European leaders have taken too long to address the eurozone sovereign debt crisis, the Asian Development Bank chief said recently, calling for swift action to prevent the global economy from being dragged down significantly.
Haruhiko Kuroda, president of the Manila-based regional lender, also said in a recent interview that the Bank of Japan should ease monetary policy more aggressively to overcome chronic deflation in the country and stem the yen’s sharp appreciation against other major currencies.
As for Europe, Kuroda, a former vice finance minister for international affairs, warned that the eurozone crisis has had a negative impact on China and other economies in Asia.
“Europe is the biggest destination for Chinese exports,” he said, while referring to the ADB’s downgrading of its growth estimate for China, the world’s second-biggest economy after the United States.
Kuroda also warned that the crisis has led many European banks to change their business strategies and withdraw funds from Asian markets, in a move that has saddled some companies in the region with rising borrowing costs.
Asked about potential measures to address market concerns, Kuroda said European leaders have moved in the “right” direction, trying to support distressed eurozone governments with the area’s bailout funds and pursuing a banking union, which could include a common fund to recapitalize and rescue failing banks in the region.
But he added they “have taken too long” and said that without implementing necessary measures more swiftly, the situation cannot be calmed down easily.
On Japan’s monetary policy, Kuroda said the BOJ must fight deflation more aggressively.
“Japan is the only nation in the world to have been suffering from deflation,” he said, adding, “Only monetary easing can beat deflation,” a comment that rejected the central bank’s view that it is necessary to take steps to boost the nation’s growth potential rather than ease monetary conditions.
Kuroda also said the BOJ should play a greater role in stemming the sharp appreciation of the yen, which has hit the economy by slowing exports.
“A vicious cycle has continued, in which the yen’s rise leads to deflation,” he said. “Market interventions work only temporarily. If we want to maintain their effect, then we need support” from a central bank aggressively easing policy.
DBJ’s loans for aircraft
The Development Bank of Japan’s loans to support aircraft procurements are expected to reach ¥80 billion to ¥100 billion in fiscal 2012 on the back of growing demand, sources said.
The estimated figure is far higher than the preceding year’s total of ¥33 billion.
In April last year, the state-backed lender fully started to provide loans to overseas airlines and aircraft leasing companies by setting up a new division handling the operations.
Initially, the DBJ expected its loans for aircraft procurements would total some ¥40 billion in fiscal 2012, which ends next March. But the loan amount is now seen to double or more from the initial projection as demand for aircraft is growing due to a predicted increase in air travel, the sources said.
European financial institutions were traditionally strong in extending loans for aircraft leasing, but they are now cautious about making such loans in the midst of the eurozone financial crisis. As a result, borrowers are increasingly turning to the DBJ, according to the sources.
In fiscal 2011, the DBJ lent money mostly to Asian carriers, including Thai Airways International and Hong Kong-based Cathay Pacific.
In the current fiscal year, the bank has expanded its customer base to Europe, the Middle East, South America and other parts of the world. The bank is seen to have already provided loans to Emirates of the United Arab Emirates and Latam Airlines Group of Chile, the sources said.
In fiscal 2013, the DBJ plans to extend ¥100 billion to ¥120 billion in aircraft loans.
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