[Congressional Record Volume 143, Number 161 (Monday, December 15, 1997)]
[Extensions of Remarks]
[Pages E2405-E2406]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page E2405]]



                 JAPAN'S ROLE IN INTERNATIONAL FINANCE

                                 ______
                                 

                         HON. HOWARD L. BERMAN

                             of california

                    in the house of representatives

                      Thursday, November 13, 1997

  Mr. BERMAN. Mr. Speaker, earlier this month two of our colleagues, 
Mr. Matsui and Mr. Kolbe, attended an interesting seminar on United 
States-Japan trade issues. I was unable to attend but received a copy 
of the remarks presented by Norifussa Kagami, executive director of the 
Export-Import Bank of Japan.
  The seminar, I understand, brought together a range of viewpoints on 
the bilateral trading relationship between the United States and 
Japan--a topic of increasing concern to the Congress as we consider the 
impact of financial problems in Asia, including in Japan, on American 
markets and economic stability. Both the United States and Japan have 
an intense interest in resolving the region's economic difficulties. As 
Mr. Kagami mentions, Japan has already played a very constructive role 
in assisting Thailand. I imagine that they will be called upon to do 
much more in the coming months.
  As ranking member of the Asia and Pacific Subcommittee of the House 
International Relations Committee, I welcome efforts at constructive 
cooperation between Japan and the United States in international 
financial markets and, of course, efforts taken by Japan to expand 
American exports to Japan in order to resolve our outstanding trade 
issues.
  I think my colleagues will find Mr. Kagami's remarks of interest and 
following is an abridged text of his address:

Speech by Norifusa Kagami, Senior Executive Director, the Export-Import 
                             Bank of Japan


                               1. Opening

       My name is Norihusa Kagami and I am from the Export-Import 
     Bank of Japan. It is my great honor to be here. I would like 
     to express my appreciation to Congressman Mel Levine for 
     taking the chairmanship and acting as the moderator today. I 
     am honored to have the presence of Congressmen James Kolbe 
     and Robert Matsui today. They are both playing a leading role 
     in discussion of U.S. trade issues with other countries.
       What I would like to do in this presentation is to talk 
     about the role played by JEXIM in U.S.-Japan trade relations. 
     I would also like to touch on our Bank's financial operations 
     in the Americas. But first, I will give you a brief overview 
     of what JEXIM is.


                        2. An Overview of JEXIM

       Our Bank was founded in 1950 with a mandate to provide 
     support to Japan's external economic policy from the 
     financial side. Since then, as a governmental financial 
     institution, with government-owned capital stock of 985.5 
     billion yen or roughly 8.2 billion US dollars today, JEXIM 
     has responded to Japan's changing political agenda over the 
     years in the ways it has provided loans, guarantees and 
     equity investment.
       Our financial resources are obtained mainly through 
     borrowings from the Trust Fund of the Ministry of Finance and 
     bonds issued in the international capital markets. The Trust 
     Fund Bureau manages funds deposited in savings accounts at 
     Japanese post offices and state-sponsored basic pension 
     funds.
       Our operational aim is to supplement and encourage the 
     activities of private financial institutions. As an 
     independent bank, our policy is to ensure repayment and cover 
     operational expenses through our income.
       JEXIM is authorized to extend the following four main 
     financing instruments. First, ``export credit'' encourages 
     exports of ships and plants. Second, ``import credit'' 
     encourages imports of energy resources and large-scale 
     finished products such as aircraft. Third, our Bank finances 
     Japanese direct investment abroad to help Japanese firms 
     expand their operations overseas. Fourth is untied loans, 
     which are loans that do not require purchase of goods and 
     services from Japan and are provided primarily to the 
     developing countries.
       Let me say that, in our total operations, the share of 
     export credit has been on a steady decline. In Japan, export 
     transactions for which our Bank provides some financing 
     accounts for a little less than 1 percent of total exports 
     today.
       Now let me take up untied loans. These loans are usually 
     cofinanced with the World Bank, IMF or other multilateral 
     financial institutions and are intended to improve economic 
     infrastructure in developing nations or to strengthen 
     international financial order. Later I will refer to this 
     loan modality when we discuss the financial support JEXIM 
     provided to a new debt strategy for Latin American countries 
     under the Brady Plan.
       Very recently, JEXIM has also provided an untied loan in 
     the yen equivalent of 4 billion dollars to Thailand so that 
     it can effectively cope with its currency crisis. This was 
     made amid concerns that the crisis was spilling over to other 
     Asian countries. This loan was extended to support the 
     economic readjustment program drawn up by the Thai government 
     in consultation with the IMF. Its objective was to uphold a 
     stable international financial order.
       This untied loan forms part of the international financial 
     package put together by the IMF and participated in by other 
     multilateral institutions as well as Asian countries. JEXIM's 
     contribution was the largest, comparable with the amount 
     committed by the IMF.


  3. U.S.-Japan Trade Issues--JEXIM's Role in Trade Friction Problems

       Next, I would like to take this opportunity to address the 
     role played by JEXIM in Japan's trade issues, especially our 
     bilateral trade frictions.
       Since late 1960's when the textile trade first posed a 
     problem between the U.S. and Japan, we have had lingering 
     problems with automobiles since 1979 and other issues. In 
     fact, they are still ongoing issues between our two 
     countries. In this context, our Bank takes credit for our 
     contribution toward easing trade friction. We have made 
     available various financing modalities. Among them are 
     facilities for imports of manufactured goods and direct 
     investment abroad. Let me now describe them in detail.

        A. Credit Facility for the Import of Manufactured Goods

       JEXIM has a credit facility specifically for the import of 
     manufactured goods that helps directly reduce trade and 
     current account surpluses. This facility was set up on 
     November 1, 1983 to foster the imports of manufactured goods 
     to Japan. It was instituted as a result of the Japanese 
     government's comprehensive package of economic measures in 
     October, 1983 and in the context of a more general objective 
     of broadening our economic interactions with other countries 
     and promoting better external relations.
       In addition, after our government decided on the emergency 
     economic package on September 16, 1993, this facility was 
     expanded to further increase imports. I am happy to report to 
     you that these efforts, made by JEXIM as well as by the 
     Japanese government, are being reflected in a rising trend of 
     the ratio of manufactured goods to total Japanese imports. It 
     climbed from 28.2 percent in 1983 to 58.9 percent in 1996.
       JEXIM has provided financing to Japanese importers of 
     American products to fund a variety of imports, including 
     aircraft and communications satellites, from Boeing, AT&T, 
     Motorola and U.S. companies. In fact, during the period from 
     1983, the year these loans were first made available, to 
     1996, imports from the United States accounted for 91 percent 
     of the total cumulative loan commitments from this facility; 
     undoubtedly an overwhelming portion. Further, after the 
     revision of the Export-Import Bank Law in May, 1984 in which 
     this facility was expanded to cover financing to exporters, 
     JEXIM has extended direct loans to foreign exporters. Of 
     eight such commitments, five were given to American 
     corporations to date. One recent example was credit provided 
     to GM and Ford for their capital investments in order to 
     produce right-hand drive automobiles to be exported to Japan.

          B. Financing Direct Investment in the United States

       JEXIM has contributed to a decrease in the trade surplus 
     not only with import credit but also with financing equity 
     investment. It bolsters overseas operations of Japanese 
     corporations and also induces economic and industrial 
     collaboration in host countries, thereby promoting the 
     international horizontal division of labor. As to investments 
     in the United States, our Bank has helped increase U.S. 
     employment as well as alleviating trade frictions through 
     financial support to direct investments of our domestic 
     automakers and semiconductor and other electronic 
     manufacturers. One recent project involves a 300-million 
     dollar direct loan to a joint semiconductor production 
     venture by American and Japanese firms in Manassas, Virginia.
       Currently, JEXIM is reviewing financial support to Amtrak 
     for the Northeast corridor high-speed train project whose aim 
     is to improve the rail linkage between Washington, D.C., New 
     York and Boston. We are now working toward the final signing 
     of the loan agreement.

                        C. Equity Participation

       Another function JEXIM performs is equity participation. 
     The first project of this kind was an investment in the 
     United States. In 1993 our Bank made equity investment 
     totaling 1.5 billion yen or 12 million

[[Page E2406]]

     dollars together with the port authority of Los Angels and 
     set up a firm that manages a construction project for a coal 
     loading terminal in Los Angels port. The terminal will be 
     used to export coal to East Asian countries including Japan. 
     For our economy, it will facilitate imports of coal, while it 
     will help boost the American coal industry.
       As I have described so far, JEXIM has been making numerous 
     cooperative efforts to date to promote projects in the United 
     States to the extent that they are relevant to Japan. We 
     intend to make further efforts in this area.


          4. Japan-U.S. Cooperation in Third Country Economies

       Now I would like to describe our role in third country 
     economies from the perspective of U.S. Japan cooperation.

     A. Formulating Projects for Private Infrastructure Development

       Globalization is a common trend seen in business activities 
     today, and the same trend has been noticeable in our Bank's 
     trade financing.
       The trend has been conspicuous especially in private 
     infrastructure projects. These projects employ project 
     financing, a financing modality where lenders take as 
     security for their loans earning flows to be generated from 
     the completed project and does not require sovereign 
     guarantee of the host country. They have been carried out by 
     international consortia of corporations, banks and 
     consultants. This phenomenon can be accounted for by several 
     underlying factors: a need to share the various risks 
     inherent to such large-scale projects in developing countries 
     that do not have sovereign guarantee; and a need to generate 
     large profits by carrying out the project at low cost, 
     through an optimum combination of the enterprises with their 
     particular comparative advantages in order to emerge as a 
     winner in global competition.

               B. Paiton Coal-Fired Thermal Power Project

       Japan and the United States have formed a strong 
     cooperative relationship in carrying out private 
     infrastructure development projects in developing countries 
     or more generally projects in third countries. I note that 
     the export-import banks of both countries have played an 
     important role in this process. JEXIM and US Xim Bank entered 
     into a Cooperation Agreement in 1991 and have since taken 
     part in many projects together, mainly in East Asia. The 
     project to build a coal-fired thermal power station by P.T. 
     Paiton Energy Company in Indonesia, for which loan 
     commitments were made in 1995, may be cited as a 
     representative example of joint projects pursued by the two 
     institutions. This was a large-scale project worth 9 hundred 
     million dollars. It attracted world attention. And those who 
     participated in this financing were not only US Xim Bank but 
     also OPIC (the Overseas Private Investment Corporation) and 
     the leading banks of the United States and Japan. I may add 
     that among the American participants in this project are 
     Mission Energy Company as the project sponsor and General 
     Electric as equipment supplier.

                         C. Sakhalin II Project

       The Sakhalin II Project may be cited as another example of 
     US-Japan joint finance projects. This is an ongoing project, 
     now at the final stage toward the signing of the loan 
     agreement in December. In this deal, JEXIM, EBRD (European 
     Bank for Reconstruction and Development), and OPIC are 
     collaborating to move forward in Russia a joint oil 
     development project among the United States, Europe, and 
     Japan. We believe it is a significant international 
     cooperative project. Let me mention that Marathon Oil Company 
     is participating in this project as the largest sponsor.

              D. 30 Percent Content Rule for Export Credit

       Projects undertaken by international consortiums bring out 
     the best of what JEXIM does. While official export credit 
     ordinarily requires a fairly high ratio of home goods content 
     in the export contract JEXIM takes a more flexible position, 
     requiring only about 30 percent Japanese goods content. In 
     other words, the remaining 70 percent that we finance is open 
     to goods and services from other countries.
       As I mentioned before, project financing is usually 
     structured by an international consortium. And it is a fact 
     that on numerous occasions, Japanese and American firms form 
     such consortia. That means American participants can obtain 
     financing from our Bank on the same terms and conditions as 
     their Japanese counterparts, provided that the 30 percent 
     content rule is fulfilled. A point I would like to make is 
     that JEXIM is contributing to the expansion of U.S. exports 
     even if it is not apparent on the surface.


                             5. Conclusion

       If we want to shape a sustainable good economic 
     relationship between the United States and Japan, 
     collaboration in third country economies is a factor of great 
     significance. In this context, JEXIM recognizes the growing 
     importance of its collaboration with U.S. official financial 
     institutions.
       I would like to say now that this is a good occasion for me 
     to hear American perspectives. I will be grateful if you 
     share your thoughts with me on the points I have made. Thank 
     you.

     

                          ____________________