TOKYO, Feb 21 (Reuters) - Japan will help Indonesia issue up to $1.5 billion of Samurai bonds and the two nations will double their bilateral currency swap arrangement, they agreed on Saturday, as the deepening global economic crisis freezes up financial markets.
Indonesia sought the agreement as the jittery state of the markets may make it hard for the country to issue bonds overseas, a senior official at Japan’s Ministry of Finance said.
The deal enables Indonesia to issue Samurai bonds from March with the state-backed Japan Bank for International Cooperation (JBIC) [JBIC.UL] providing a guarantee of up to $1.5 billion.
Jakarta, which has never issued yen-denominated foreign bonds in the Japanese capital market, has not set any terms and dates for such issues.
In a joint statement, Japan also pledged to engage in a joint emergency loan facility through JBIC for Indonesia that Jakarta, the World Bank, the Asian Development Bank and other countries are considering setting up.
The two sides, meeting in Thailand ahead of a gathering of finance ministers from 13 Asian countries on Sunday, also agreed to double their existing bilateral swap agreement to $12 billion.
The Japanese MOF official said the measures were precautionary.
“The Indonesian economy is basically in good shape... Due to the global financial crisis and worsening of economic conditions, its currency is weakening and share prices are falling, but it is not at all in a critical situation.”
Finance ministers from the 10 members of the Association of Southeast Asian Nations (ASEAN) plus Japan, China and South Korea are expected to discuss expanding their currency swap scheme to $120 billion at the Sunday meeting on the resort island of Phuket. [nBKK419207]
Japanese Finance Minister Kaoru Yosano is missing the meeting but will be represented by a parliamentary secretary for finance.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. (Reporting by Tetsushi Kajimoto; Editing by Hugh Lawson)