March 31, 2015 / 10:14 AM / 2 years ago

Japan says not bound by deadline to join AIIB, and not yet decided

5 Min Read

China's President Xi Jinping (front C) poses for photos with guests at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing October 24, 2014.Takaki Yajima

TOKYO (Reuters) - As dozens of countries from Europe to the Middle East to Africa jump on the bandwagon of joining the China-backed Asian Infrastructure Investment Bank (AIIB), Japan is opting to stay out for now, with officials believing it can sign up later if its conditions are met.

Japanese officials have shrugged off the March 31 deadline set by China to become a founding member of the Beijing-based bank, and say they attach greater importance to conditions being met rather than when to join.

"It's not a matter of setting a deadline. Our stance remains unchanged that we must cautiously watch how (China) guarantees fair governance at the AIIB," a government source told Reuters.

"We have not ruled out the possibility of either joining or staying out," the source said, speaking on condition of anonymity because he was not authorised to speak to media.

Japan is caught between the misgivings about the AIIB expressed by its biggest ally, the United States, Tokyo's rivalry with Beijing, and the desire of some officials and businesses to partner with the rapid growth of China, the world's second-biggest economy.

Washington, worried about China's economic clout, has said it's still not clear whether the AIIB will uphold international standards of governance, and social and environmental safeguards.

The Japanese government source said unless China resolves Japan's concerns about the AIIB, it could be possible that Japan would stay out of the institution even when it is officially established.

China's Finance Minister Lou Jiwei said earlier this month that the AIIB would be set up by the end of the year. All parties will complete talks and sign the charter of the AIIB by mid-year, and by year-end will make the charter effective and officially establish the institution, he said.

These dates could be considered key junctures for joining.

Finance Minister Taro Aso has repeatedly said China has not resolved Japan's concerns but Japanese officials say negotiations on Japan joining the bank are going on behind the scenes. China has said it is open to Japan's joining.

"As for whether or not Japan is willing to participate, we have previously said that we welcome all countries to proactively participate," foreign ministry spokeswoman Hua Chunying said on Tuesday.

She added China would respect the wishes of any country "whether or not they join or when they decide to join".

One Japanese source told Reuters that China has shown some flexibility on setting up a governing board, which Japan has asked for, to examine and approve loans for projects.

Conditions More Important

Some Japanese officials and business executives have voiced concern about the possible disadvantage latecomers may face in ensuring good governance principles at the AIIB and securing infrastructure contracts funded by the bank once it begins operations.

But other government officials have brushed aside such concerns, arguing that conditions being met are more important than timing.

Views are mixed within the Japanese government, said an adviser to Prime Minister Shinzo Abe. Japanese media reported on Tuesday that Abe ordered his ruling party to study whether to join the AIIB.

More than 40 nations including Britain, Germany, Russia, Australia, Brazil and Egypt have announced their intention to join, adding clout to an institution seen as enhancing China's regional and global influence.

"The only option for Japan is to not join," said the Abe adviser. "The AIIB is a challenge to the status quo led by the World Bank and Asian Development Bank (ADB). It's impossible that Japan would join such an institute."

"Doing so without the U.S. would hurt our alliance," he said.

Some analysts have said instead of joining, Japan can cooperate with the AIIB by co-financing projects through existing institutions such as the ADB, the Manila-based institution it dominates along with the United States. That way it could also avoid providing funds to finance the AIIB.

"Some Japanese firms worry they may be at a disadvantage in procurement if Japan stays out of the institute," said Toru Nishihama, emerging market analyst at Dai-ichi Life Research Institute. "But Japan should not jump on the bus thinking it’s bound for treasure mountain. We must think whether we have a lot of money to spend, taking into account our public finances."

Additional reporting by Yuko Yoshikawa in TOKYO and Ben Blanchard in BEIJING; Editing by Raju Gopalakrishnan

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