Full Report - Subregional Office for East and North-East Asia - escap

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013
Figure 2.1 Inflation in selected East and North-East Asian economies, 2010-2012
Percentage
16
14
12
10
8
6
4
2
0
-2
China
Hong Kong,
China
Japan
Macao, China
Mongolia
Republic of
Korea
2010 2011 2012
Sources: ESCAP, based on national sources; and CEIC Data Company Limited. Available from http://ceicdata.com (accessed on 30 March 2013).
Note: Data for 2012 are estimates.
In Japan, consumer prices rose during the first half
of 2012. However, deflationary situation re-emerged
in the remainder of the year. For the year as a
whole, consumer price index remained unchanged,
meaning zero inflation in 2012 as compared to
0.3% deflation in 2011. The Bank of Japan boosted
asset purchases five times in 2012 and introduced
a new bank lending facility to provide banks with
collateralized loans at an overnight call rate of 0.1%,
while also announcing no change in its policy rate
of 0-0.1%. Early 2013, in a departure from previous
practice, the Bank of Japan decided to double the
inflation target to 2% for fiscal year 2013/14.
Mongolia was a clear outlier, with inflation accelerating
to 16% in April 2012, before receding to
14.4% in November 2012, still well above the Bank
of Mongolia’s 10% target. Inflation for the year as
a whole was 14.3%, much higher than the 9.2%
recorded in 2011. The roots of high inflation are
to be found in high food (notably meat) prices
and an expansionary fiscal policy which has led to
demand-side pressures in an already overheating
economy.
Monetary policy stance supportive of
growth
In responding to concerns that growth may be
slowing too quickly, Governments in countries in the
subregion activated appropriate policy levers. The
burden of the countercyclical response was split
between fiscal and monetary policy. Policymakers’
tasks are complicated by actions elsewhere: loose
monetary policies may translate into higher consumer
prices, whereas quantitative easing in the United
States may cause inflows of speculative funds into
the subregion, which may cause nominal appreciation
of the currencies of economies in the subregion.
In December, the Government of the Republic of
Korea acted proactively to ward off possible volatility
and cut the forward position limit for foreign banks
from 200% to 150% of capital, and from 40% to
30% for domestic banks.
The ongoing shifts in the balance of risks from inflation
made it relatively easy to introduce adjustments on
the margin to the country’s monetary policy stance.
In June 2012, China cut borrowing costs for the
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