Japan should join the AIIB
Greek PM Tsipras in Moscow for talks

 

The government does not rule out the possibility of joining a China-led development bank to be launched by the year’s end and also envisages a possible contribution of up to $1.5 billion to the institution in the event of Japan’s participation, according to a draft paper on the institution.

Despite what would be the second-largest contribution after China’s, Japan is concerned that such a fiscal burden will not guarantee it influence in the proposed Asian Infrastructure Investment Bank, given the opaqueness in its governance standards, says the draft government paper, a copy of which was obtained Tuesday.

But Tokyo, in close coordination with Washington, which is also staying out of the AIIB, will urge Beijing to ensure fair governance and transparent management of the AIIB in line with international standards, the draft says.

Japan will continue to file demands “from outside” the AIIB, the draft says, arguing Tokyo’s possible involvement in negotiations for the Agreement, or the basic rules governing the bank, “will be the biggest card against China.”

Prime Minister Shinzo Abe will carefully consider whether to join the initiative while taking into account the pros and cons of Japanese participation as spelled out in the draft paper.

Assuming that $10 billion of the AIIB’s initial capitalization of $50 billion would be financed by actual payments by potential members, the envisaged Japanese tranche of $1.5 billion was calculated based on the size of the nominal gross domestic product of potential participants, and on the assumption that Asian economies account for 75 percent of the payments and that non-Asian members hold the remainder.

After confirming “founding members” on April 15, China aims to agree on the AIIB’s worldnews of Agreement by the end of June through negotiations involving over 50 countries and territories that have signed up for the institution.

While even European members of the Group of Seven industrialized economies and U.S. allies in Asia such as Australia and South Korea hope to take part in the negotiations, Tokyo and Washington, which view the AIIB as a challenge to the World Bank and Asian Development Bank, both of which they themselves lead, are standing back from joining.

According to the draft paper, the positive points of joining negotiations to set up the AIIB are that Japan can be directly involved in the rule-making process of the bank and that Japanese entry could lead to improved relations between Tokyo and Beijing.

Negative points for entering the talks are that it will hurt ties with the United States and that Japan may end up giving “legitimacy” to a Chinese instrument that critics say intends to bring developing countries in Southeast, Southwest and Central Asia into Beijing’s economic sphere of influence.

Cabinet ministers have said Tokyo had asked Beijing about whether it will be possible to establish fair governance in the AIIB and whether carrying out lending that ignores debt sustainability will inflict harm on other creditors, but that China has yet to provide a clear explanation.

Tokyo will also call for transparency in the screening process for the provision of AIIB loans.

Looking ahead, Japan will continue to gather information about the AIIB, such as relations between the subscription of shares among members and their voting rights, schedules in the coming months and the compatibility of the bank’s operations with international standards, according to the draft.

Japan should join the AIIB
Greek PM Tsipras in Moscow for talks
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