On Tuesday, Bank of Japan Governor Kazuo Ueda expressed that the risks to Asia’s economy are smaller compared to other regions due to its resistance to the banking sector issues in the United States and Europe. This statement highlights the positive outlook for Asia’s economy, which has a significant influence on Japan’s recovery because of its proximity and vast market size. Ueda stated that the region’s financial institutions have sufficient capital buffers and less exposure to problematic banks, although Asian policymakers must remain cautious about potential fallout from the U.S. and European banking sectors.
The BOJ’s enormous stimulus programme is expected to phase out soon, determined mainly by factors such as the risk of a global recession. As one of the few bright spots in the global economy, the ASEAN+3 economies grew by 3.2% in 2022 and are expected to expand by 4.6% in 2023, fuelled by strong domestic demand, according to the group’s joint statement on Tuesday. However, Ueda raised concerns regarding the risks associated with China’s future. He noted that China’s economy is in good condition now due to reopening, but there is a chance that geopolitical risks could impede growth and negatively impact the region’s economy in the medium to long term.
Despite the positive outlook for Asia’s economy, policymakers need to be wary of possible spillovers from uncertainties surrounding the U.S. and European economies. Still, the region has proven to be resilient to these risks, with Asian financial institutions having strong capital buffers and less exposure to problematic banks in these regions. Given the enormous influence of Asia’s economy on Japan’s fragile recovery, Ueda’s comments may help alleviate concerns about the impact of external risks on the country’s economy.
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