Japan debates new low-cost yen loan

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Subject: Japan debates new low-cost yen loans to Asia

Japan debates new low-cost yen loans to Asia
04:05 a.m. Dec 10, 1998 Eastern

By Yoshiko Mori

TOKYO, Dec 10 (Reuters) - Japan's bureaucrats are locked in debate over a
new one trillion yen ($8.5 billion) loan facility for Asia that may come on
top of the $30 billion aid package already unveiled by Tokyo in October,
officials
said on Thursday.

The new loans, if agreed by all four ministries in charge of aid policies,
are likely to be announced by Prime Minister Keizo Obuchi when he meets
leaders of the Association of South East Asian Nations (ASEAN) in Hanoi on
December
16.

But the four -- the Economic Planning Agency and the ministries of finance,
trade and foreign affairs -- are divided over early adoption of such a loan
scheme.

Asked about prospects of a new loan announcement by Obuchi during his ASEAN
trip next week, a spokesman for the Prime Minister's Office said: ``I am not
sure if we will be able to come up with specifics of the new loans by
then.''

ASEAN groups Brunei, Indonesia, Laos, Malaysia, Myanmar, the Philippines,
Singapore, Thailand and Vietnam.

The Finance Ministry is believed to be wary of a new loan scheme for which
financial backing has yet to be found, and a senior ministry official would
only say that ``absolutely nothing has been decided,'' including whether to
offer such loans.

The loans, if they materialise, will be a part of the one trillion yen that
the government has pledged to set aside for Asian recovery in a recently
announced 24 trillion yen economic stimulus package, trade officials said.

But no budgetary steps have been taken so far to immediately fund the one
trillion yen aid for Asia, MOF officials said.

The Trade Ministry, meanwhile, is keen to boost its aid profile in Asia, and
is aggressively promoting the scheme, which it hopes will be offered on a
tied basis to Asian governments.

In tied loans, recipient nations must procure materials for infrastructure
projects from Japanese manufacturers, and such a scheme could be made part
of Japan's stimulus steps.

In 1978, Tokyo decided to reduce the proportion of tied loans -- which were
unpopular with recipients -- and since 1996 all Japanese official
development assistance has been untied.

Trade officials are also seeking extremely generous terms for the new loans,
such as 0.75 percent annual interest rate for 40-year maturities.