Fed official warns of spillover risks for Asia

Asian economies must be mindful of spillover risks as a decade of unconventional easing policies by major central banks is withdrawn faster than expected, according to International Monetary Fund Deputy Managing Director Kenji Okamura.

Okamura said that the risk applied particularly to the most vulnerable economies.

He said that Asian economies had to choose between supporting growth with more stimulus and withdrawing it to manage debt and inflation.

While Bank of Japan policy runs counter to a global shift towards monetary tightening, central banks in the United States, Britain and Australia raised interest rates recently.

Okamura, a former Japanese vice finance minister for international affairs, said that the COVID-19 epidemic, the war in Ukraine and tighter global financial conditions would make this year challenging for Asia.

He said that the war was affecting Asia because of higher commodity prices and slower growth in Europe.

He said at his first media event since becoming one of four deputy managing directors at the global lender last year, Okamura warned of the possibility of even more forceful tightening if inflation expectations kept on drifting. There is a risk that drifting inflation expectations could require more forceful tightening, he said.