Asian Economies Have ‘Robust’ Crisis Shields, BOJ Official Says

Bloomberg News
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(Bloomberg) -- Asian countries are much better positioned to weather economic storms than they were in the past, thanks to strong foreign reserves and sound financial-market development, a top Japanese central banker said.

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“The current Asian economy is so robust,” Bank of Japan Assistant Governor Tokiko Shimizu told a panel session on Tuesday at the Boao Forum in southern China. “Even though the US and European countries have faced high inflation, high interest rates, Asian countries almost all are in good shape.”

Many Asian central banks have boosted their foreign reserves over recent decades in a bid to ensure there’s no repeat of the crisis that began in 1997, when a run on several currencies spread more broadly across other financial markets and triggered deep recessions.

Emerging economies in the region more than tripled their combined reserves between 2000 and 2008, even after adjusting for inflation, the Asian Development Bank estimated.

There’s been a steep increase in advanced-economy interest rates over the past two years. In the past, that kind of move would often push Asian countries into deep crisis, but there’s much greater resilience now, Shimizu said.

One reason for the change is that “thirty years ago there were almost no local currency-denominated bond markets,” she said. “Nowadays, many Asian countries have developed those,” helping to reduce maturity or currency mismatches that are “always the source of crisis.”

What’s more, the swelling of the region’s foreign-exchange reserves since the Asian financial crisis “means we defend ourselves based on those very strong FX positions,” Shimizu said.

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