$80-Billion FUND TO protect currencieS

Japan and Korea are pushing ahead with a planned US$80-billion fund aimed at shielding Asian currencies from speculative attacks amid increased volatility in the global financial market.

China and the 10-country Asean will also be key contributors of the proposed fund.

According to a recent meeting of the Asian Development Bank (ADB), Japan, Korea and China agreed to set up the pool of foreign-exchange reserves to be tapped by nations when they need to protect their currencies.

China currently has the world's biggest foreign exchange reserves of $1.8 trillion, while Japan's reserves amounted to more than $900 billion.

China, Japan, and South Korea will provide 80 per cent of the foreign-exchange pool, while Asean will contribute the rest.

South Korea's President Lee Myung-bak last week urged Japan and China to discuss a response to the global credit crisis that contributed to the won's 41-per-cent slump against the yen this year.

South Korean officials have suggested that the countries concerned should speed up the agreement to create the $80-billion currency-protection fund.

Yesterday, Japanese Finance Minister Shoichi Nakagawa said in Washington, after attending a meeting of G-20 finance ministers and central bankers, that he and South Korean Finance Minister Kang Man-soo had agreed to map out details on the planned reserve pool.

Earlier, Kang said South Korea, Japan and China had yet to agree on how much share they will take in the $80-billion fund.

According to Kang, China wants to decide the size of the contribution in accordance with the size of each country's foreign-exchange reserves while Japan wants to use the value of gross domestic product.

South Korea's suggestion is for the three countries to contribute equally, Kang said.

Meanwhile, Japanese Finance Minister Nakagawa said yesterday that the Group of 20 nations had called for bold steps to respond to the financial crisis because it may affect the economies of developing nations.

The financial crisis "stems from the industrialised nations, mainly the US, so it may have a significant impact on the economies in the developing countries", Nakagawa told reporters.

"They want the industrialised nations to handle it responsibly."

Earlier, leaders of the world's seven biggest economies or G-7 also met in Washington to discuss measures to prevent the global financial meltdown after stocks plunged worldwide and a global recession loomed.

"The current situation calls for urgent and exceptional action," the finance ministers and central bankers said in a statement.

State guarantee for French banks

The French government will today propose a law designed to offer a state guarantee for banks endangered by the global financial crisis, a ruling party deputy said yesterday.

Gilles Carrez, a senior member of the parliamentary finance committee, said the law would be unveiled at an emergency cabinet meeting called by President Nicolas Sarkozy in response to the economic meltdown.