Updates from the Managing Director

 [LOIMOU] Bidaya 2

Dear Executive Directors, In light of the recent progress in the management of the crisis, the Board of Governors has commenced discussions with the Managing Director of the Executive Board to establish an independent and autonomous body to evaluate the decisions of the EB. This is to ensure the accountability of the EB following growing international condemnation of the failure of the IMF in handling the financial contagion in East Asia. As such, the Independent Evaluation Office, comprising research officers and economists, will be established to assess the decisions made by the EB. Under its Terms of Reference, the IEO is fully independent from the Management of the IMF and operates at arm's length from the EB. While the IEO will not interfere with the internal discussions of the EB, senior economists and research officers will provide constructive feedback on the Board’s activities as they see fit. Board of Governors

Financial contagion spreads from one East Asian nation to another As a recession emerges in South Korea, Japan struggles with another beast of its own. The yen has experienced an all-time low in value since the start of the crisis, but never has it experienced such a large dip as 5.7% in the last 20 days. The fall in demand for Japanese exports and declining investment in Japan is understandable. The recent recession in Thailand, the major scandal in Indonesia, and the asset bubble and eventual panic in South Korea are all possible reasons for a dip in investor confidence in Japan, also known as one of the most interconnected and open economies in Asia pre-crisis. The fall in export demand from neighbouring SEA nations following the BOP crisis and recession is a plausible explanation for the pessimism directed towards major Japanese export-oriented industries and companies.  Consequently, Japanese efforts to defend the yen are failing to sustain it at the current value any longer, ...