*
ASEAN+3 finance leaders meet in Incheon, South Korea,
Tuesday
*
Japan hopes to propose strengthening currency swap lines
*
Expansion will offer better safeguards vs pandemic,
disasters
(Adds statement from tri-lateral meeting)
By Leika Kihara and Jihoon Lee
INCHEON, South Korea, May 2 (Reuters) - Asian finance
leaders will on Tuesday look for ways to tighten safeguards to
address emergency funding needs during pandemics and natural
disasters, as global recession fears and volatile financial
markets cloud the economic outlook.
The impact of U.S. interest rate increases on the region's
capital flows may also be discussed when finance ministers and
central bank chiefs of ASEAN+3 - which groups the 10-member
Association of Southeast Asian Nations (ASEAN) and Japan, China
and South Korea - meet on Tuesday.
Japan, which co-chairs this year's meeting with Indonesia,
hopes to discuss strengthening currency swap lines, Finance
Minister Shunichi Suzuki told reporters on Friday.
Japan is keen to propose a facility that enhances the use of
existing currency swap lines, and allows members to tap funds in
emergencies, said three sources with direct knowledge of the
matter.
The recent failures of two U.S. banks have alarmed
policymakers about vulnerabilities in the global banking system
and the possibility of market turbulence as a result of
aggressive U.S. interest rate rises.
In a meeting with his Chinese and Japanese counterparts
before the ASEAN+3 gathering, South Korean Finance Minister Choo
Kyung-ho said cooperation had become more important for Asia and
the rest of the world with the global economy at an "inflection
point".
"Despite the close economic relationships among China,
Japan, and Korea, we have observed a recent slowdown in economic
relations, particularly in terms of trade in goods and
services," the three ministers said in a statement.
"We recognize the importance of strengthening our economic
and trade relations to secure post-pandemic growth, minimize any
lasting negative effects, and preparing for future shocks," they
said.
The ASEAN+3 group created a network of currency swap lines
called the Chiang Mai Initiative Multilateralisation (CMIM) in
2000, after the Asian financial crisis of the late 1990s, and
revamped it into a multilateral network in 2010, to help each
other forestall or combat sharp capital outflows.
But the swap lines have never been used, not even during the
COVID-19 pandemic, leading to calls within the group for the
system to be more accessible.
While Asian policymakers stress their countries have
sufficient foreign reserves and buffers to fend off another
crisis, they may see scope for enhancements to arrangements to
combat market upheaval, analysts say.
"The fact CMIM has never been tapped since being created
shows countries find it hard to use," said Toru Nishihama, chief
emerging market economist at Dai-ichi Life Research Institute.
While it was important to make the CMIM more flexible,
countries should also ensure they have strong surveillance in
place to avoid moral hazard, he added.
Developing Asia is expected to achieve strong economic
growth of 4.8% in 2023, faster than 4.2% growth in 2022 thanks
to China's rebound, according to the Asia Development Bank (ADB)
projections.
The ASEAN+3 finance leaders, including Suzuki and Bank of
Japan (BOJ) Governor Kazuo Ueda, are meeting on the sidelines of
the ADB's annual meeting in Incheon in South Korea this week.
(Reporting by Leika Kihara and Jihoon Lee; Additional reporting
by Tetsushi Kajimoto in Tokyo; Editing by Sharon Singleton and
Sam Holmes)
