Catalyzing International Finance
The "blood of industry": The importance of financial function in economic activity is sometimes expressed in the following way. When the financial system is strained, a financial crisis may emerge, and could immediately inflict a severe blow to the economy. As the financial system is increasingly globalized, there is a high chance that it may not be possible to contain financial turmoil in one economy, and that it could well develop into a global crisis, with its contagious effects causing a chain reaction. The Asian currency crisis still remains in our recent memory. It began in Thailand in 1997 and spilled over into other Asian countries, inflicting serious damage on them. Once the financial crisis had developed, the cost of dealing with its consequences was enormous, inevitably calling for mobilization of public funds and emergency measures. What is important is to promote international cooperation in a concerted effort to prevent the recurrence of such a crisis, based on our past experience.
JBIC is one of the organizations given the role of preventing the recurrence of such a crisis, and of responding to turmoil in international finance activities. In its capacity as an official financial institution, JBIC has made several efforts to maintain order in international financial activities. As collaboration and networks with other countries are crucial, JBIC has been building cooperative ties through direct dialogue based on trust cultivated with other countries. Specifically, JBIC has contributed to building a financial system which will lead to stability in Japan and Asian countries, and to the promotion of the recycling of funds to Asia by utilizing Islamic finance, which has been drawing worldwide attention lately.
Here are some of JBIC's activities for maintaining international financial order.
Ten years have passed since the Asian currency crisis in 1997 when the currency and financial crisis initially engendered in Thailand spilled over into Indonesia, Malaysia and other Asian countries. This section examines the evolution of the crisis--how it began and eventually wound down--and, in the process, touches on the role performed by Japan and JBIC.
Once an international financial crisis occurs, it is important to take appropriate steps for managing the crisis. At the same time, it is equally important to put in place an institutional framework which will work to prevent crises before they occur. Here are some of JBIC's activities to develop an international finance system leading to the prevention of financial crises.
Globalization has made the relations between Japan and Asian countries more important than ever. Recycling oil money generated by soaring oil prices into Asia has become a key to Asian economic growth and, hence, Japanese growth.