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back to index backASIAtalk May,  2007

Asia's economic giants say yes to currency deals

The finance ministers of Japan, China and South Korea agreed yesterday to strengthen efforts to develop a region-wide scheme of bilateral currency agreements into more powerful multilateral deals.

The top economic policy-makers from Asia's three biggest economies also expressed confidence about their economic prospects, but cited the need to adopt appropriate policies in line with sustained global growth.

"We are optimistic about the economic prospects for both regional and global economies in 2007," the ministers said in a joint statement after talks on the sidelines of the Asian Development Bank's annual meeting in Kyoto, western Japan.

"We recognised the need to keep vigilant on potential risk factors and emphasised the importance to adopt appropriate macroeconomic policies in a manner compatible with sustained global growth," the statement added.

After hour-long discussions the ministers pledged to continue boosting regional financial cooperation under the Aseanplus China, Japan, and South Korea framework (dubbed Asean+3), including strengthening the region's seven-year-old web of bilateral currency swaps called the Chiang Mai Initiative (CMI).

"We agreed to strengthen our efforts to jointly explore ways for CMI multilateralisation," the statement said.

Asean+3 finance ministers are expected to agree on Saturday to pool foreign reserves as part of CMI to help avert runs on currencies and the kind of financial turmoil that rocked Asia a decade ago.

But the statement did not say if the ministers discussed pooling the three countries' massive foreign currency reserves to fight potential threats from short-term capital flows.

Speaking after the meeting, Japanese Finance Minister Koji Omi said he told his Chinese and South Korean counterparts that currencies should move in line with economic fundamentals and currency levels should be left to markets.

"The Chinese side said they are positive about making the Chinese yuan flexible," he said, quoting Chinese Finance Minister Jin Renqing.

"But they added that they would do it gradually and in a controllable manner," Omi told reporters after talks with Jin and their South Korean counterpart Kwon O-kyu.

The comment came after ADB President Haruhiko Kuroda reiterated earlier in the day that greater foreign exchange flexibility is in the interests of China's economy.

The three ministers also agreed to keep fostering still-immature Asian bond markets.

"We believe that this collective work will facilitate the diversification of issuers and types of local currency-denominated bonds and thus contribute to the deepening of local bond markets," the statement said.

Separately, the Korean Finance Ministry said: "Ways to multilateralise CMI and develop Asia bond markets are expected to be announced after the Asean+3 finance ministers' meeting."

Asean (the Association of Southeast Asian Nations) groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Reuters

Source:   The Brunei Times - GAI

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