ASEAN ministers concerned weak yen will slow region's growth

Asian Economic News, April 16, 2001

KUALA LUMPUR, April 9 Kyodo

Finance ministers of Southeast Asian countries voiced concern Sunday over the recent depreciation of Asian currencies, especially the Japanese yen, as economic growth in the region is expected to slow to 3-5% this year from 5.3% last year.

''We noted with concern the recent volatility of financial markets and the major currencies, particularly the depreciation of the Japanese yen,'' finance ministers from the Association of Southeast Asian Nations (ASEAN) said in a joint press statement issued at the end of their two-day meeting in the Malaysian capital.

The depreciation, the worst since the 1997 financial crisis, ''has created uncertainty and instability in regional financial markets and could adversely affect the prospects for continued growth of the ASEAN economies,'' the statement said.

Malaysia Finance Minister Daim Zainuddin, who chaired the meeting, told reporters the ministers are monitoring the situation, especially the yen.

''We do take note on what's happening and we'd adjust accordingly what we should do to suit the need of each individual country,'' he said.

Meanwhile, when the deputies of ASEAN finance ministries and central bank chiefs met with their dialogue partners from China, Japan and South Korea, Zembei Mizoguchi, director general of the Japanese Finance Ministry's International Bureau, gave assurances that his government will not hesitate to take ''appropriate action'' if the yen weakens further.

According to a Japanese official, Mizoguchi, who led the Japanese delegation at the meeting Sunday, said the recent volatile movement of the yen does not reflect Japan's economic fundamentals.

Mizoguchi also stressed that the government did not intentionally weaken the yen, which has plunged over 11% so far this year. The yen traded at 123.93 to the dollar Friday.

The official said the South Korean delegate has urged the Group of Seven developed nations to make more efforts to stabilize exchange rates.

Last year, ASEAN economies recorded 5.3% growth after hitting 3.4% in 1999.

The strong growth in 2000 was due to ''strong economic expansion in the United States and Europe, which led to very buoyant demand for the region's exports, especially for electronic goods.''

The average inflation rate in the region was subdued at only 2.5% compared with 9.7% in 1999.

But the ministers noted ''some of our member economies experienced occasional bouts of volatility in the foreign exchange and stock markets during the year due to a number of factors including political uncertainties.''

This year, with the U.S. economy looking increasingly weak and growth in Europe expected to be moderate, and the Japanese economy remaining ''fragile, given the structural problems within the financial sector,'' ASEAN economies are forecasting growth at an average of 3 to 5%.

Meanwhile, Daim welcomed the move by Japan to return to the zero-interest rate.

''In the case of the Japanese government, they have been trying to encourage consumption and, up to date, we detect that consumers are not spending. They have reduced further the interest rates with the hope that consumers will spend and create economic activities. We hope it will be successful. If they are successful, it's good for us. If they consume more, then we can export more,'' he said.