Japan Shouldn’t Join AIIB for Time Being, LDP Panel to Tell Abe

Japan shouldn’t join the China-led Asian Infrastructure Investment Bank until governance concerns are addressed, a panel of ruling party lawmakers will advise Prime Minister Shinzo Abe this week, according to a person with direct knowledge of the plan.

The Liberal Democratic Party’s AIIB panel will discuss a draft recommendation on June 3 and submit a final report to Abe before Japanese Finance Minister Taro Aso meets his Chinese counterpart on June 6 in Beijing, the person said, asking not to be named because the plan is not yet public.

The recommendation will express concerns over the governance of the AIIB and the possibility that China will be able to exert strong influence over areas of investment, the person said. The panel doesn’t favor joining the infrastructure bank, but keeping options open so the government can use its position as a diplomatic card in talks with China.

The new $100-billion lender being established by China will boost Beijing’s presence in the region’s infrastructure business. Japan, which along the U.S. chose not to join 57 other nations in setting up the AIIB, still plans to increase infrastructure spending in the region. The Asian Development Bank, which is headed by Japan, will expand funding for infrastructure projects to about $110 billion over the next five years.

“This is more about politics than economics, as Japan has the ADB and doesn’t really need to join,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG. “Japan is likely to continue to follow the U.S.”

Shirakawa added that Japan could lose out on some investment projects in Asia if the AIIB gains influence.

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