Pesek on Asia: Rajan's Repo Raise
Good morning. Here's my take on some of the stories driving the debate in politics, finance and social issues across Asia today:
Rajan surprises the markets
India's new central bank governor defied predictions with his first rate decision, raising the repo rate by a quarter percentage point in order to help stem inflation that's been exacerbated by the falling rupee. More hopefully, the Reserve Bank of India also eased up on some of the measures it had taken to tighten liquidity in order to shore up the rupee. Once Asia's worst-performing currency, the rupee has recovered in recent days after Rajan's counterpart in Washington, Ben Bernanke, made clear that the Fed would keep the monetary taps open until the U.S. economy showed stronger signs of recovery. Rajan, the former University of Chicago economist who correctly predicted the 2008 financial crisis, could be forgiven for hoping that the after-effects of that crisis linger for just a bit longer.
This is no time for complacency
Meeting in Bali ahead of next months' Asian economic summit, finance ministers from the region urged emerging nations to use the respite provided by Bernanke to push forward with reforms to make their economies more resilient. While markets seem to be booming again, the underlying problems exposed over the last few months still exist, and as South Korea's Hyun Oh-seok told his colleagues, "Tapering ... will continue to be a major risk factor in the global markets." Every country has different problems to solve, from unsustainable current-account deficits in India and Indonesia, to China's need to wean itself off of investment-led growth. All of them, though, would be smart to use this time to get their houses in order.
Abe begins pushing for Fukushima decommissioning
Ten days after downplaying Japan's radiation crisis to International Olympic Committee voters, Prime Minister Shinzo Abe visited the wrecked Fukushima Dai-Ichi atomic station. It was only Abe's second appearance there since becoming prime minister in December, and he called on Tokyo Electric Power Co. to act faster to halt leaks of radioactive water into the ocean. He also urged Tepco to decommission the two remaining reactors at the site, following the four it wrote off in April 2012 due to damage from the earthquake and tsunami. It would have been much better if these measures had come two-and-half-years ago, but permanently shuttering the crippled reactors is at least a first step toward cleaning up Japan's nuclear mess.
Philippine central bank is wind beneath Aquino's wings
As President Benigno Aquino gets kudos for producing growth as fast as China -- both economies are zooming along at a 7.5 percent pace -- the international media is turning the spotlight on an unsung hero in Manila. That would be central-bank head Amando Tetangco, whose inflation-target policy has fostered microeconomic stability that's fueling confidence at the macroeconomic level. While Aquino has done an impressive job tackling corruption, Tetangco is transforming what he used to call an "event-rich economy" into a stable one. The headline on the Wall Street Journal's latest ode to Tetangco says it all: "Philippines’ Turnaround More Than Just Battle vs. Graft."
Nothing goes right in Afghanistan
With the Taliban already assassinating election officials in the runup to next spring's presidential vote, and with Western troops set to leave by the end of next year, Afghanistan could use some good news about the future. Instead, the South China Morning Post reports that one of the biggest deals signed thus far -- a $3 billion agreement for the Chinese to develop the massive Mes Aynak copper deposits, the world's second-biggest -- may be in jeopardy. According to the SCMP, state-owned China Metallurgical Group has asked to renegotiate the terms of the deal, as its economy slows and commodity prices drop; the company is looking to cut a pledged $800 million bonus to be paid to the Afghan government, as well as the negotiated 19.5 percent royalty rate. As foreign aid becomes harder to come by, that's money that Kabul can't do without.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)