00:00The trade uncertainty is coming back up again with new tariff threats coming from President Trump.
00:05How does this change things for developing Asia?
00:09Thank you very much for having me and nice to meet you again, Sherry.
00:14Yes, indeed, the uncertainty is not good.
00:18You know, particularly the uncertainty and unpredictability of the trade policy operates like tax upon planning.
00:32Sherry, you can't make a rational decision on the pricing or sourcing or procurement with this kind of moving target
00:45every day.
00:45So it would dampen or delay investment and they increase their risk premium, deteriorating the financial markets.
00:54So this is not so good.
00:55So really, we need the stability and predictability of the policy regime.
01:02And in addition, another thing Asia is facing is, of course, the geopolitical tension heightening, which would dampen their risk
01:11appetite and also may increase the commodity prices.
01:14Like in the case of the Russian invasion to Ukraine.
01:19Yeah.
01:20Who will hurt the most from geopolitical and also trade uncertainty being heightened now?
01:26Yeah, actually, everyone, particularly innocent people, will be affected by this.
01:32So, you know, geopolitical tension and particularly the material conflict, in addition to the loss of lives, which is really
01:44unfortunate, but, you know, basically, the economic growth, particularly, you know, the inclusive and sustainable growth needs the stability of
01:54geopolitics.
01:55You know, the peace is the prerequisite for the global economy, which will affect everyone in the world.
02:07And also what we're seeing these days is financial market stability as well, which the Asian Development Bank has said
02:14is really key when it comes to developing Asia.
02:16So how much of it is actually stemming also from the Japanese markets itself?
02:22Yeah, yes.
02:24First of all, for Asian markets, you know, they are much more robust and resilient if you compare it to
02:31the days in the Asian financial crisis.
02:33ADB has supported deepening their domestic financial markets and diversifying the partners and their own economies.
02:43And the regional connectivity is boosting their resilience.
02:49And for Japan, there are many, many impacts on it.
02:54But anyway, I think in these days of the high unpredictability, the best insurance policy against the external shocks and
03:07the speculative attacks is the maintenance of the prudent macroeconomic policy, including fiscal, monetary and structural reform.
03:18And the most important thing is market confidence.
03:24Is Japan maintaining that microprudential stability that you're talking about?
03:30Yeah, that's really the attention the global investors are watching on it.
03:36But, you know, I really appreciate, for instance, the Prime Minister Takahashi's statement on the February 9th, just after the
03:44landslide victory for the ruling party,
03:46committing their responsible fiscal policies to ensure market confidence.
03:54This is, I think, welcomed by the global market.
03:59And as long as it is implemented rigorously, I think it can increase the market confidence and stabilize the economy.
04:13At the same time, we continue to get indications that perhaps there might be more pressure on the Bank of
04:18Japan to hike more slowly,
04:21especially given the reflationist BOJ board members that have been nominated.
04:26Will this be a problem just more broadly to the rest of the world, as we have seen the JGB
04:32meltdown,
04:33the yen volatility also spill over to other markets?
04:37Obviously, I can't talk about the specific monetary policies of any countries.
04:43But in general, for instance, there are persistent negative real interest that are rather deep for a long time.
04:52It's not good for the market economy to function.
04:55And there is still remaining the interest gap with the Fed and the perceived rather gradual shift in the BOJ
05:07rate might have some effect on the exchange rate.
05:14But the market, the Forex market, but the central bank is focusing on the price stability.
05:22And the price stability, of course, is affected by many things, including the impact of the imported inflation through the
05:32exchange rate fluctuation.
05:34So, but the most important thing is the central bank decision is a sort of collective decision by nine whites,
05:45men and women.
05:46And we really expect a very good decision, particularly based upon data.
05:51Data-driven decision is very much important.
05:56And it's not just Japan, right?
05:58I mean, we're talking about many other Asian economies that the ADB also covers that are seeing currencies pressured, whether
06:05it's the rupee or the Korean won as well.
06:08And we've seen authorities step in and intervene in the currency space.
06:12As an official who has actually done this in the past, what's the impact and effectiveness of doing that?
06:19Yeah, I think, as I mentioned, the AI economies and the macroeconomic position is much better than before.
06:31And for instance, the accumulation of foreign reserves and the much freer market for Forex.
06:38And most importantly, the diversification of the economy and the deepening of their own domestic market, particularly the local currency,
06:50is really a good protection for these external shocks.
06:54So, we are very much confident that we can have a rather stable financial market in Asia.
07:02And the ADB is strongly supporting these efforts.
07:08Kanda-san, before we let you go, right now the focus is very much on how artificial intelligence will change
07:14the global economy,
07:16whether it's really helping with labor shortages that some of these Asian economies suffer from,
07:21or also at the same time, the inflationary pressures that we're seeing just because of memory chip prices surging at
07:28the moment.
07:29How is the ADB calculating the net impact and really how it could be a game changer for developing Asia?
07:37Yeah, thank you.
07:38This is really a rather, I think, the decades topic for me.
07:45And it is really a fashion everywhere that people are talking about the impact of the AI.
07:51You know, there are many, many implications.
07:53But the most important things, among others, are two things.
07:57One is, of course, the productivity gain.
07:59It will be a game changer to, you know, give an opportunity for the most vulnerable people to leapfrog,
08:08for instance, the financial inclusion or for the handicapped to access to the productivity.
08:15But on the other hand, as you rightly mentioned, there is a fear of the massive job replacement and unemployment
08:23may destabilize the society.
08:27So what we need is, of course, there are many things, among others, the education and the skills for people,
08:35not to be the slavery or the redundancy vis-Ã -vis machines, but continue to be the master of machines.
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