonesia. The loan scheme, which would be an alternative
option to the Southeast Asian nation's bond issue, has been considered by
Indonesia and its development partners such as the World Bank and the Asian
Development Bank.
The official said Japan's aid through the JBIC will not exceed 1.5 billion yen
in total, when Indonesia opts not to issue samurai bonds due to market
conditions and rely on the loan arrangement instead.
Meanwhile, the size of the existing bilateral swap arrangement under the
so-called Chiang Mai Initiative will be raised from $6 billion to $12 billion.
The web of bilateral swap deals was launched in 2000 as part of regional
efforts to avert a financial crisis similar to the 1997-1998 turmoil in Asia.
Affected by the global economic crisis, Indonesia's foreign exchange reserves
have dropped $10 billion to $50.9 billion since last July, while the Indonesian
rupiah last year fell by 16 percent against the dollar, the biggest decline in
eight years.
Under the Chiang Mai Initiative, Indonesia also has a $4 billion bilateral swap
arrangement with China and another $4 billion deal with South Korea.
ASEAN plus China, Japan and South Korea have decided to transform the current
network of bilateral swap arrangements into a multilateral operating fund that
can deploy up to $80 billion.
The 13 economies are set to agree to expand the pool of funds to $120 billion
during the Phuket meeting, according to sources familiar with the matter.
==Kyodo
2009-02-21 22:28:11