‘Yen credit request makes good economic sense’
Economist: Getting favour from Japan makes good economic sense
THE Japanese government’s possible extension of yen credit to Malaysia would further strengthen the relationship between the two countries.
Economist Dr Yeah Kim Leng said there would not be concerns over Malaysia’s ability to repay.
“From the national perspective, Japan is already importing sizeable amounts of crude oil and natural gas from Malaysia,” he said.
In his recent visit to Japan, Prime Minister Tun Dr Mahathir Mohamad had asked Japan to consider providing soft loans to help deal with the country’s financial problems.
Yeah said the yen credit extension was relatively safe based on Japan’s credit risk perspective.
“I think there is very little credit risk in terms of repayment, largely because Malaysia has a sizeable export volume to Japan. The country will be able to generate yen export earnings to repay the debt,” he added.
Japanese Prime Minister Shinzo Abe, during Dr Mahathir’s courtesy call, said they would study the request. However, no specific amount was discussed.
Yeah said the Japanese government had the financial capacity to extend loans for overseas development or financial assistance.
“It makes good economic sense to substitute more expensive debts with cheaper yen credit,” said Yeah.
“The measure will help to improve investors’ confidence and make the government’s financial capacity to remain intact.”
“There is a good chance of getting assistance from Japan, including the country’s financial institutions to assist Malaysia to reduce its debt servicing burden by substituting with cheaper credit (loans with lower interest),” he said.
Inter-Pacific Research head of research Pong Teng Siew said it was most likely the Japanese government was positioning itself to compete with China for influence in this region.
“This is a good time for Japan to win back influence in Malaysia.”
He said it was a good opportunity for Malaysia to take advantage on soft loans to refinance its expensive debts.
Economist Dr Yeah Kim Leng says there is very little credit risk in terms of repayment to Japan because Malaysia has a sizeable export volume to Japan.