The Pattern of Japan's ODI into ASEAN and New Miyazawa Initiative

Southeast Asian Economies have grown remarkably since the sharp yen appreciations in 1985. And it happened alongside the formation of strong economic linkages in the region. Since the late 1980's, the yen appreciation have induced the increase of Japanese foreign direct Investment (FDI) and intra-industry trade in ASEAN, strengthening the so-called 'Asian growth dynamism' with Japanese manufacturer's overseas expansion. However, the rapid growth of South-east Asia countries has suddenly come to halt in 1997, and ASEAN countries faced a difficult economic situation as a result of the financial crisis in the East Asia. Hoping to form closer ties with Southeast Asian economies and become increasingly interdependent, Japanese government has supported more than half of the US$30bn earmarked to ASEAN countries in the first stage of the New Miyazawa Plan. Also, the announcement of a second stage has made it clear that the emphasis has changed from direct financial assistance to indirect assistance for forming regional bond market and wider use of Yen. With a view to this goal, the International Cooperation Bank (ICB) was formed in October, 1999 and would provide a guarantee for bonds that the ASEAN countries would issue. The result of this analysis demonstrates that Japan intend to promote the internationalization of the Yen through the financial assistance of the New Miyazawa Plan to ASEAN although the proposal for an Asian Monetary Fund (AMF) had been rejected as a result of US intervention