GREATER NOIDA, India May 3 Japan has tapped its reserves to invest in bonds issued by major economies in Southeast Asia, Japan's Finance Minister Taro Aso said on Friday, part of a strategy aimed at strengthening regional bond markets.
Finance ministry officials said the country had purchased a small, unspecified amount of the dollar-denominated Pan Asia Bond Index Fund, investing in local currency bonds issued by Indonesia, Malaysia, Philippines, Singapore and Thailand.
Aso was speaking after the first joint meeting of finance ministers and central bank governors from both sides as Japan seeks to take advantage of emerging Asian growth to revitalise its own economy.
"I hope Japan and ASEAN countries will build a win-win relationship to achieve economic growth and that it will contribute to growth and development of Asia as a whole," Aso told a news conference after the meeting.
Japan hopes its purchases of the index fund will catalyse private investment in Asian bond markets, which are far less liquid than those in the developed world. Tokyo may consider future purchases depending on circumstance, the officials said.
To stave off a recurrence of financial crises in the region, Japan and the major ASEAN economies will consider enhancing bilateral swap arrangements to provide extra liquidity should their currencies come under attack.
Japan has already concluded swap arrangements with Indonesia and the Philippines, and it is considering reentering agreements with Malaysia, Thailand and Singapore which expired in recent years.
Tokyo hopes the bilateral arrangements would supplement a multilateral emergency currency protection fund which sets rigid conditions tied to bailout demands from the International Monetary Fund.
To help Japanese firms raise funds in local currency, Japan and ASEAN will consider a scheme in which Japanese banks would receive funds from central banks by offering Japanese government bonds as collateral through the Bank of Japan.
Such a cross-border collateral scheme was put in place between Japan and Thailand in the wake of Thai floods in 2011.
The agreement comes as the regional cooperation mood has soured, with a meeting of finance chiefs from China, Japan and South Korea called off amid renewed tension over Japanese ministers' visits to a shrine for war dead.
Finance chiefs from China and South Korea also skipped a meeting of the ASEAN +3 grouping.
To further strengthen financial ties with ASEAN, Japan and the bloc's five major economies will launch a joint working group comprising senior officials to discuss a wide range of issues including financial cooperation and development. (Reporting by Tetsushi Kajimoto; Editing by Frank Jack Daniel and Toby Chopra)