ADB Sounds Alarm on U.S. Yield Jump as Asia Debt Rises
- Mounting debt could lead to cascading crises, Asakawa says
- Asia needs to shore up tax income to counter the risks
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The Asian Development Bank warned that rising U.S. yields could trigger currency and debt crises across Asia like past shocks that rocked emerging markets.
Developing Asia has loaded up on dollar-denominated debt to pay for the fight against Covid-19. That’s raised the risk of capital flight and loan defaults should further gains in U.S. yields cause local currencies to plunge, according to ADB President Masatsugu Asakawa.
“Past experience shows that whenever U.S. yields go up, capital markets in emerging and developing markets take a major hit,” the 63-year-old former top Japanese currency official said in an interview this week. “We are very concerned about the potential risks surrounding the debt pile-up.”