BOJ's Kuroda welcomes expansion of China-led infrastructure bank

By Leika Kihara

YOKOHAMA, Japan (Reuters) - Bank of Japan Governor Haruhiko Kuroda welcomed on Tuesday the expansion of China-led Asian Infrastructure Investment Bank as positive for the regional economy, urging multinational lenders to cooperate in meeting Asia's fast-growing infrastructure needs.

"Infrastructure needs are huge and it's simply not possible for the Asian Development Bank and the World Bank to fill the gap completely," Kuroda, who was formerly head of the ADB, tolda seminar hosted by an ADB-affiliated think tank.

He said healthy competition from Chinese, Indian and Japanese initiatives could be positive for improving infrastructure and boosting economic growth.

Kuroda's remarks are the strongest endorsement to date by a Japanese policymaker for the growing presence of AIIB, which some in Tokyo see as a vehicle to boost China's regional clout.

They also come ahead of the ADB's 50th annual meeting in Yokohama, eastern Japan, at the weekend, where its 67 members are set to seek ways to differentiate the ADB from rival lenders such as the AIIB.

The AIIB has been viewed as a rival to the Western-dominated World Bank and the ADB, which is jointly led by the United States and Japan. The United States initially opposed the AIIB's creation and is not a member, but many U.S. allies, including Canada, Britain, Germany, Australia and South Korea have joined.

HEALTHY COMPETITION

Japan, following Washington's lead under then-U.S. President Barack Obama, did not join the AIIB as well, partly from concern it would conflict with the ADB, the Manila-based institution dominated by Japan and the United States.

But Kuroda said the establishment of AIIB and the fact it attracted many members were a "good" thing as they help meet rapidly increasing infrastructure-funding needs in the region.

"The ADB has promoted regional cooperation in Asia. It also tried to link regional initiatives with each other. That is the way we should go forward, rather than making a single Asia programme or an Asia initiative," he said.

"The realistic way is to promote regional initiatives and link them with each other."

Kuroda also urged politicians to contain geopolitical conflicts which were "not good for anyone."

The ADB, founded in 1966, has by convention been headed by Japanese financial bureaucrats including Kuroda and current president Takehiko Nakao.

Vying for influence in the region, China created AIIB in 2015 which now has 70 members including countries awaiting ratification, exceeding those of the ADB.

On the surface, the two lenders have cooperated, co-financing several projects under a 2016 agreement that set the stage for joint funding.

But many Japanese officials, including premier Shinzo Abe's aides, are cautious of the AIIB - taking the view that it serves as a vehicle to fund China's global leadership ambitions.

A week after the ADB gathering, leaders from 28 nations will attend China's New Silk Road summit aimed at expanding links between Asia, Africa and Europe - underpinned by billions of dollars in infrastructure investment.

(Reporting by Leika Kihara; Editing by Chris Gallagher and Sam Holmes)