A year has passed since the devaluation of the Thai baht touched off the still continuing Asian currency and financial crisis. Meanwhile, the affected countries managed to carry on through the worst phase of the predicament thanks to emergency assistance led by the International Monetary Fund. But the IMF support programs were predicated on the recipient countries' acceptance of structural and institutional reforms. It is a crucial time now for these countries to show whether they can move forward in implementing the reforms.
Throughout the crisis, Keidanren used every possible opportunity, such as meetings with visiting foreign leaders and hearings held with representatives of member corporations, to keep abreast of the latest developments and exchange views with important players in the regional economy. In February, the Special Task Force on the Asian Currency and Financial Crisis (headed by Nobuo Tateisi, Chairman of Omron Corporation) was established under the Committee on Asia and Oceania established. This Special Task Force has since produced a number of reports and submitted them to various conferences. One of them was the Asian Neighbors' Forum, an event hosted by Keidanren in April and attended by leaders of national business organizations of the region.
It has been noted on more than one such occasions that other nations of Asia look to Japan for leadership in rising to the present challenge. This is a heavy responsibility. Should Japan, for example, allow the yen to keep losing in value, it could end up exacerbating the regional economic crisis rather than contributing to its resolution.
We, therefore, clarify Japan's responsibility and make a fresh resolve to help achieve economic recovery in Asia.
The most fundamental role Japan can play in helping to overcome the Asian crisis is to turn around its own domestic economy as quickly as possible. Since last October, the Japanese government and the Liberal-Democratic Party have announced a series of emergency economic measures. The upshot was the comprehensive policy package of April 24 featuring a total of ¥16 trillion in public works investment and additional tax cuts, etc. The effects of these stimulus measures are expected to show in the latter half of the fiscal year 1998. Yet, for the expansionary fiscal policy to bring lasting benefit beyond the short term, we must restore confidence in the future of the Japanese economy. Essential to restoring that confidence, in turn, are a successful restabilization of the nation's financial system, including a solution to the bad loan problem and a drastic reform of the taxation system. The business community, for its part, will join the effort to revitalize the Japanese economy by striving to improve productivity and business efficiency in the financial and distribution sectors, among other areas.
Countries affected by the Asian economic crisis are now experiencing an economic downturn that has brought rising unemployment, while the reform of financial systems has triggered a credit crunch. This is a period of critical importance to their undertakings in structural reform. In response to the regional crisis, Japan has already offered financial assistance of various kinds reaching a total of $42 billion. It is hoped that this country will carry through steadily with these measures. Japan must also cooperate, as becomes necessary, in providing relief to the less privileged members of society. Another area in need of Japanese cooperation is that of keeping up the levels of economic activity through expansion of the so-called yen loans and credits by the Export-Import Bank of Japan. The business community, for its part, calls for individual Japanese corporations to continue with their operations overseas, thus demonstrating their steadiness in cooperating with their host countries. Also, we in the private sector will work together with the government in supporting human resources development and the growth of supporting industries, both being of medium- and longer-term importance to Asian economies.
We in the Japanese business community remain convinced that Asian economies have a large potential for economic growth and that once they ride out the present difficulties a promising future awaits them. Accordingly, we believe that the current regional disorder should not be allowed to distract us from our long-term focus. For the sake of long-term development in Asia, it is important that regional countries adhere to the agenda for trade and investment liberalization that already have been adopted by the Asia-Pacific Economic Cooperation (APEC) and other regional forums. The member countries of the Association of Southeast Asian Nations (ASEAN) must continue to strengthen solidarity, expand the ASEAN Industrial Cooperation scheme (AICO) and bring the ASEAN Free Trade Area (AFTA) to fruition. If we in Japan are to urge others to move forward with liberalization, then we have to set an example by freeing up the sectors of our own economy in which liberalization is lagging. Currency stability is an important prerequisite for more advanced liberalization within the ASEAN region. In connection with this issue, there are growing voices in favor of further internationalization of the yen. Japan needs to develop its short-term financial markets in order to create an environment conducive to the increased attraction of the yen as an international currency. The Japanese corporations will make efforts to promote the switch of the yen in their international transactions starting in areas where it is possible.
Views Expressed at Meetings of Special Task Force on Asian Currency and Financial Crisis