'Mr Yen' Sees No Bursting of U.S. Bubble in 1-2 Years
By Vithoon Amorn
Reuters
BANGKOK, Thailand (May 3) - Former Japanese vice finance minister Eisuke Sakakibara said on Wednesday he does not expect the U.S. stock bubble to burst in the next two years but the Fed would need to raise interest rates to ensure a soft landing.
Speaking at a lunch in Bangkok, Sakakibara was asked when he thought the U.S. bubble would burst.
``I don't see that happening in the next one to two years,'' he said.
Sakakibara said he believed the U.S. economy could avoid a bubble collapse and manage a soft landing by cooling its economic growth to about 3-4 percent in the next two years from an expected 5-6 percent this year.
``I think that the U.S. Federal Reserve needs to raise interest rates...they need to move cautiously and to maneuver in a very subtle way,'' he said referring to rates moves.
Sakakibara, once Japan's top financial bureaucrat and dubbed ``Mr Yen'' for his ability to move financial markets, said he was not surprised by current U.S. stock market corrections after sharp rallies in February and March.
He said a difference between U.S. and Japanese economic bubbles was that high U.S. economic growth was backed by major innovations in the U.S. information technology sector.
Sakakibara, now a professor at Keio University in Tokyo, was in Thailand to attend an annual meeting of the Asian Development Bank in Chiang Mai, in the north of the country later this week.
He repeated criticism of the United States for not providing direct financial assistance to Thailand, South Korea, and Indonesia when they were hit by deep economic crises in 1997 and 1998.
The Asian crisis started in Thailand in 1997, and the IMF and U.S. Treasury first viewed Thailand's problems as a local phenomenon. But the turmoil soon spread across Asia and beyond, pushing many countries into recession and high unemployment.
Sakakibara, who was a candidate to head the International Monetary Fund, backed proposals for Asia to develop its own integrated debt market and an Asian Monetary Fund (AMF) that could act as a local lender of last resort.
Asked if an AMF would help prevent a new Asian economic crisis in the future, he said: ``It would help. I would not say it could prevent (a new crisis) but it would help (Asia cope with it).''
Sakakibara said Southeast Asian countries and Japan, China and South Korea were expected to discuss on the sidelines of the ADB meeting a proposal on expanded Asian currency swap arrangements.
But he did not expect the talks to reach any conclusion.
Asked about the proper size of increased swap arrangements for Asian countries, he said: ``The number being floated around of $200 million is too small. It needs at least say $20 billion.'' |
