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International relations

America's EXIM Bank to expand trade insurance tie-ups with Japan

Tokyo and Washington to beef up coverage to counter Chinese advances in Asia

LNG plants in Asia, a type of project that Japanese companies excel in, will be partially covered by U.S. trade insurance when American companies are participants. (Photo courtesy of Tokyo Gas)

TOKYO -- The U.S. and Japanese governments plan to expand trade insurance they jointly offer on energy, aircraft and other deals to better compete with Chinese companies for big projects in Asia, Nikkei has learned.

Washington and Tokyo will target Japanese-led projects with U.S. participation, with the American side taking on some of the risk of those deals. Japan's Nippon Export and Investment Insurance and the Export-Import Bank of the United States, both state-sponsored bodies, are scheduled to sign an agreement Monday.

The Japanese and U.S. governments help mitigate risks exporters face from such threats as armed conflicts, natural disasters and corporate bankruptcies at export destinations, thereby easing private sector lending for such deals.

The new arrangement will cover export deals that Japanese companies lead, such as liquefied natural gas plants and the mid-sized passenger plane SpaceJet developed by Mitsubishi Aircraft. The amount of coverage per deal is expected to range from several hundred million dollars to more than $1 billion.

Until now, the U.S. only jointly offered trade insurance on American-led deals, but the projects that are seeing high demand in the Indo-Pacific region are mostly related to infrastructure development and energy facilities that Japanese companies excel at. Consequently, by adding Japan-led projects to the mix of deals that the U.S. reinsures, the partners aim to expand funding for them and seal more contracts.

Authorization for America's EXIM Bank expires on Nov. 21. Although widely supported by that country's business community, re-authorization is opposed by some progressive and libertarian-minded lawmakers who call it a form of corporate welfare.

According to the Asian Development Bank, the demand for infrastructure in Asia will total about $26 trillion between 2016 and 2030. The strengthening of cooperation between the Japanese and U.S. trade insurers was looked into at the request of the U.S. side. As China aggressively expands investment in the region under its Belt and Road policy, Washington appears to be seeking a counterweight.

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