Reuters/Tokyo
Bank of Japan Governor Haruhiko Kuroda said yesterday current global ultra-loose monetary conditions raise the possibility of unhealthy capital flows into Asian economies.
Asian countries need to make sure their financial systems are robust and keep a watchful eye on credit growth to ensure that external shocks do not harm their domestic demand-driven recoveries, Kuroda also said.
Asian financial markets have settled down since the Federal Reserve began tapering debt purchases under its monetary easing, but capital flows could destabilise again as central banks are likely to withdraw their ultra-lose policy at different speeds.
“Such capital flows could result in the build-up of distortions and risks in the financial systems of these economies,” according to a text of a speech that Kuroda delivered at a policy forum organised by the Bank of Thailand.
Rapidly expanding populations have fuelled growth in many Asian countries up until now, but some Asian countries need to worry about slowing population growth or even a population decline, Kuroda said.
Japan has the world’s fastest-ageing society, which has pushed down its potential growth rate and reduced money flowing into the welfare system, Kuroda said.
The BoJ has left policy unchanged since unleashing an intense burst of stimulus in April last year, when it pledged to pull Japan out of chronic deflation and push up consumer price inflation to 2% in roughly two years.
The BoJ has repeatedly said Japan’s economy can ride out the effects of a sales tax hike in April. Many analysts agree with the central bank’s view that economic growth will rebound in July-September after an expected contraction in the second quarter, as the tax hike effect eases.
