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Q & A about The New Initiative to Overcome the Asian Currency Crisis (New Miyazawa Initiative)

Q1.What is the import of the New Miyazawa Initiative in brief?
A1.Asian countries affected by the currency crisis continue to experience economic difficulties. The relationship between Japan and Asian countries is strengthening amidst the global economy. Under these circumstances, to assist Asian countries affected by the currency crisis in overcoming their economic difficulties and to contribute to the stability of international financial markets, Japan must immediately provide a support package. Japan stands ready to provide a package of support measures totaling US$30 billion, of which US$15 billion will be made available for Asian countries' medium- to long-term financial needs for economic recovery, and the other US$15 billion will be set aside for their possible short-term capital needs during the process of implementing economic reforms.


Q2.


What caused the Asian currency crisis?
A2.While the Asian currency and economic crises since the summer of 1997 did not necessarily arise for identical reasons in the various countries, some factors can be said to have contributed to the crises. These include the recent overvaluation of exchange rates and the subsequent expansion of current account deficits, and the erosion of market confidence which led to the rapid outflow of short-term capital that had, in some countries, been invested in sectors such as real estate and did not necessarily contribute to higher productivity.


Q3.


How is the Asian economy now?
A3.While Asian countries have experienced instability in their exchange rates and financial markets since the summer of 1997, exchange rates are now regaining stability compared to the previous situation, and stock markets are showing signs of upturn.
On the other hand, although the situation differs from country to country, the real economy continues to be in a serious state in the various nations. Although some countries now have a surplus in their current account due mainly to a dramatic decrease in imports, some difficulties, such as a decline in the growth rate, an increase in poverty and unemployment, and the emergence of a credit crunch, remain to be solved.


Q4.


Why does Japan need to support Asian countries even though Japan faces its own economic difficulty?
A4.Japan is closely tied to Asian countries in terms of history and geography. In addition, the Japanese economy is linked with the Asian economy amidst the global economy. Economic prosperity in Asia has positive effects on the Japanese economy, and economic crisis in an Asian country spreads to other Asian countries through international markets. Under these global circumstances, it is important to provide well-balanced support to foreign countries as well as to improve the quality of life in Japan. Japan is expected to provide appropriate assistance befitting a major economic power in the international society, especially to Asian countries which are closely linked to Japan.


Q5.


What is the difference between the New Miyazawa Initiative and the Asian Monetary Fund (AMF) discussed last year?
A5.The AMF, discussed last year, was a multilateral scheme focused on the stabilization of currency. The New Miyazawa Initiative, announced this October, mainly consists of bilateral support focused on assisting Asian countries affected by the currency crisis in overcoming their economic difficulties and contributing to the stability of international financial markets.


Q6.


How will the New Miyazawa Initiative be used? What is different from former forms of support?
A6.

The New Miyazawa Initiative is used to assist fund procurement efforts by Asian countries affected by the currency crisis so that they can achieve economic recovery. The New Miyazawa Initiative aims to;

(1) Support corporate debt restructuring in the private sector and efforts to make financial systems sound and stable

(2) Strengthen the social safety net

(3) Stimulate the economy (implementation of public undertakings to increase employment)

(4) Address the credit crunch (facilitation of trade finance and assistance to small- and medium-sized enterprises)

Support will be implemented with the prerequisite of economic reform, taking into account the situation in each country.



Q7.


Do the tax revenues appropriated for support measures in the New Miyazawa Initiative total US$30 billion?
A7.The support measures are not grants but mainly loans, which will be repaid.


Q8.


How do Asian countries view the New Miyazawa Initiative? Is Japan consulting with Asian countries in implementing the New Miyazawa Initiative?
A8.The New Miyazawa Initiative was announced at the meeting of Asian finance ministers and central bank governors (Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, and Thailand) held on October 3. The meeting issued a statement that the ministers and governors welcomed the Japanese initiative. Multilateral development banks and the U.S. also appreciate the New Miyazawa Initiative.
Japan is working to implement the New Miyazawa Initiative by dispatching the missions to target countries (Indonesia, Malaysia, Philippines, South Korea, and Thailand) to exchange views on how to implement the Initiative.


Q9.


How can I learn more about the New Miyazawa Initiative?
A9.Please refer to the file "A New Initiative to Overcome the Asian Currency Crisis(New Miyazawa Initiative) " to learn about the New Miyazawa Initiative in more detail.