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Japan aid package 'the right tonic'



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Japan aid package 'the right tonic'
WASHINGTON -- Japan's US$30-billion aid package for Asian crisis-hit
countries, unveiled last week, is ''exactly what we need'', said Thai
Finance Minister Tarrin Nimmanahaeminda. 
Although plans on how the aid will be disbursed among the Southeast Asian
countries have not been finalised, there is no per-country limit and, as
yet, no conditions attached on how to spend the money, according to Tarrin. 
For Thailand, Tarrin said, the aid would be useful in stimulating domestic
demand, which is a crucial part of the government's plan to tackle the
economic crisis. 
''It's good if we can stimulate domestic demand by running a public
deficit, but it's even better if we can run the deficit with the support of
external and long-term financing,'' said the finance minister. 
Tarrin spoke in Washington, where he was attending the annual meetings of
the World Bank and the International Monetary Fund. He received an
enthusiastic round of applause from financial delegations and bankers after
he presented the measures the Thai government had taken in restructuring
the banking and corporate sectors. 
Although Japanese Finance Minister Kiichi Miyazawa revealed the aid package
last week in Tokyo, the details will not be finalised for another two
weeks. Tarrin said it was still uncertain how the Japanese plan would be
incorporated into a recently announced effort by the US government to help
Asian countries restructure corporate and banking debts. 
The Japanese package envisages a support mechanism backed by Japanese funds
to offer interest subsidies to Asian countries which are borrowing abroad.
The funds will help countries with weak currencies compensate for the
current high cost of borrowing. 
Japan will provide direct financial assistance through Export-Import Bank
of Japan loans and acquisition of Asian bonds by the bank and by offering
official development-aid loans in yen to Asian countries. 
It will also offer guarantees for bank loans to Asian countries and for
Asian bond issues to help the countries raise funds in international
financial markets. 
In the short term, Japan will set aside US$15 billion for swap arrangements
to help in areas such as trade finance. 
In the longer term, Japan called for ''the establishment of an
international guarantee institution with a prime focus on Asian countries.'' 
US Treasury Secretary Robert Rubin on Saturday welcomed the Japanese plan,
which he said supported the objectives of President Bill Clinton's recent
call to promote growth and recovery in Asian countries, a Treasury
Department spokesman said. 
Leading economist Paul Krugman, responding to a question about the best
move the G-7 could make to help the ailing economies, said he wanted to see
more flexibility and that the industrialised nations should ''forgive
countries that experiment with different policies''. 
However, he was cautious about predicting the outcome of the Japanese aid
and questioned why Japan was not helping its own banking sector. 
BY KLOMJIT CHANDRAPANYA 
The Nation