November 14, 2008
Japan is preparing to offer $100 billion (£68.3 billion) of its foreign exchange reserves to bolster the International Monetary Fund’s (IMF) coffers, government sources have told The Times.
Senior government sources in Tokyo added that Japan’s proposals at today’s Group of 20 industrialised and emerging nations meeting in Washington could go beyond the huge financial endowment to the IMF and would seek to make Taro Aso, Japan’s Prime Minister, the “Gordon Brown of Asia”.
Among Mr Aso’s reading material for the 11-hour flight to the US capital, is a proposal from within his own party that suggests establishing a vast “World Stabilisation Fund” that would invite contributions from forex reserves held by governments everywhere.
Kotaro Tamura, a ruling party MP, said: “By showing that Japan is taking a lead in saving the world and by becoming more aggressive in offering solutions to the financial crisis, Mr Aso could be a star – he would be respected like Gordon Brown.”
The immediate Japanese offer to the IMF, expected to be unveiled today in Washington, is designed to increase substantially the IMF’s ability to lend to emerging economies savaged by the global financial crisis.
Countries in Eastern Europe have already been forced to accept loans from the IMF, but economists are giving warning that the risk of meltdown could soon emerge in Asia. Japan is already the second-largest donor to the IMF, and has the world’s second-
largest coffer of foreign reserves – some $980 billion.
Mr Aso, will announce the offer at today’s G20 meeting, but government sources say that he will “gauge the mood of international co-operation” before suggesting any further measures.
Finance ministry sources confirmed that Mr Aso was “preparing to demonstrate Japan’s commitment to global financial stability through its foreign reserve strength”, and that “the ability of the IMF to lend aggressively through this crisis must be a priority”.
Although details of the plan have not been widely disclosed throughout the Government, it is understood that the reserves – already mostly held in the form of US Treasuries – would be offered as collateral for the IMF as it attempted to raise funds as emergency needs arise.
Japan is proposing to lend about 10 per cent of its reserves to ensure that the IMF is itself able to meet its funding demands.
However, the loan will need to be structured carefully, said Japanese government sources, so that the facility does not actually lead to a sell-off of US Treasuries in an already unstable market.
The Japanese Government is privately hoping that its actions will prompt other nations with hefty foreign reserves to make similar offers to the IMF, though it is likely to stop short of making an explicit demand that others follow suit.
China, with even larger reserves than Japan, is viewed as a likely candidate to provide collateral, as are Middle Eastern oil producers.
Japan Bailing out the IMF Alrighty then.
One thing leads to another and another:
- So now countries have to bailout the IMF
- Who is bailing out countries
- Who need bailouts
- To bailed out their banks
- Who need bailouts
- Because of the US mess.
How interesting it all is.
Before you know it the Countries who Bailed out the IMF will need bailouts to pay for the money given to the IMF for Bailouts.
So who will be left to Bail them out I wonder?
Japan should just cut out the middle man and bailout the countries on it’s own.
That would save money in the end I am sure. Middle men always have to get a cut out of any transaction.