IMF urges Asia to be mindful of spillover risks from tightening (updated)
20/05/2022 05:46
* Global tide of tightening comes faster than expected -IMF
* Widening gap in interest rates behind yen weakness
* Echoes view on balance yen depreciation helps Japan
(Adds Japan mission chief, detail, context on yen)
By Tetsushi Kajimoto
TOKYO, May 20 (Reuters) - Asian economies must be mindful of
spillover risks as a decade of unconventional easing policies by
major central banks is unwound faster than expected,
International Monetary Fund(IMF) Deputy Managing Director Kenji
Okamura said.
This risk applied particularly to the most vulnerable
economies, said Okamura.
Asian economies faced a choice between supporting growth
with more stimulus and withdrawing it to stabilise debt and
inflation, he said.
The Bank of Japan's easing policy -- which the IMF has
described as quite effective -- runs counter to a global shift
towards monetary tightening, with central banks in the United
States, Britain and Australia having already raised interest
rates.
The widening gap between Japanese and U.S. interest rates
has been a major factor behind the recent yen depreciation to
two-decade lows.
"You can mostly explain the recent movements, especially the
last month, in the yen based on essentially tighter global
monetary policy" including the U.S. Federal Reserve, said Ranil
Salgado, assistant director and Japan mission chief at IMF's
Asia and Pacific Department.
"The yen depreciation on balance helps Japan," Salgado
added, echoing views of BOJ Governor Haruhiko Kuroda.
Okamura, a former Japanese vice finance minister for
international affairs, said the COVID-19 pandemic, the war in
Ukraine and tighter global financial conditions would make this
year "challenging" for Asia.
The war was affecting Asia through higher commodity prices
and slower growth in Europe, he said.
Speaking at his first media event since becoming one of four
deputy managing directors at the global lender in December,
Okamura warned on the prospect of even more forceful tightening
if inflation expectations kept on "drifting".
"There is a risk that drifting inflation expectations could
require an even more forceful tightening," he said, calling for
calibrated policies and clear communication.
(Reporting by Tetsushi Kajimoto; Editing by Bradley Perrett and
Sam Holmes)
((tetsushi.kajimoto@thomsonreuters.com; +81-3-6441-1829;))