Incheon, South Korea (Armfalcon.com) – Asia’s financial leaders will on Tuesday seek ways to tighten safeguards to address emergency funding needs during pandemics and natural disasters, as fears of a global recession and volatile financial markets cloud the economic outlook.
The impact of rising US interest rates on regional capital flows can also be discussed when finance ministers and heads of central banks of ASEAN+3 – which groups the 10-member Association of Southeast Asian Nations (ASEAN) and Japan, China and South Korea – meet on Tuesday.
Japan, which is co-chairing this year’s meeting with Indonesia, hopes to discuss strengthening currency exchange channels, Finance Minister Shunichi Suzuki told reporters on Friday (28/4/2023).
Japan is interested in proposing facilities that increase use of existing currency exchange channels, and allow members to tap into funds in an emergency, said three sources with direct knowledge of the matter.
The recent failures of two US banks have policy makers concerned about vulnerabilities in the global banking system and possible market turmoil as a result of aggressive US interest rate hikes.
In a meeting with his Chinese and Japanese counterparts before the ASEAN+3 meeting, South Korean Finance Minister Choo Kyung-ho said cooperation was becoming more important for Asia and the rest of the world as the global economy was at an “inflection point”.
“Despite the close economic ties between China, Japan and Korea, we have observed a recent slowdown in economic ties, particularly in terms of trade in goods and services,” the three ministers said in a statement.
“We recognize the importance of strengthening our economic and trade ties to secure post-pandemic growth, minimize lasting negative effects, and prepare for future shocks,” they said.
The ASEAN+3 group created a network of currency exchange channels called the Chiang Mai Initiative Multilateralisation (CMIM) in 2000, following the Asian financial crisis in the late 1990s, and transformed it into a multilateral network in 2010, to help each other prevent or combat outflows. sharp investment.
But the exchange line was never used, even during the COVID-19 pandemic, which led to calls within the group for the system to be more accessible.
While Asian policy makers stress their countries have sufficient reserves and buffers to fend off another crisis, they may see room for increased regulation to combat market turbulence, analysts say.
“The fact that CMIM has never been used since it was created shows that countries have a hard time using it,” said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute.
While it is important to make CMIM more flexible, countries must also ensure that they have strong oversight in place to avoid moral hazard, he added.
Developing Asia is expected to achieve strong economic growth of 4.8 percent in 2023, faster than the 4.2 percent growth in 2022 thanks to China’s rise, according to Asian Development Bank (ADB) projections.
ASEAN+3 finance leaders, including Suzuki and Bank of Japan (BoJ) Governor Kazuo Ueda, met on the sidelines of the ADB’s annual meeting in Incheon in South Korea this week.
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Translator: Apep Suhendar
Editor: Faisal Yunianto
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