The Bank of Japan deserves praise for its policy response to the nation’s worst earthquake and ensuing nuclear crisis, said Norman Chan, chief executive of the Hong Kong Monetary Authority.
“The BOJ has done quite a lot by injecting unprecedented amounts of liquidity into the system,” Chan said in response to questions during a panel discussion in Sydney today. “The BOJ has done what it can.”
Japan’s central bank has injected 33 trillion yen ($417 billion) into the banking system this week, trying to settle markets after the earthquake March 11 that triggered a tsunami which killed thousands and damaged a nuclear plant on the northeastern coast.
Finance ministers and central bankers of the Group of Seven industrial nations will hold talks tomorrow to discuss the aftermath of the quake, Japanese Finance Minister Yoshihiko Noda said in Tokyo today.
Chan said that while it’s the duty of monetary authorities and central banks to make sure markets remain orderly, they shouldn’t try to prevent them from gyrating during crises.
“They key question is to ensure that during those swings, which are inevitable in unusual circumstances, the integrity of the market remains intact,” he said.
Chan, who was in Sydney to attend a forum on trading with China, said that nation’s approach to full convertibility for its currency would be an “incremental” process.
“If you are looking for a concrete timetable you will be disappointed,” he said. “The Chinese approach is incremental, trial-and-error, and one step at a time.”
Hong Kong is seeking to grow as an offshore center for yuan trading, as Chinese Premier Wen Jiabao allows the currency to become more readily available beyond China’s borders to reduce reliance on U.S. dollars in trade and finance.
Yuan deposits in Hong Kong rose 18 percent from December to a record 370.6 billion yuan ($56 billion) in January, according to the HKMA, as policy makers prepared to allow companies to sell yuan-denominated shares in the city and to let funds invest in the mainland’s debt markets.
Sales in the city of yuan-denominated debt, known as dim sum bonds, totaled 13.3 billion yuan in the first two months of the year compared with zero in the same period of 2010. The amount of local-currency debt issued in Shanghai rose 13 percent to 267.5 billion yuan.