JANET Yellen's nomination to lead the United States Federal Reserve (Fed) may signal a reprieve for Asian economies including China and South Korea from any immediate reduction of stimulus that could roil markets and capital flows.
South Korea said it expects Yellen will "consider well" the effects on other nations of reducing US bond-buying, while Koichi Hamada, an adviser to Japanese Prime Minister Shinzo Abe, predicted the new chairman won't rush to exit monetary easing.
A deputy Indonesia central-bank governor said Yellen's appointment would be positive for local and global financial markets.
Asia is grappling with US Fed policy shifts and the Group of 20 economies plans to identify market turmoil from central banks' stimulus withdrawal as a key risk to the global financial system.
Emerging-market stocks plunged in May when chairman Ben Bernanke signalled that record easing may be pared, then rebounded when the US Fed maintained stimulus last month.
"If the Federal Reserve pulls out the rug underneath Asian markets, it could clearly lead to some nasty repercussions," said Frederic Neumann, HSBC Holdings Plc's co-head of Asian economics in Hong Kong.
"But Yellen is seen as somebody who might withdraw stimulus only gradually and that buys Asian policy makers time to build up the defenses for the day when US interest rates do begin to rise."
US President Barack Obama will announce the nomination at 3pm in Washington on October 9, a White House official said in an e-mailed statement. If confirmed by the Senate, Yellen, 67, would succeed Bernanke, 59, whose second four-year term ends in January.
"She has rich experience and an impressive resume as a policy maker," Choi Hee Nam, director general of the South Korea finance ministry's international finance bureau, said yesterday.
"I expect her to consider well the ripple effects on other countries" from policy decisions such as altering the US Fed's bond-buying programme, Choi said.
Bank Indonesia deputy governor Perry Warjiyo said in a mobile-phone message yesterday that tapering of US stimulus may not come into effect immediately with Yellen's appointment. Philippine Finance Secretary Cesar Purisima said in a phone message that Yellen's nomination signals stability, policy continuity and a "steady course for the Fed."
"I assume Yellen's nomination means QE for longer and the exit of QE is likely to be gentle," said Dong Tao, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong.
"That would be good news for China," which is having difficulty maintaining growth momentum just as the "tides of global money printing" might begin to turn, Tao said.
Hamada, a retired Yale University professor who advises Abe on monetary policy, said Yellen is "more likely to seek a way to make an economic recovery certain by keeping policy accommodative. Bloomberg