Japan’s top currency official Takehiko Nakao played down the negative effects of developed economies’ monetary easing on emerging nations, as Chinese Commerce Minister Chen Deming expressed concern.
“Even if there is some inflow of money because of monetary expansion, developing countries and emerging economies had been suffering from deleveraging by banks,” Nakao, 57, said in an interview in Tokyo today. “So it’s good if there is some new flow to developing countries.”
Speaking in Beijing, Chen said quantitative easing by Japan, the U.S. and Europe “shouldn’t spill over and affect other nations,” adding to expressions of concerns from emerging nations facing capital inflows and inflation and asset-bubble risks. He said he was worried about inflation and an “oversupply of money.”
Japanese officials are defending currency declines and monetary easing as part of the cost of reviving the nation’s economy, saying that benefits will ultimately flow to the rest of the world. The yen fell to a more than 3 1/2-year low today against the dollar, as investors expect an improving labor market in the U.S. to compel the Federal Reserve to slow stimulus even as Japan eases.
“The inflow of capital to emerging economies and developing countries due to expansion monetary policies in advanced economies is not as much as people say,” said Nakao, Japan’s vice finance minister for international affairs and the nation’s nominee to head the Asian Development Bank. He was echoing the International Monetary Fund’s view.
The Philippines supports Japan’s nomination of Nakao for the ADB presidency, Finance Secretary Cesar Purisima said today in a statement. India also plans to support Japan’s nomination, according to an Indian government official with direct knowledge of the country’s position who asked not to be named per ministry policy.
Treasury Department spokeswoman Holly Shulman declined to comment on the U.S. position on Japan’s nomination.
While the yen’s slide of about 16 percent since mid-November has spurred some criticism, Nakao defended Bank of Japan easing, saying it isn’t aimed at weakening the currency.
“Japanese policies are oriented toward the domestic market with the objective of getting out of deflation and strengthening growth,” he said.
The currency was 0.8 percent weaker at 95.57 per dollar as of 6:21 p.m. in Tokyo after touching 95.61, the lowest since August 2009.
Federal Reserve Bank of Dallas President Richard Fisher this week said Japanese Prime Minister Shinzo Abe had “politicized” the Bank of Japan.