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)