Pesek's View From Asia

Good morning, everyone. Here's my take on some of the stories driving the debate in politics, finance and social issues across Asia today:

India's new central banker faces a near-impossible challenge.

As Federal Reserve watchers obsess over the Lawrence Summers versus Janet Yellen drama in the U.S., India has found the right central bank head at an ideal moment. Raghuram Rajan predicted the 2008 global crisis that former Treasury bigwig Summers helped create with his deregulatory zeal. (At the time Summers slammed Rajan's prediction as ``slightly Luddite,'' before later apologizing.) Now the University of Chicago oracle steps into turbulence of India's own making. As Reserve Bank of India governor, Rajan must halt a rupee plunge that's precipitating a worrisome capital flight. Smarts will help, but he could use monetary weapons more: with foreign-exchange reserves at a three-year low, the RBI cannot keep intervening to bolster the currency. If a wise and respected economist like Rajan can't save the rupee, markets will start fearing no one can.

As Indonesia's growth slides below 6 percent, markets are growing wary.

The ``fragile five'' is terrible club for Indonesia to join. That's Morgan Stanley's grouping of economies that require higher interest rates and lending restrictions to shore up their currency, at the expense of broader growth (members include Brazil, India, South Africa and Turkey). The recent breakdown of a $6.5 billion bid for PT Bank Danamon Indonesia by Singapore's DBS Group also made for some ugly headlines that President Susilo Bambang Yudhoyono may want to take to heart. Few economies anywhere have more potential than resource-rich Indonesia. Yudhoyono's team must work harder to remind global investors why.

Shinzo Abe is facing financial reality as the yen rises, complicating his strategy to revive Japan Inc.

It's an inconvenient fact of economics and investment that improving sentiment drives up currencies. And as markets bet on Abe's chances of ending deflation, the yen is, guess what, at a six-week high. The Bank of Japan, which started a two-day policy meeting today, is grappling with a paradox Abe has yet to explain away: how do you rely on a weak currency to support growth and at the same time prevent rising confidence from boosting it? Instead of worrying about rewriting Japan's history books, Abe may want to think about out how to revise the laws of Economics 101.

Vietnam gets serious about cleaning up bad loans -- some rare good news from the volatility-plagued economy.

The nearly $5 billion of spoiled debt sitting on bank balance sheets is crimping lending and holding back one of Asia's investment darlings. Now, the state asset management company plans to acquire as much as $474 million of those IOUs over the next two months. Vietnam has a long way to go to restore its financial sector to health and welcome more foreign investment. But this long overdue step suggests the government is serious about raising its economic game and stabilizing markets.

Efforts to pour $300 billion into Asia's transport links run into unexpected roadblock: Ben Bernanke.

To reduce growth bottlenecks and raise competitiveness, Indonesia, Thailand, Malaysia and the Philippines need $128 billion of investment in roads, $119 billion for rail, $33 billion in ports and $16 billion for airports through 2020. At the same time, though, public debt yields are surging as traders bet on the Federal Reserve's tapering process. Concerns that Fed Chairman Bernanke's withdrawal from quantitative easing will unnerve markets are raising Asia's $300 billion infrastructure bill by the day. Bernanke has plenty else to worry about, of course. But now Asia's building plans hang on his every word.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.