Thursday, October 10, 2013 9:46:24 PM
In Asia, hopes that Yellen will avoid taper turmoil
By Kathleen Hunter and Mark McQuillan, Bloomberg News Bloomberg
11:20 p.m. CDT, October 9, 2013
BEIJING — Janet Yellen's nomination to lead the Federal Reserve may signal a reprieve for Asian economies from any immediate reduction of stimulus that could roil markets and capital flows.
South Korea said it expects Yellen will "consider well" the effects on other nations of reducing U.S. bond-buying, while Koichi Hamada, an adviser to Japanese Prime Minister Shinzo Abe, predicted the new chairman won't rush to exit monetary easing. A deputy Indonesia central-bank governor said Yellen's appointment would be positive for local and global financial markets.
Asia is grappling with Fed policy shifts and the Group of 20 economies plans to identify market turmoil from central banks' stimulus withdrawal as a key risk to the global financial system. Emerging-market stocks plunged in May when Chairman Ben Bernanke signaled that record easing may be pared, then rebounded when the Fed maintained stimulus last month.
"If the Federal Reserve pulls out the rug underneath Asian markets, it could clearly lead to some nasty repercussions," said Frederic Neumann, HSBC Holdings Plc's co-head of Asian economics in Hong Kong. "But Yellen is seen as somebody who might withdraw stimulus only gradually and that buys Asian policy makers time to build up the defenses for the day when U.S. interest rates do begin to rise."
President Obama will announce the nomination at 3 p.m. Wednesday in Washington, a White House official said in an emailed statement. If confirmed by the Senate, Yellen, 67, would succeed Bernanke, 59, whose second four-year term ends in January.
"She has rich experience and an impressive resume as a policymaker," Choi Hee Nam, director general of the South Korea finance ministry's international finance bureau, said by phone from Sejong Wednesday. "I expect her to consider well the ripple effects on other countries" from policy decisions such as altering the Fed's bond-buying program, Choi said.
Bank Indonesia Deputy Governor Perry Warjiyo said in a mobile-phone message Wednesday that tapering of U.S. stimulus may not come into effect immediately with Yellen's appointment. Philippine Finance Secretary Cesar Purisima said in a phone message that Yellen's nomination signals stability, policy continuity and a "steady course for the Fed."
Bank of Japan Deputy Governor Hiroshi Nakaso, speaking to reporters after a speech today in Matsue, western Japan, declined to comment on the policy effects of Yellen's nomination. China's central bank and Ministry of Foreign Affairs didn't immediately respond to requests for comment.
Li Daokui, a former People's Bank of China academic adviser, said in an interview that Yellen's appointment means there will be a "prolonged period of appreciation" for the yuan as additional "hot money" flows into China. That deepens a monetary-policy dilemma over whether to lower interest rates to reduce the attraction for inflows, or to gear policy more toward fighting inflation, Li said.
Cao Yongfu, a researcher who follows U.S. economic policy for the government-run Chinese Academy of Social Sciences, said Yellen's nomination will help sooth China's short-term concerns that an immediate tapering of Fed bond-buying would cause volatility in capital flows.
Even so, prolonged easing under Yellen may result in dollar depreciation and undermine the value of China's foreign exchange reserves, Cao said. "Yellen's big challenge will be to shift Fed policies back to normal from an ultra-loose stance — you can't always keep your foot on the gas."
As the Fed's No. 2 official, she has articulated the case for maintaining highly accommodative monetary policy. In a series of 2012 speeches, she outlined why interest rates could remain near zero into late 2015, and in a 2011 speech she justified the Fed's first two rounds of large-scale asset purchases with an estimate that the programs would create 3 million jobs.
Yellen isn't among the Fed policymakers who have pressed this year to pare back asset purchases.
"I assume Yellen's nomination means QE for longer and the exit of QE is likely to be gentle," said Dong Tao, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong. "That would be good news for China," which is having difficulty maintaining growth momentum just as the "tides of global money printing" may start to turn, Tao said.
Hamada, a retired Yale professor who advises Abe on monetary policy, said Yellen is "more likely to seek a way to make an economic recovery certain by keeping policy accommodative." If prospects of an exit weaken, that may put pressure on the yen to strengthen, which risks harm to Japan's economy and would boost the need for the BOJ to act, said Hamada, who doesn't speak for the government.
At the same time, Hamada said he would "very much welcome" Yellen's appointment. "She has long experience in central bank policy and she understands the role of monetary policy in the macro economy. She is the most appropriate person to lead the Fed."
Yellen has been vice chairman of the Fed in Washington since 2010. As president of the Federal Reserve Bank of San Francisco in the six previous years, she monitored Asia and oversaw banks with foreign exposure, including Wells Fargo & Co.
She also deepened her institution's ties to Asia, starting a biennial conference on Asia economic policy in 2009 that attracted central bank officials from China, South Korea, the Philippines, Taiwan and Singapore, according to a list of attendees on the bank's website.
Yellen oversaw many of the biggest Asian banks doing business in the U.S., hosted Asian central bankers and financial regulators for get-togethers and traveled often to the region, said David Loevinger, former U.S. Treasury Department senior coordinator for China affairs.
She has a "deep understanding of Asian economies, banks and business practices," said Loevinger, now an emerging- markets analyst at TCW Group Inc. in Los Angeles. "She was less prone to lecturing than other U.S. government officials. Asians appreciated that."
The concern of emerging markets is that when the Fed does begin tapering its bond buying, it could hurt them by sparking an exodus of cash and higher borrowing costs. Brazil, Turkey, South Africa, India and Indonesia are the most vulnerable, Goldman Sachs Group Inc. strategists said in a Sept. 5 report.
By contrast, the International Monetary Fund said Oct. 7 that Canada, South Korea and Australia are among the countries best placed to weather any global market volatility from the withdrawal of U.S. monetary stimulus. The IMF and World Bank hold annual meetings this week in Washington, where G-20 finance ministers and central bankers will also gather.
Even if it doesn't serve as central bank to the world, the Fed is still entering a fresh era in which international events will increasingly shape its decisions, according to Barry Eichengreen, a professor at the University of California at Berkeley, where Yellen taught.
In a July paper, he said U.S. unemployment and inflation will be affected as globalization forces the U.S. to be more open to trade and financial transactions, emerging markets eat into its share of the world economy and the dollar's role as the sole reserve currency is eventually eroded.
"Progressively the Fed is going to have to be more outward-looking," Eichengreen said in an August interview.
http://www.chicagotribune.com/news/sns-wp-blm-news-bc-fed-asia09-20131009,0,62033.story
---- this one reads well for Janet Yellen's nomination, too ..
Obama's Fed Nominee Was Pivoting to Asia Long Before He Was
Posted By Alicia P.Q. Wittmeyer Wednesday, October 9, 2013 - 5:00
Asian markets seemed pleased .. http://www.cnbc.com/id/101097063 .. by the news, which broke Tuesday evening (or Wednesday morning, Asia time) that President Obama would nominate .. http://www.cbsnews.com/8301-250_162-57606762/obama-nominates-tough-proven-leader-janet-yellen-to-lead-fed/ .. Janet Yellen for the position of Fed chair this afternoon. Policymakers in the region, who'd been cheering .. http://www.livemint.com/Opinion/RUIi3F6XgUNzG8azxhuOGL/Asia-wants-Janet-Yellen-at-Fed-and-US-should-listen.html .. for her, spoke warmly .. http://blogs.wsj.com/economics/2013/10/09/asian-policy-makers-welcome-yellen/ .. of the selection -- mostly because the relatively dovish Yellen is seen as someone who'll be slower to roll back the easy money policies of her predecessor, giving Asia more time to prepare for the day the greenback spigot turns off.
But Yellen also has something of a special relationship with the region, which Bank of Japan Deputy Governor Hiroshi Nakaso alluded to when he told .. http://blogs.wsj.com/economics/2013/10/09/asian-policy-makers-welcome-yellen/ .. the Wall Street Journal that "we already have a relationship of mutual trust with each other." Yellen spent six years, from 2004 to 2010, as president of the Federal Reserve Bank of San Francisco, a position that involved traveling to Asia at least once a year on fact-finding missions, and brought her to countries across the region from South Korea to Vietnam to India. The reports she produced after each trip are typically brief -- and sometimes rather dry -- accounts of the state of each country's economy and the challenges it is likely to face. But they do give us an occasional hint about the likely new Fed chair's thoughts on the world's most economically dynamic region.
During a November 2007 visit to Southeast Asia .. http://www.frbsf.org/economic-research/publications/economic-letter/2008/february/economic-conditions-singapore-vietnam-monetary-policy/ , for instance, Yellen was charmed by Vietnam's frenetic energy. "My instant impression was one of a widespread entrepreneurial spirit and an openness to new and practical ideas," she recalled. "The streets are crowded with motor scooters and economic activity, round-the-clock construction activity, and urban centers that already mirror those in far more developed economies. The sense of optimism and excitement is palpable."
Visiting India in 2005, she was struck by the country's economic disparities, which she called .. http://www.frbsf.org/economic-research/publications/economic-letter/2006/july/a-monetary-policymaker-passage-to-india/ .. "dizzying." "We were lucky enough to see the serene magnificence of the Taj Mahal," she wrote. "Another manmade wonder -- more of the 21st century than of the 17th -- was a technology campus, for all the world like any such facility you might see in Silicon Valley. But en route to both, we saw other faces of India -- shanties, roads clogged not just with cars, but with pedestrians, peddlers, pushcarts, cows, goats, even a caravan of camels. Scenes like these are not only unforgettable, they are also emblematic of the challenges the country faces."
Yellen paid at least three visits to China as president of the San Francisco Fed, in 2004, 2006, and 2009, visiting the financial centers of Hong Kong and Shanghai, the capital Beijing, and the western city of Chengdu, to get a first-hand look at China's inland development efforts. She brought back thorough reports on a range of issues related to the world's second-largest economy, from its progress on banking sector reforms (in 2004, she was "guardedly optimistic") to China's giant current account surplus ("few people ... believe that even a more substantial RMB appreciation would have much effect on China's overall trade balance").
Throughout, Yellen demonstrates a keen awareness of how the Fed's policymaking, and U.S. economic developments more generally, play out in Asia. In China, she found officials who told her that, while they were eager to see the U.S. make a full recovery, they were worried about the impact that loose monetary policies could have on the value of their dollar-based assets, as well as the undesired stimulus effects. Singaporeans told her they were skeptical of the notion of "decoupling" -- that is, that the U.S. and Asian economies have delinked to some extent in recent years -- and the Koreans and Japanese described .. http://www.frbsf.org/economic-research/publications/economic-letter/2008/december/economy-korea-japan-monetary-policy/ .. how their banks were sent scrambling for capital following the U.S. subprime mortgage collapse, despite not having wide exposure to U.S. mortgages.
How much does it matter that Janet Yellen has a background in Asia? It surely doesn't mean that as Fed chair, she'll be considering the fate of Korean bankers when weighing interest rate decisions (or at least, they'll be far, far from the forefront of her mind). Still, consider this: Yellen's one-time rival for the Fed chief job, Larry Summers, is not the most popular man .. http://www.bloomberg.com/news/2013-09-15/who-s-going-to-miss-larry-not-asia-.html .. in Asia. That's thanks in part to his stint at the Treasury Department, during the 1997 Asian financial crisis, when he and other Western policymakers handed down a round of one-size-fits-all policy prescriptions for a range of Asian economies that today are widely believed to have made things worse.
Going on a handful of fact-finding missions doesn't make Yellen an Asia expert either. But if nothing else, traveling from Japan to India must be a good lesson in the diversity of Asian economies; a little nuance in thinking about the world's most important economic region is never a bad thing.
http://blog.foreignpolicy.com/posts/2013/10/09/obama_s_fed_nominee_janet_yellen_was_pivoting_to_asia_before_he_was
By Kathleen Hunter and Mark McQuillan, Bloomberg News Bloomberg
11:20 p.m. CDT, October 9, 2013
BEIJING — Janet Yellen's nomination to lead the Federal Reserve may signal a reprieve for Asian economies from any immediate reduction of stimulus that could roil markets and capital flows.
South Korea said it expects Yellen will "consider well" the effects on other nations of reducing U.S. bond-buying, while Koichi Hamada, an adviser to Japanese Prime Minister Shinzo Abe, predicted the new chairman won't rush to exit monetary easing. A deputy Indonesia central-bank governor said Yellen's appointment would be positive for local and global financial markets.
Asia is grappling with Fed policy shifts and the Group of 20 economies plans to identify market turmoil from central banks' stimulus withdrawal as a key risk to the global financial system. Emerging-market stocks plunged in May when Chairman Ben Bernanke signaled that record easing may be pared, then rebounded when the Fed maintained stimulus last month.
"If the Federal Reserve pulls out the rug underneath Asian markets, it could clearly lead to some nasty repercussions," said Frederic Neumann, HSBC Holdings Plc's co-head of Asian economics in Hong Kong. "But Yellen is seen as somebody who might withdraw stimulus only gradually and that buys Asian policy makers time to build up the defenses for the day when U.S. interest rates do begin to rise."
President Obama will announce the nomination at 3 p.m. Wednesday in Washington, a White House official said in an emailed statement. If confirmed by the Senate, Yellen, 67, would succeed Bernanke, 59, whose second four-year term ends in January.
"She has rich experience and an impressive resume as a policymaker," Choi Hee Nam, director general of the South Korea finance ministry's international finance bureau, said by phone from Sejong Wednesday. "I expect her to consider well the ripple effects on other countries" from policy decisions such as altering the Fed's bond-buying program, Choi said.
Bank Indonesia Deputy Governor Perry Warjiyo said in a mobile-phone message Wednesday that tapering of U.S. stimulus may not come into effect immediately with Yellen's appointment. Philippine Finance Secretary Cesar Purisima said in a phone message that Yellen's nomination signals stability, policy continuity and a "steady course for the Fed."
Bank of Japan Deputy Governor Hiroshi Nakaso, speaking to reporters after a speech today in Matsue, western Japan, declined to comment on the policy effects of Yellen's nomination. China's central bank and Ministry of Foreign Affairs didn't immediately respond to requests for comment.
Li Daokui, a former People's Bank of China academic adviser, said in an interview that Yellen's appointment means there will be a "prolonged period of appreciation" for the yuan as additional "hot money" flows into China. That deepens a monetary-policy dilemma over whether to lower interest rates to reduce the attraction for inflows, or to gear policy more toward fighting inflation, Li said.
Cao Yongfu, a researcher who follows U.S. economic policy for the government-run Chinese Academy of Social Sciences, said Yellen's nomination will help sooth China's short-term concerns that an immediate tapering of Fed bond-buying would cause volatility in capital flows.
Even so, prolonged easing under Yellen may result in dollar depreciation and undermine the value of China's foreign exchange reserves, Cao said. "Yellen's big challenge will be to shift Fed policies back to normal from an ultra-loose stance — you can't always keep your foot on the gas."
As the Fed's No. 2 official, she has articulated the case for maintaining highly accommodative monetary policy. In a series of 2012 speeches, she outlined why interest rates could remain near zero into late 2015, and in a 2011 speech she justified the Fed's first two rounds of large-scale asset purchases with an estimate that the programs would create 3 million jobs.
Yellen isn't among the Fed policymakers who have pressed this year to pare back asset purchases.
"I assume Yellen's nomination means QE for longer and the exit of QE is likely to be gentle," said Dong Tao, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong. "That would be good news for China," which is having difficulty maintaining growth momentum just as the "tides of global money printing" may start to turn, Tao said.
Hamada, a retired Yale professor who advises Abe on monetary policy, said Yellen is "more likely to seek a way to make an economic recovery certain by keeping policy accommodative." If prospects of an exit weaken, that may put pressure on the yen to strengthen, which risks harm to Japan's economy and would boost the need for the BOJ to act, said Hamada, who doesn't speak for the government.
At the same time, Hamada said he would "very much welcome" Yellen's appointment. "She has long experience in central bank policy and she understands the role of monetary policy in the macro economy. She is the most appropriate person to lead the Fed."
Yellen has been vice chairman of the Fed in Washington since 2010. As president of the Federal Reserve Bank of San Francisco in the six previous years, she monitored Asia and oversaw banks with foreign exposure, including Wells Fargo & Co.
She also deepened her institution's ties to Asia, starting a biennial conference on Asia economic policy in 2009 that attracted central bank officials from China, South Korea, the Philippines, Taiwan and Singapore, according to a list of attendees on the bank's website.
Yellen oversaw many of the biggest Asian banks doing business in the U.S., hosted Asian central bankers and financial regulators for get-togethers and traveled often to the region, said David Loevinger, former U.S. Treasury Department senior coordinator for China affairs.
She has a "deep understanding of Asian economies, banks and business practices," said Loevinger, now an emerging- markets analyst at TCW Group Inc. in Los Angeles. "She was less prone to lecturing than other U.S. government officials. Asians appreciated that."
The concern of emerging markets is that when the Fed does begin tapering its bond buying, it could hurt them by sparking an exodus of cash and higher borrowing costs. Brazil, Turkey, South Africa, India and Indonesia are the most vulnerable, Goldman Sachs Group Inc. strategists said in a Sept. 5 report.
By contrast, the International Monetary Fund said Oct. 7 that Canada, South Korea and Australia are among the countries best placed to weather any global market volatility from the withdrawal of U.S. monetary stimulus. The IMF and World Bank hold annual meetings this week in Washington, where G-20 finance ministers and central bankers will also gather.
Even if it doesn't serve as central bank to the world, the Fed is still entering a fresh era in which international events will increasingly shape its decisions, according to Barry Eichengreen, a professor at the University of California at Berkeley, where Yellen taught.
In a July paper, he said U.S. unemployment and inflation will be affected as globalization forces the U.S. to be more open to trade and financial transactions, emerging markets eat into its share of the world economy and the dollar's role as the sole reserve currency is eventually eroded.
"Progressively the Fed is going to have to be more outward-looking," Eichengreen said in an August interview.
http://www.chicagotribune.com/news/sns-wp-blm-news-bc-fed-asia09-20131009,0,62033.story
---- this one reads well for Janet Yellen's nomination, too ..
Obama's Fed Nominee Was Pivoting to Asia Long Before He Was
Posted By Alicia P.Q. Wittmeyer Wednesday, October 9, 2013 - 5:00
Asian markets seemed pleased .. http://www.cnbc.com/id/101097063 .. by the news, which broke Tuesday evening (or Wednesday morning, Asia time) that President Obama would nominate .. http://www.cbsnews.com/8301-250_162-57606762/obama-nominates-tough-proven-leader-janet-yellen-to-lead-fed/ .. Janet Yellen for the position of Fed chair this afternoon. Policymakers in the region, who'd been cheering .. http://www.livemint.com/Opinion/RUIi3F6XgUNzG8azxhuOGL/Asia-wants-Janet-Yellen-at-Fed-and-US-should-listen.html .. for her, spoke warmly .. http://blogs.wsj.com/economics/2013/10/09/asian-policy-makers-welcome-yellen/ .. of the selection -- mostly because the relatively dovish Yellen is seen as someone who'll be slower to roll back the easy money policies of her predecessor, giving Asia more time to prepare for the day the greenback spigot turns off.
But Yellen also has something of a special relationship with the region, which Bank of Japan Deputy Governor Hiroshi Nakaso alluded to when he told .. http://blogs.wsj.com/economics/2013/10/09/asian-policy-makers-welcome-yellen/ .. the Wall Street Journal that "we already have a relationship of mutual trust with each other." Yellen spent six years, from 2004 to 2010, as president of the Federal Reserve Bank of San Francisco, a position that involved traveling to Asia at least once a year on fact-finding missions, and brought her to countries across the region from South Korea to Vietnam to India. The reports she produced after each trip are typically brief -- and sometimes rather dry -- accounts of the state of each country's economy and the challenges it is likely to face. But they do give us an occasional hint about the likely new Fed chair's thoughts on the world's most economically dynamic region.
During a November 2007 visit to Southeast Asia .. http://www.frbsf.org/economic-research/publications/economic-letter/2008/february/economic-conditions-singapore-vietnam-monetary-policy/ , for instance, Yellen was charmed by Vietnam's frenetic energy. "My instant impression was one of a widespread entrepreneurial spirit and an openness to new and practical ideas," she recalled. "The streets are crowded with motor scooters and economic activity, round-the-clock construction activity, and urban centers that already mirror those in far more developed economies. The sense of optimism and excitement is palpable."
Visiting India in 2005, she was struck by the country's economic disparities, which she called .. http://www.frbsf.org/economic-research/publications/economic-letter/2006/july/a-monetary-policymaker-passage-to-india/ .. "dizzying." "We were lucky enough to see the serene magnificence of the Taj Mahal," she wrote. "Another manmade wonder -- more of the 21st century than of the 17th -- was a technology campus, for all the world like any such facility you might see in Silicon Valley. But en route to both, we saw other faces of India -- shanties, roads clogged not just with cars, but with pedestrians, peddlers, pushcarts, cows, goats, even a caravan of camels. Scenes like these are not only unforgettable, they are also emblematic of the challenges the country faces."
Yellen paid at least three visits to China as president of the San Francisco Fed, in 2004, 2006, and 2009, visiting the financial centers of Hong Kong and Shanghai, the capital Beijing, and the western city of Chengdu, to get a first-hand look at China's inland development efforts. She brought back thorough reports on a range of issues related to the world's second-largest economy, from its progress on banking sector reforms (in 2004, she was "guardedly optimistic") to China's giant current account surplus ("few people ... believe that even a more substantial RMB appreciation would have much effect on China's overall trade balance").
Throughout, Yellen demonstrates a keen awareness of how the Fed's policymaking, and U.S. economic developments more generally, play out in Asia. In China, she found officials who told her that, while they were eager to see the U.S. make a full recovery, they were worried about the impact that loose monetary policies could have on the value of their dollar-based assets, as well as the undesired stimulus effects. Singaporeans told her they were skeptical of the notion of "decoupling" -- that is, that the U.S. and Asian economies have delinked to some extent in recent years -- and the Koreans and Japanese described .. http://www.frbsf.org/economic-research/publications/economic-letter/2008/december/economy-korea-japan-monetary-policy/ .. how their banks were sent scrambling for capital following the U.S. subprime mortgage collapse, despite not having wide exposure to U.S. mortgages.
How much does it matter that Janet Yellen has a background in Asia? It surely doesn't mean that as Fed chair, she'll be considering the fate of Korean bankers when weighing interest rate decisions (or at least, they'll be far, far from the forefront of her mind). Still, consider this: Yellen's one-time rival for the Fed chief job, Larry Summers, is not the most popular man .. http://www.bloomberg.com/news/2013-09-15/who-s-going-to-miss-larry-not-asia-.html .. in Asia. That's thanks in part to his stint at the Treasury Department, during the 1997 Asian financial crisis, when he and other Western policymakers handed down a round of one-size-fits-all policy prescriptions for a range of Asian economies that today are widely believed to have made things worse.
Going on a handful of fact-finding missions doesn't make Yellen an Asia expert either. But if nothing else, traveling from Japan to India must be a good lesson in the diversity of Asian economies; a little nuance in thinking about the world's most important economic region is never a bad thing.
http://blog.foreignpolicy.com/posts/2013/10/09/obama_s_fed_nominee_janet_yellen_was_pivoting_to_asia_before_he_was
It was Plato who said, “He, O men, is the wisest, who like Socrates, knows that his wisdom is in truth worth nothing”
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