President, Asian Development Bank
The Asian Development Bank has downgraded the region's economy. Now, do we need to worry about further downturns?
It's true that we have downgraded about 0.5 percent from the previous outlook, and it is now about 6 percent growth for this year. The downgrade effected slower growth in India and China, and some other countries. In the case of China, I think the downgrade is because of the slower growth and because of the Chinese policy itself. In the case of India, I would say the growth been a little bit disappointing, because many foreign investors now see India a little bit behind of expectation about reforms and so on.
How do you see the possibility of a further slowdown in China?
The Chinese economy can be slower, but it doesn't mean that growth will be stopped. Because there are so many domestic requirements....consumption, investment, environment, infrastructure and so on. And urbanization is ongoing...they need a lot of investment in those areas. So of course, there can be some adjustment from time to time and it can be a little bit lower than expectation, but overall, China still has a lot of potential to grow. Addressing the issues of shadow banking, addressing the efficiency of the market, including the state-owned corporations, those are needed policies. And I believe the authorities understand that.
Asian economies were impacted by speculation that the US Fed will taper soon. Would there be further effects when the Fed takes action?
The market already has incorporated some elements of a tapering off, before the action itself. So when it materializes, it might have some impact, but I don't think it would have a major impact.What I want to stress here is that the Asian economies are now much more better prepared for any turbulence, compared to the time of the Asian crisis. First of all, our economies are much more dependent on domestic or regional demand than the demand of the other economies, through export, and also, the macroeconomic policy has been very prudent. And in many countries, the fiscal condition is better. And the monetary policy is more sound, and financial regulations are much stronger. Foreign reserve has been built up, so there is a buffer there. In addition to that, we have now a safety net, a safety net like the Chairman Initiative, which is lending foreign reserve to each other, if countries need more liquidity. I think the risks can be avoided.
What are the challenges of Abenomics?
It is really important to change the image that Japan is very dormant, or very slow about structural policies. And actually, Japan is already an open and interesting market, if we look at the tariff rates for the manufactured products, it's very low, and it's one of the lowest in the world. So it should be attractive market for investment and for trade but there is a certain perception that Japan is slow to move and structural policy is behind. By starting structural reforms, and by selling that well to the global investors and markets, I think it would have a greater impact.
In terms of the role of the Asian Development Bank, more than half of the member nations have developed into middle-income countries. Do you see any changes in the role the bank should play?
One of the key issues is how they can get out of what we call the "middle-income trap." After they reach a middle- income level, it's very difficult to get out of it, to be high-income countries. So the knowledge becomes important, and infrastructure is again important, and innovation in industry is important. How we can support those issues is also our key challenge.
The ADB has recently offered 23 million dollars in aid to typhoon-ravaged areas of the Philippines.
It's too early to mention the economic impact of the disaster. But if there is more need for money, we can think about front-loading our lending to Philippines, which is already planned.Going forward, one of the issues for Asia is how we can manage disaster better, including preparedness. After the tsunami and earthquake of Tohoku in Japan, we realized that the preparedness for disaster is so important. How to strengthen the resilience of our community ... how to prepare, how to mitigate the impact, how to address the issues after it happens...those are very important issues for Asia.