Asian currency turmoil to settle soon: BOJ

Asian currency turmoil to settle soon: BOJ

TOKYO (Reuter): Bank of Japan (BOJ) Executive Director Takeshi
Anzai said on Wednesday that he sees Asian currency turmoil
settling down soon.

He said Asian currencies should reflect economic fundamentals.

Asked about the outlook for the Thai economy, Anzai told
Reuters Financial Television: "The economy of Thailand may slow
down temporarily after the country's decision to float the baht
on July 2."

He added that the BOJ supported Thailand's measures to rein in
its domestic inflation.

Anzai said that he does not see foreign exchange volatility
casting a shadow over growth in Asia, adding that the authorities
in Asia must make clear their views to prevent the markets from
overshooting.

"There might be a one-off slowdown in this process of
adjustment. That's unavoidable, but it's also a good thing. This
is not a crisis," Anzai said.

Asked about the usefulness of so-called repo pacts in the
context of recent volatility in Asian currencies, Anzai said that
they had not been needed since the situation had not resulted in
a lack of liquidity.

That alone demonstrates that the recent situation is not a
crisis, he said.

In April of 1996, Japan agreed with the monetary authorities
of Australia, Hong Kong, Indonesia, Malaysia, the Philippines,
Singapore and Thailand to establish bilateral repo or repurchase
agreements to provide liquidity in times of currency crises.

South Korea joined the pact in January this year.

The repo pact gives participants instant access to cash by
selling their holdings of U.S. government securities to the
pact's partners with a promise to buy them back later.

Anzai said the recent developments in Thailand and the
Philippines have given policy makers more flexibility to
concentrate on domestic fundamentals.

Malaysia and Indonesia have already been pursuing "a
relatively more flexible" foreign exchange policy and Anzai said
he understood that authorities would continue that.