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Japan "Wakes Up," Joins China-led Development Bank (And Then Backs Out)

It’s official: the US is on its own when it comes to opposing the China-led Asian Infrastructure Investment Bank (see here for full summary of AIIB developments). We suppose it was only a matter of time, but news that Japan will seek membership in a matter of months will likely still come as somewhat of a surprise to Washington, given the otherwise tenuous relationship between the two countries and considering Japan’s leadership role in the ADB. Nevertheless, the Japanese have apparently come to the same conclusion as Australia and South Korea: not joining simply isn’t an option no matter how loudly the US protests. Here’s more from FT:

Japan is likely to join the Asian Infrastructure Investment Bank within a few months, according to the country’s ambassador to Beijing, a move that would see Tokyo break ranks with Washington and leave the US as the only big holdout.


Masato Kitera told the Financial Times he agreed with Japanese business leaders’ belief that the country would sign up to the China-led development bank by June.


“The business community woke up late, but now they have mounted a big campaign for the AIIB which appears to be very effective,” Mr Kitera said…


A Japanese move to join the bank would be a reversal of rhetoric and, for China, the biggest coup yet given the fractious relationship between the two Asian powers.


Japan also has strong links to the rival Asian Development Bank, the head of which it traditionally appoints, and has in the past questioned the need for a new bank...


No country was seen to be as supportive of the US position as Japan — in part because many officials in both countries saw the AIIB as a direct challenge to the Japanese-controlled Asian Development Bank.


But Japanese executives look on China’s ambitious plans to help build infrastructure in the region as a huge business opportunity, as well as a chance to help repair frayed relations.

So in the end, money does indeed talk, and the possibility that the $50 billion venture may serve to shore up relations between Beijing and Tokyo has apparently proven sufficient to outweigh “concerns” about the fund’s lending standards. Of course, as we’ve noted on any number of occasions, the only real concerns about the bank revolve around the degree to which China uses the institution as an instrument of foreign policy, something Beijing has sought to play down even as it pushes for loans to be denominated in yuan. The ball is now in Washington’s court in terms of adopting a stance towards the bank that strikes a face-saving balance between caution and acceptance. 

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Meanwhile, someone in Washington called someone in Tokyo as indicated by the following which came across on Bloomberg Monday evening: