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The article reports on the plan of China, Japan and South Korea to set up a foreign exchange reserve fund along with the Association of Southeast Asian Nations (ASEAN). According to the article, the countries and the ASEAN will set up the fund in order to support each other to avoid possible financial risks from the U.S. subprime mortgage loan crisis. It is stated that the subprime crisis was similar to the Asian financial crisis in 1997.

The article focuses on the trade relations between China and Japan. It states that the economic ties between the two countries have paved the way for the stable development of their bilateral relations. It is inferred that foreign trade between China and Japan has improved in quality. According to the article, both China and Japan have huge foreign exchange reserves.

The article discusses whether central banks should worry about capital losses. Like most monopolies, central banking can be a highly lucrative business. But not all central banks are fortunate. The European Central Bank made a loss in 2004, for the second year in a row. The Bank of Japan (BoJ) and other Asian central banks have amassed two trillion dollars in foreign-exchange reserves, perhaps 70% of them in dollars. Should the dollar fall, these central banks will be exposed to heavy capital losses. If China continues to amass reserves at its current pace, a 33% appreciation of the yuan at the end of 2006 might inflict a capital loss of almost 15% of GDP. Losses on such a scale would be deeply unsettling to any central banker. But they would not be unprecedented. Economists at Goldman Sachs reckon that Asian central banks, excluding Japan, hold twice the reserves they need. If these reserves were to lose their value, in local currency terms, the taxpayer might not rush to replace them.

Despite the rising cost of events such as earthquakes in Japan, the country's non-life insurers do not seem to be setting aside enough reserves to cover future disasters. Should a couple of huge catastrophes occur within several years of each other, there are concerns that some might have to dip into, and perhaps exhaust, their capital to cover the shortfall. The Financial Services Agency (FSA), the insurers' regulator, is worried. It wants to tighten rules on how to set aside reserves for natural disasters by April 2004, and is currently studying a report by an industry committee on what to do. About half the industry's premiums come from car insurance, for which policies are renewed annually. Yet in the past year or so, non-life insurers have been selling a growing number of long-term fire-insurance policies (which in Japan cover more general damage to property) that may commit them to huge pay-outs for natural disasters. So far the industry is not resisting the FSA's plans, though that might change if new rules requiring extra provisions pushed some firms into the red.

Discusses developments taking place in the international business as of March 1997. Reasons for the closure of a factory of Renault SA in Belgium; Information on the death of businessman Yahaya Ahmad of Malaysia's national automobile manufacturer Perusahaan Otomobil Nasional Bhd.; Report that AT&T Corp. is planning $2.6 billion-worth of cuts in the next two years; Focus on Japan's current-account surplus that leapt to $1.28 billion in January, four times its size a year earlier.

This article focuses on the mystery behind the capital flow in Japan. A current-account surplus need not go hand in hand with an outflow of both long- and short-term capital. Japan in the late 1980s and 1990s offers evidence. Despite its current-account surplus, Japan was borrowing short-term money from abroad in order to invest far larger sums in overseas assets. Then, after 1990, this peculiar relationship went into reverse. Despite a growing current-account surplus, long-term capital flowed into Japan, implying a correspondingly huge outflow of short-term capital.