Time for Asia to tighten monetary policy
As the world economy picks up, Asian central banks are playing with fire as they delay raising interest rates after years of monetary easing
Asian central banks delaying a normalisation of interest rates risk either having to play catch-up when the US Federal Reserve starts to increase - or worse, a financial bust.
It's more than five years since super-easy monetary policies were adopted by the Fed, the Bank of England and others in response to the economic downturn triggered by the global financial crisis, and the world economy is largely humming again.
But no Asian central bank - aside from those in India and Indonesia which have acted in response to specific bouts of investor unease - has yet begun to normalise rates.
There are plenty of excuses as to why: fears that the "first mover" would attract disproportionate capital inflows; an insurance against the risks of a hard landing for China's economy; a failure of Abenomics to revive Japan; or the still generally below-trend inflation rates across the region.
Low rates allow governments and firms to avoid making urgently needed reforms
Given an absence of capital controls, the core choice facing the region's central banks can be summed up as this: tighten and be swamped by even more capital inflows fuelling the financial upcycle; or stay loose, intervene to limit exchange-rate appreciation and fuel the (domestic credit-led) financial upcycle.