{ "title": "Reflections on Macroprudential Policy", "publication": "IMF News, January 23, 2014", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp012314a", "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp012314a", "overlayPath": "/en/news/articles/2015/09/28/04/53/sp012314a/index.md", "summary": "Speech delivered by Naoyuki Shinohara, Deputy Managing Director, International Monetary Fund, Tokyo, January 23, 2014; marked as \"As Prepared for Delivery\".", "authors": [ "Naoyuki Shinohara" ], "publishDate": "2014-01-23", "sections": [ { "heading": "Global Outlook", "content": "- Speech delivered by Naoyuki Shinohara, Deputy Managing Director, International Monetary Fund, Tokyo, January 23, 2014; marked as \"As Prepared for Delivery\".\n- Context: \"Last September marked the five-year mark from the collapse of Lehman Brothers\" which \"triggered the worst financial crisis the world has seen in decades.\"\n- IMF assessment: \"The latest update to the Fund’s World Economic Outlook, released just two days ago, shows that global activity strengthened in the second half of 2013.\"\n- Projections and assessments:\n - Global activity \"is expected to improve further in 2014-15, driven largely by recovery in the advanced economies.\"\n - \"But global growth remains below potential—the level consistent with economic health and full employment.\"\n - Labor markets in advanced economies are weak and unemployment \"remains unacceptably high.\"\n - Slack in advanced countries raises the risk that inflation will run below levels consistent with price stability; \"The specter of deflation, of course, is very dangerous—something Japan understands well.\"\n- Emerging markets: \"are cooling off somewhat\" and face risks from \"the unwinding of domestic imbalances, such as credit booms and weakened fiscal and external positions.\"\n- Low-income countries: need to \"become more resilient to shocks by building sufficient buffers and raising more revenue.\"" }, { "heading": "Asia’s Prospects", "content": "- Regional growth estimates:\n - \"The IMF estimates that Asian growth hit about 5 percent in 2013, and will rise to about 5¼ percent in 2014.\"\n- Drivers and risks:\n - Domestic demand has driven growth but has \"been more subdued lately\" due to tighter financial conditions and, in some cases, policy or political uncertainty.\n - Financial conditions \"remain generally supportive even after the recent tightening, and labor markets have been resilient.\"\n - Asian exports \"picked up in recent months\" but future growth is contingent on sustained recovery in advanced economies.\n - Inflation expected to remain low, with exceptions: \"India and, to a lesser extent, Indonesia.\"\n - Region experienced \"re-pricing of financial assets and the wave of capital outflows from emerging markets in spring-summer last year\" with overall impact so far manageable but country-specific stress.\n- Country-specific notes:\n - Japan: \"growth will remain above trend as the contractionary effects of the consumption tax hike are offset by the latest fiscal stimulus.\"\n - China: \"growth rebounded in the second half of 2013 and should remain robust this year. It likely will moderate marginally as measures to cool credit expansion dampen investment.\"\n - India: \"growth is expected to firm on policies supporting investment and a favorable monsoon, but it will remain below trend.\"\n - ASEAN (including Malaysia and the Philippines): \"registered healthy growth in 2013\" with sound prospects for 2014; \"Indonesia is projected to slow largely as a result of recent monetary tightening.\"\n- Policy implications:\n - Tighter global liquidity and homegrown structural impediments will weigh on growth, partly offset by pickup in exports and domestic demand.\n - Greater differentiation across the region if conditions tighten further:\n - Countries with strong fundamentals and credible policies can offset tighter global credit with lower policy rates and fiscal support.\n - Countries that have delayed reforms or tolerate high inflation \"may be forced to respond with pro-cyclical tightening.\"\n - Announcing credible medium-term reforms would \"rebuild confidence and ease policy trade-offs.\"\n- Commentary on local currency promotion: use of local currencies in Cambodia, Lao PDR, Myanmar and Vietnam is \"important, but under-researched\" and influenced by history, confidence effects, and credible and independent central banks." }, { "heading": "Macroprudential Policy in Asia", "content": "- Rationale:\n - The financial crisis highlighted \"the costs of systemic instability\" and the need for \"dedicated macroprudential policies to safeguard financial stability.\"\n - Asia, as a key destination for capital flows, faces challenges that have direct implications for macroprudential policies.\n- Key concerns:\n - \"Implications of financial liberalization in China will be significant and difficult to predict.\"\n - \"Increased volatility of cross-border capital flows will continue to preoccupy policymakers.\"\n - Need for deeper financial markets and further development of macroprudential policies to reduce vulnerabilities and enhance resilience.\n- Regional experience:\n - Macroprudential approach \"is not new to Asia\"—post-Asian Crisis reforms improved regulation and supervision.\n - Asia’s bank-dominated systems \"have come through the global financial crisis generally unscathed.\"\n - ASEAN+3 countries have \"deployed targeted and escalating macroprudential policies\" to address housing and other asset market vulnerabilities amid low global interest rates and surging capital flows.\n - Measures targeted mortgage loans, car loans, or credit card loans deemed at risk and \"have helped address vulnerabilities.\"\n- Limits:\n - Macroprudential policies \"cannot be expected to prevent all future crises\" and are \"unlikely to contain risks driven by real imbalances\" on their own.\n - Must be supported by strong supervision and enforcement and complemented by monetary, fiscal, and other policies.\n - Authorities should consider unintended consequences such as impacts on trade finance and financial deepening." }, { "heading": "Enhancing the Effectiveness of Policy Tools", "content": "- Key steps to improve macroprudential effectiveness (as identified in the speech):\n - Developing the capacity to assess systemic risk;\n - Assembling and calibrating the macroprudential toolkit;\n - Communicating clearly with the public and markets;\n - Monitoring and closing regulatory and data gaps; and\n - Setting up appropriate institutional frameworks.\n- Specific deficiencies in the Asian context:\n - Closing existing data gaps;\n - Assessing systemic risks;\n - Enhancing regional and international cooperation.\n- Data and analysis needs:\n - \"Assuring access to the appropriate data and information is critical\" for operational macroprudential policy.\n - Need for closer analysis of vulnerability build-up in the context of financial sector interconnectedness.\n - Further progress required in establishing early warning systems and developing technical capacity to analyze systemic risk.\n- Cross-border and coordination issues:\n - Regional and international cooperation is important as Asia integrates with the global system.\n - Nationally optimal macroprudential policies \"may be suboptimal when financial cycles are not synchronized across countries, or systemic intermediaries can evade policy actions taken by national authorities.\"\n- Role of macroeconomic policy:\n - Appropriate macroeconomic policy can reduce burdens on macroprudential tools and improve understanding and monitoring of transmission mechanisms." }, { "heading": "Addressing Spillover Effects", "content": "- Consideration: \"how macroprudential policy could help address potential spillover effects from exiting unconventional monetary policies.\"\n- Possibility: same tools that offset capital inflow risks may help limit adverse consequences of a reversal of inflows.\n- Development: \"Developing macroprudential policy will remain a work in progress.\"" }, { "heading": "Conclusion", "content": "- Trade-offs: \"macroprudential policy, like any public policy, is not free of costs\" and involves trade-offs between stability and efficiency.\n - Example: higher capital and liquidity requirements can enhance systemic stability but may \"make credit more expensive and lower economic growth.\"\n- Policy judgment: balancing benefits and costs \"require difficult judgments.\"\n- Institutional collaboration: importance of increasing collaboration between the IMF and AMRO to serve Asia more effectively; the speaker expresses support for ongoing cooperation and technical assistance.\n- Closing: speaker expresses hope that the seminar contributes to better understanding and that the IMF \"is ready to help advise on the development and implementation of effective macroprudential policies in Asia.\"\n\nSource: \"Reflections on Macroprudential Policy\" By Naoyuki Shinohara, Deputy Managing Director, International Monetary Fund, January 23, 2014.\n\n---\n\n\n References\n\n- People's Republic of China and the IMF\n- Cambodia and the IMF\n- India and the IMF\n- Indonesia and the IMF\n- Japan and the IMF\n- Malaysia and the IMF\n- Myanmar and the IMF\n- Philippines and the IMF\n- Vietnam and the IMF\n- Speeches\n- Naoyuki Shinohara\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp012314a" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/28/04/53/sp012314a/index.md)", "[Structured JSON version](/en/news/articles/2015/09/28/04/53/sp012314a/index.json)", "[Bundle manifest](/en/news/articles/2015/09/28/04/53/sp012314a/bundle-manifest.json)", "Authors: Naoyuki Shinohara", "Published: January 23, 2014", "Speech delivered by Naoyuki Shinohara, Deputy Managing Director, International Monetary Fund, Tokyo, January 23, 2014; marked as \"As Prepared for Delivery\".", "Context: \"Last September marked the five-year mark from the collapse of Lehman Brothers\" which \"triggered the worst financial crisis the world has seen in decades.\"", "IMF assessment: \"The latest update to the Fund’s World Economic Outlook, released just two days ago, shows that global activity strengthened in the second half of 2013.\"", "Projections and assessments:", "Emerging markets: \"are cooling off somewhat\" and face risks from \"the unwinding of domestic imbalances, such as credit booms and weakened fiscal and external positions.\"", "Low-income countries: need to \"become more resilient to shocks by building sufficient buffers and raising more revenue.\"", "Regional growth estimates:", "Drivers and risks:", "Country-specific notes:", "Policy implications:", "Commentary on local currency promotion: use of local currencies in Cambodia, Lao PDR, Myanmar and Vietnam is \"important, but under-researched\" and influenced by history, confidence effects, and credible and independent central banks.", "Rationale:", "Key concerns:", "Regional experience:", "Limits:", "Key steps to improve macroprudential effectiveness (as identified in the speech):", "Specific deficiencies in the Asian context:", "Data and analysis needs:", "Cross-border and coordination issues:", "Role of macroeconomic policy:", "Consideration: \"how macroprudential policy could help address potential spillover effects from exiting unconventional monetary policies.\"", "Possibility: same tools that offset capital inflow risks may help limit adverse consequences of a reversal of inflows.", "Development: \"Developing macroprudential policy will remain a work in progress.\"", "Trade-offs: \"macroprudential policy, like any public policy, is not free of costs\" and involves trade-offs between stability and efficiency.", "Policy judgment: balancing benefits and costs \"require difficult judgments.\"", "Institutional collaboration: importance of increasing collaboration between the IMF and AMRO to serve Asia more effectively; the speaker expresses support for ongoing cooperation and technical assistance.", "Closing: speaker expresses hope that the seminar contributes to better understanding and that the IMF \"is ready to help advise on the development and implementation of effective macroprudential policies in Asia.\"", "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)", "[Cambodia and the IMF](http://www.imf.org/external/country/KHM/index.htm)", "[India and the IMF](http://www.imf.org/external/country/IND/index.htm)", "[Indonesia and the IMF](http://www.imf.org/external/country/IDN/index.htm)", "[Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)", "[Malaysia and the IMF](http://www.imf.org/external/country/MYS/index.htm)", "[Myanmar and the IMF](http://www.imf.org/external/country/MMR/index.htm)", "[Philippines and the IMF](http://www.imf.org/external/country/PHL/index.htm)", "[Vietnam and the IMF](http://www.imf.org/external/country/VNM/index.htm)", "[Speeches](https://www.imf.org/en/news/searchnews)", "[Naoyuki Shinohara](https://www.imf.org/external/np/omd/bios/ns.htm)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/28/04/53/sp012314a/index.md", "json": "/en/news/articles/2015/09/28/04/53/sp012314a/index.json", "bundleManifest": "/en/news/articles/2015/09/28/04/53/sp012314a/bundle-manifest.json" }, "generatedAtUtc": "2026-09-27T09:12:34.869Z" }