Sound monetary policies vital for firm exchange rate
Sound monetary policies vital for firm exchange rate
NUSA DUA, Bali (JP): Businesspersons meeting over the weekend, under the APEC Financiers Group, saw sound fiscal and monetary policies as one of the primary conditions to secure a stable currency market.
"We all agree that governments should pursue sound fiscal and monetary policies, with sustainable current account deficits to secure a stable global monetary system," Toyoo Gyohten, chairman of the Bank of Tokyo, said.
Robert D. Hormats, vice chairman of Goldman Sachs, specifically called on the Japanese government to further deregulate its market and the United States government to reduce its budget deficit and increase its savings rate.
The two businessmen made the remarks at a news conference at the end of the first meeting of the APEC Financiers Group at the Bali Inter-Continental Resort, which was hosted by Lippobank and the Indonesian Private National Banking Association (Perbanas).
APEC (Asia Pacific Economic Cooperation forum) groups Australia, Brunei, China, Canada, Chile, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States.
Perbanas' Chairman Trenggono Purwosuprodjo said the meeting was held to implement the recommendation of the first APEC finance ministers' meeting in Honolulu, Hawaii, in March, 1994.
The Honolulu meeting called for the formation of a financiers group of private financial sector leaders to convene a meeting to identify issues regarding capital market development, to explore ways to strengthen private sector contacts and the possibility of establishing a more permanent private sector structure.
Recommendations
"We have suggested several recommendations to the APEC finance ministers, who are holding their second annual meeting at the Grand Bali Beach, regarding infrastructure financing, capital market development and effective financial market environments," Trenggono said.
Trenggono said the meeting, attended by 38 bankers and businessmen from 13 out of the 18 APEC members, did not include the exchange rate volatility in the official agenda.
"But since all of us have been affected by the excessive currency swings, notably the Japanese yen and the dollar, that issue popped up in discussions between the participants," he added.
Gyohten noted that exchange rate volatility discouraged cross border capital flows because such uncertainty increased the risks of investments.
"Therefore, I think, there should be a stronger international cooperation to remove the currency volatility," the Japanese banker added.
Another businessman from Singapore observed that the price uncertainty caused by currency swings would affect especially long-term investments, which are badly needed by APEC members to develop their infrastructure.
He said exchange rate gyrations also increased the risks and uncertainty in international transactions and depressed the supply of exports and the demand for imports.
Hormats said that since the impact of the yen-dollar misalignment was quite significant on international business transactions, it was high time for both countries to act together in a more concerted manner to cope with the problem.
"I think further deregulation of the Japanese market would be quite helpful," he added.
The United States in turn should work harder to reduce its budget deficit and to increase its savings rate, the American investment banker added.
Businesspeople from the developing countries seemed to bear a greater brunt of the exchange rate volatility because most of them, notably the medium and small-scale ones, do not have the resources, adequate networks, to hedge against exchange rate risks. (vin)