Japan Seeks Bigger Voice in Finance : Power at World Banking Agencies Falls Short, It Says

Early this month, Japan reaffirmed its support for a proposal by U.S. Treasury Secretary James A. Baker III to extend $20 billion in emergency loans to the world’s 15 most indebted countries. But that support has since proved to be highly qualified.

Despite its new position as the world’s leading creditor country, Japan has agreed to share in the Baker-proposed loans only to the extent of providing the same percentage of loans it has made to these countries in the past.

Hideo Ishihara, managing director of the Industrial Bank of Japan, said Japan shares European suspicions that Baker’s proposal was designed largely to help bail out the American banks that lent large amounts to developing countries and now cannot be repaid.

Toyoo Gyoten, director of international finance at the Finance Ministry, said the same thing, indirectly.

“Banks have very complicated and sometimes conflicting interests” in handling the debtor-country issue, he said. “It is not as simple as to say, ‘Japan has a surplus, so why don’t Japanese banks do more?’ ”

Ten of the countries Baker proposed to help are in Latin America, and American banks’ exposure there is particularly heavy.

The Japanese have about $10 billion out in loans to Mexico, their biggest exposure in a debtor country. They also are heavily exposed in Hong Kong, particularly in shipping and real estate. But on average, Japanese hold only 15% of the IOUs of the countries that are heavily in debt.

Japanese financiers reject any suggestion that because Japan has accumulated a great deal of excess capital it should provide a greater share of any new loans. Ishihara suggested that Japan could take on a greater share of new loans only if banks in the United States and Europe, whose exposure is already greater, shoulder most of the risk for the new loans.

Mark E. Buchman, executive vice president of Union Bank, said in an interview in Los Angeles that “nobody is anxious to be the first to commit new loans” and added that the Japanese “have never been very brave in international lending.”

John Loughran of Morgan Guaranty Trust Co. of New York said he thinks that a persuasive argument could be made for Japan to assume more of the loan burden. He said trade patterns should be examined to determine who will provide what percentage of new loans to debtor nations.

“If the Japanese are earning, say, the equivalent of 30% of Mexico’s debt payments in exports to Mexico, you could sustain an argument that they ought to provide 30% of the new loans,” Loughran said.

Conference Scheduled

He said the test will come May 4 to 6, when seven industrialized democracies, including the United States and Japan, take part in a summit conference here.

“The Baker plan will come up in the Tokyo summit and the Japanese will be asked to provide more,” Loughran said.

Japan has long sought a stronger voice in the decisions made by the world’s financial institutions. Some Japanese financiers suggest that giving Japan greater voting power would induce Japan to assume greater responsibility for global economic problems.

Japan has a $1.6-trillion economy, which is 40% of the $4-trillion American economy, but Japan has only a third of the decision-making power the United States has in the World Bank. In the International Monetary Fund, the discrepancy is even larger: Japan ranks as the world’s No. 2 economic power but ranks fifth in voting power.

In the World Bank, Japan’s has 6.93% of the total vote, compared with 20.9% for the United States. Moreover, the World Bank this year is raising more of its operating funds in yen than in dollars--$3 billion in yen versus $2.6 billion in dollars, after swaps for other currencies are taken into account.

The Finance Ministry’s Gyoten, asked if he feels that the world wants Japan’s money but not its voice in decision-making, replied, “What you say may reflect the international feeling.”

The United States has been urging Japan to assume greater responsibility in global economic affairs but it has resisted Japan’s bid for a stronger voice in international financial institutions. As a result, Japan did not achieve even its present voting strength in the World Bank until 1984.

Situation Must Change

“The plumbing still works in a rough sort of way but the edifice is crumbling,” a senior official of the World Bank said. “Politics has to catch up with the economic reality. Japan hasn’t taken over the role as financier to the world . . . and I don’t think it can . . . but the United States can no longer call the shots unilaterally.”

Although Japan provides large shares of the funds in other international financial institutions, only in the Asian Development Bank, which Japan helped establish, does it have voting rights commensurate with its strength, Gyoten complained.

He said the Finance Ministry is prepared to increase Japan’s capital subscription--and thus its voting rights--in all the international financial institutions in which it participates.

Obtaining greater voting rights in international institutions, he said, “is a very time-consuming process, because it is a process of changing the existing order.”