Iceland First?

"...Japan is ready to take leadership in contributing to support countries by providing funds."

"...died a quick death in the face of U.S. opposition..."

"The loans would be funded by 200 billion yen ($2 billion) contributed by IMF member countries plus loans from the foreign currency reserves of Middle Eastern oil exporters as well as the likes of Japan and China, the paper said.

China, which has pledged to cooperate with other countries to tackle the current crisis, has been repeatedly urged by Washington to play a greater role in international financial policy-making commensurate with its economic power..."
Japan stands ready to help the International Monetary Fund ride to the rescue of countries struck down by the global credit crisis, Finance Minister Shoichi Nakagawa said "If there's something the IMF can do, I want them to do it flexibly. Japan will cooperate with that, including providing funds for it," Nakagawa told reporters in Washington on Thursday.

He was speaking on the eve of a meeting of finance ministers and central bank chiefs from the Group of Seven (G7) rich nations, whose support will be crucial if the plan is to work.

"The impact of the credit crisis is spreading to the world. To minimize the chain-reaction, Japan is ready to take leadership in contributing to support countries by providing funds. And I will call for other countries' cooperation at the G7 meeting tomorrow," Nakagawa said.

"Japan alone has $995 billion in official foreign currency reserves. China has $2 trillion, the world's largest stockpile."

The Nikkei newspaper reported that Japan would propose making trillions of dollars in currency reserves held by Asian and Middle Eastern governments available to support IMF-led bailouts.

Japan alone has $995 billion in official foreign currency reserves. China has $2 trillion, the world's largest stockpile. The Nikkei said the IMF program would be available to smaller emerging countries but not to members of the G7 -- the United States, Japan, Britain, France, Germany, Canada and Italy -- or to other large nations.

"What the IMF should think about is not G7 or G8 countries, but about contingencies that may arise in newly emerging economies and other areas at this time of financial crisis, credit crunch and the dollar's exchange rate," Economics Minister Kaoru Yosano said in Tokyo.

The G8 is made up of the Group of Seven plus Russia.

Japan also took the diplomatic initiative during the 1997/98 Asian financial crisis, proposing the creation of an Asian Monetary Fund to help the region recover from a meltdown that plunged several countries into a deep recession.

The plan died a quick death in the face of U.S. opposition.

Iceland First?

Prime Minister Taro Aso, speaking in Tokyo, said Japan would propose at Friday's G7 meeting that Iceland be helped via the IMF -- an idea that the north Atlantic island has so far resisted.

However, Prime Minister Geir Haarde warned this week that Iceland faced the risk of national bankruptcy because of the crisis, which has forced the government to seize control of the country's three biggest banks.

Under the Japanese plan, the IMF would ask the borrowing country to draw up a plan to revitalise its financial sector including writing off its bad assets, the Nikkei said.

It was not clear how -- or if -- this would differ from the conditions the IMF usually sets in return for an emergency loan.

The loans would be funded by 200 billion yen ($2 billion) contributed by IMF member countries plus loans from the foreign currency reserves of Middle Eastern oil exporters as well as the likes of Japan and China, the paper said.

China, which has pledged to cooperate with other countries to tackle the current crisis, has been repeatedly urged by Washington to play a greater role in international financial policy-making commensurate with its economic power.

But Beijing has given no indication that it is willing to mobilize its reserves in the way that Japan -- its big regional political rival -- is suggesting.

The Group of 20 countries, which brings together key rich and developing economies, will meet in Washington on Saturday during the IMF/World Bank annual meetings and could provide a forum to air the Japanese proposal.

The IMF said it was ready to lend to countries hit by the global credit crunch and had activated an emergency financing mechanism first during the Asian financial crisis a decade ago.

IMF Managing Director Dominique Strauss-Kahn told a news conference it would provide financial assistance not only to emerging and developing nations, but also to Western countries.

"Nobody knows if some ... advanced economies will not also be in need of some help by the IMF," he said, adding that funds would be made available quickly to countries in need. "Very quickly means two weeks at most," he added.

The Fund already sent a mission to Iceland.

Copyright 2008 Reuters. Click for restrictions