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Japan, China, South Korea finance leaders warn of recovery risks

Japan, China, South Korea finance leaders warn of recovery risks

FILE PHOTO: A general view of Two International Finance Centre (IFC), HSBC headquarters and Bank of China in Hong Kong, China July 13, 2021. REUTERS/Tyrone Siu

TOKYO: Financial leaders from Japan, China and South Korea on Thursday (May 12) warned of risks to Asia's economic recovery from the COVID-19 pandemic and committed themselves to backing market stability and sound fiscal policy.

Heightened risks included unexpectedly early rises in interest rates "in some advanced nations", accelerating inflation, and disruption from the war in Ukraine, finance ministers and central bank governors of the three countries said in a joint statement.

The statement followed an annual meeting, held online, before the leaders were due to meet virtually with their counterparts from the Association of Southeast Asian Nations, also on Thursday.

The Japanese, Chinese and South Korean officials affirmed their commitment to using support measures, which they did not specify, for maintaining financial market stability and long-term fiscal sustainability.

"We must remain on guard against heightening risks to which the regional economic recovery is being exposed ... on top of the ongoing Russia-Ukraine conflict and earlier-than-expected monetary policy normalisation in some advanced nations," it said.

"These factors could become downside risks to the regional economic outlook, causing volatility to financial markets and capital flows."

The statement made no mention of specific countries. But US interest rate rises and related reductions in central bank assets have driven up the dollar. This has raised the prospect of capital flight from some emerging markets and a rising burden of dollar-denominated debt in the developing world.

The officials also steered clear of references to currency market moves, notably rises in the dollar and falls in the yen, or sanctions against Russia's invasion of Ukraine, which Moscow calls a "special operation."

Instead, the officials underscored progress in regional initiatives, including a mechanism aimed at helping countries in times of financial distress, the Chiang Mai Initiative Multilateralisation currency swaps deal.

A deep divide has emerged within the Group of 20 (G20) major economies, which includes Western nations that have accused Moscow of war crimes in Ukraine. Other members - China, Indonesia, India and South Africa - have not joined Western-led sanctions against Russia over the conflict.

The 10-member Association of Southeast Asian Nations is chaired by Cambodia this year and includes Indonesia, which currently chairs the G20.

Source: Reuters/gs

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