IMF official says Asia continuing to show rebound

IMF official says Asia continuing to show rebound

HONG KONG (Dow Jones): The Asian region continues to show
signs of recovery, according to Stanley Fischer, first deputy
managing director of the International Monetary Fund.

Speaking Thursday in Hong Kong, he said "you never know when
an economy turns, whether it is turning or you are seeing a false
spring." But, he assured that indicators such as output all
around Asia show "the recovery is getting underway."

Fischer said the region's recovery is happening without
threatening the return of rampant inflation.

But even if prices did start to rise, the cause would be a
positive, demand-driven effect, rather than a worrying supply
shock, he added. Overall, Fischer said being concerned about
inflation is "not high on the agenda right now."

The IMF official also said "the recoveries are domestically
driven rather than foreign-driven because the export markets for
this region have been very weak."

Japan's first quarter gross domestic product numbers
underscore the trend, he said. "It is good news and encouraging,"
Fischer said, going on to suggest that the authorities in Tokyo
should consider a supplemental budget later in the year.

He added a suggestion that Japan has benefited from following
an IMF diagnosis for its reforms.

Fischer made a number of other points in his broad-based
speech:

-An increasing number of countries are likely to try
inflation-targeting as their primary monetary policy tool, he
said. In the longer term, fixed exchange rates, currency blocs
and policies such as dollarization are likely.

-The Asian financial crisis has shown that halfway policies on
currency exchange rate systems won't work. "If you're going to
have a fixed exchange rate, you'd better have a strong commitment
to it," such as through legislation, he said. And, "floating
exchange rates isn't the end of the story," he said.

-Policy-makers are moving to patch holes in the international
economy exposed by the Asian crisis. For example, he said highly
leveraged hedge funds in the future may be subject to more
indirect control, by affecting the way banks lend to them. "That
would change how the international system works," he said. "The
work really is underway."

-China is rapidly addressing its economic problems, he said.
That China is moving fast on its economic reforms even though the
country isn't in a crisis is a "very good signal and sign for the
prospects for China," he said.

-"Hong Kong, too, with its policies continuing on the right
track has, I believe, a good possibility for recovery in the
second half of the year, despite the weaknesses of the first
quarter," he said.

-Corporate reforms are lagging behind work in other areas
around the region, although completing the reform process will
take time. "These are long-term problems that need sustained
work," he said.