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LEAD: ASEM for vigilance over 'faster-than-expected' global rate hikes+(Japan Economic Newswire Via Thomson Dialog NewsEdge)VIENNA, April 9_(Kyodo) _ (EDS: ADDING MORE INFO) Finance ministers from Asia and Europe on Sunday called for vigilance over rising global interest rates, saying "faster than currently expected tightening of global financial conditions" poses a risk to an otherwise solid world economy. Wrapping up a two-day meeting in Vienna, Asia-Europe Meeting finance ministers also cited "high and volatile" oil prices, widening current account imbalances and a possible avian flu pandemic as risks to the global economy. The ASEM ministers' worries about higher borrowing costs reflect rising interest rates in the United States, Europe and Japan, with the yield on Japan's benchmark 10-year government bonds surging Friday to 1.9 percent for the first time in a year and nine months. Japanese Finance Minister Sadakazu Tanigaki said he will "closely monitor" developments in rate movements because they could alter the flow of funds "in favor of safer markets in advanced economies" and such a reversal of capital flow "might adversely impact the availability of funds for emerging economies." Tanigaki told reporters after the meeting that ASEM finance ministers did not discuss foreign exchange issues, including China's currency system. Speculation is growing that the Bank of Japan -- which ended its five-year-old quantitative credit easing policy on March 9 -- may lift its zero interest rate policy as early as the summer, joining the U.S. Federal Reserve Board and the European Central Bank in tightening credits. If the central banks in Japan, Europe and the United States raise interest rates in parallel, it will be the first time in 26 years since 1979-1980, when the oil crisis stemming from the Iranian Revolution led world central banks to worry about inflationary pressure. During the Vienna talks, ASEM finance ministers shared concern that long-lasting high prices of oil and other sources of energy could increase inflationary pressure, slow growth and cause instability in the global economy, especially in developing countries. "Effects on ASEM countries were asymmetric, with some, especially less developed, countries being severely affected," the ministers said in a chairman's statement issued after the meeting. "Ministers noted further that it is important to avoid second round effects on wages which would drive up inflation." Oil prices have hovered around $65 a barrel in recent trading, just below last year's record high of $70.85 a barrel, and shown few signs of abating, given tensions involving Iran and Nigeria and surging demand by emerging powerhouses China and India. Along with calls for increased investments in energy efficiency, production and refining capacity, and improvements in oil market data, the ASEM ministers stressed the importance of "enhanced regular dialogue between oil-producing and oil-consuming countries and the facilitation of transferring energy-saving technologies," according to the statement. The ministers said the global imbalances "have widened" since their last meeting in 2005 in China, voicing strong concern over the huge U.S. current account deficits and Asia's large trade surpluses and dollar reserves. They "stressed the importance of reducing these imbalances to ensure stable and sustainable conditions for promoting global economic growth in the medium term," the statement said. "To this end, they recognized the need for a multi-pronged approach involving all countries concerned to implement appropriate policies to contribute to an orderly global adjustment," it said. The wording was taken as urging the United States to further fiscal consolidation and increase savings rates, China to speed up its currency system reforms, and Japan and Europe to advance structural reforms in a joint quest to address global current account imbalances. |