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SUBJECT : “Japanese Disease Could Mutate to Other Major Economies”: Stephen Roach   [ allforu62 ]   2010.10.13

“Japanese Disease Could Mutate to Other Major Economies”: Stephen Roach
Stephen Roach, Non-Executive Chairman of Morgan Stanley Asia underscored that central bankers around the world need to act preemptively, not reactively amid concerns over a long-term economic recession like the one Japan had in the past.

“The Japanese disease could mutate to other major economies, including high-flying economies in Asia. It is necessary to act preemptively ahead of time. That is the critical lesson from Japan,” Roach said in his special lecture entitled ‘Lessons from Japan,’ at the 11th World Knowledge Forum hosted by Maeil Business Newspaper in the Sheraton Grande Walkerhill Hotel on October 12th.

“Speculation is still going on ever since the 17th century, and central bankers are finding that it cannot be prevented at all,” Roach said and continued, “however, it is difficult to say that big bubbles in the past were not predictable.”

He pointed out that it would be too late to do something afterwards like Japan belatedly took action when the bubbles disappeared and facilities investment decreased. He again highlighted “powerful and aggressive early action.”

“The U.S. embarked on a path that eerily resembles Japan in the 1990s. U.S. public debts are likely to soar by 90% by 2020, very much close to Japan’s trajectory. A savings-short U.S. is witnessing a significant surge in its financial deficits, more heavily depending on foreign capital,” he explained about the economic situation going on in the U.S. at the present time.

“Not to repeat the Japanese blunder, governments around the world should be out there for addressing issues like the asset and credit bubbles and fiscal insecurity. Central banks need well-balanced coordination policies that are free of political ideologies,” he said.

In a press conference after the lecture, Roach told reporters that some scholars call for appreciation of the Chinese yuan, but there is no guarantee that these complex and unpredictable issues can be resolved by currency fix.

He emphasized that if the U.S. encourages China to roll out policies that can boost its domestic market, not only U.S. exports will increase but also that will help other countries create new jobs. According to Roach, it is not just the currency that will fix the problem, but a method that brings win-win to the entire global economy through which both the U.S. and China will achieve stable growth.

[Written by Na-rae Chung - Su-hyun Song / edited by Soyoung Chung]

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]

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