Bloomberg News

Bank of Japan’s Miyao Says Europe Is Global Economy’s Top Issue

November 30, 2011

Nov. 30 (Bloomberg) -- Europe’s sovereign-debt woes are the top issue for a global economy that still hasn’t recovered from the financial crisis, said Ryuzo Miyao, member of the Bank of Japan’s policy board.

“The most immediate and pressing problem in the world economy is Europe’s sovereign-debt crisis,” Miyao said today during a panel discussion in San Francisco. “The world is still struggling in the aftermath of the financial crisis,” triggered by the collapse of the U.S. subprime-mortgage market in 2007.

Miyao spoke hours after six central banks, including the BOJ and Federal Reserve, made it cheaper for banks to borrow dollars in emergencies in response to increased tensions in financial markets. Stocks surged, extending the biggest three- day rally in global equities since 2009, and the euro strengthened after the announcement.

There is a “seemingly growing consensus” that central bankers should be taking into account asset bubbles in the formulation of monetary policy, Miyao said. “Difficult challenges remain,” including the best way to detect and respond to imbalances.

The central banker was joined on the panel, titled “Policy Reforms After the Crisis,” by Kim Jun Il, deputy governor and chief economist for the Bank of Korea, and Norman Chan, chief executive of the Hong Kong Monetary Authority.

Kim, appearing at the Federal Reserve Bank of San Francisco’s annual Asia Economic Policy Conference, said that “the challenge facing the world economy is how to reduce debt, or deleverage, without hampering growth.”

‘Reduce Public Debt’

“There’s no question about the need to reduce public debt,” as well as the debt of financial institutions and households, Kim said.

In addition, “we need a credible, long-term fiscal plan to anchor market expectations,” Kim said. Yet “fiscal austerity will have a negative impact on growth in the short term.”

--Editors: Gail DeGeorge, Kevin Costelloe

To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net


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