Nomination of Yellen to head the Fed well received

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Nomination of Yellen to head the Fed well received

Korea welcomed the nomination of Janet Yellen to be Federal Reserve chairman, saying she will need to weigh the effects of reducing U.S. monetary stimulus on other nations.

Koichi Hamada, an adviser to Prime Minister Shinzo Abe, said that although he welcomed Yellen’s nomination, it may hurt the Japanese economy, which has been on a fast recovery course this year thanks to the aggressive policy pushed by Abe.

“She has rich experience and an impressive resume as a policy maker,” Choi Hee-nam, director general of the Ministry of Strategy and Finance’s international finance bureau, said by phone from Sejong yesterday. “I expect her to consider well the ripple effects on other countries.”

Asian officials are grappling with risks associated with Fed policy shifts.

Emerging-market stocks plunged after May 22, when Chairman Ben S. Bernanke signaled that stimulus might be pared in the near future, and then rebounded after the Fed last month continued its quantitative-easing program.

In the United States, President Barack Obama will announce the nomination at 3 p.m. on Oct. 9, a White House official said in an e-mailed statement.

Yellen, 67, won the nomination after former Treasury secretary and White House economic adviser Lawrence Summers withdrew from consideration when Democrats on the Senate Banking Committee expressed opposition to his candidacy.

Hamada said the nomination of Yellen raises the odds of prolonged U.S. stimulus that could strengthen the yen and damage the Japanese economy.

“Yellen probably won’t seek an exit from an accommodative policy immediately,” said Hamada, a former Yale University professor, speaking by phone from Connecticut.

Hamada, 77, was one of Abe’s advisers on the creation of the reflationary policies called Abenomics and on choosing a governor for the Bank of Japan, the job taken by Haruhiko Kuroda in March.

Hamada said Kuroda and his officials must be ready to act if a stronger yen damages the world’s third-biggest economy.

The yen tumbled about 20 percent against the dollar in the past year, helping Japanese exporters and Abe’s efforts to jolt the nation out of a 15-year deflationary malaise. The BOJ has already rolled out unprecedented stimulus.

“The BOJ doesn’t have to promise anything now, but I want them to be ready in case damage to Japan’s economy becomes clear,” Hamada said.

While Hamada has Abe’s ear, Hamada doesn’t speak for the Japanese government, and Abe doesn’t always follow his advice. On Oct. 1, Abe announced that the government was pressing ahead with a sales-tax increase that Hamada opposed.

Hamada welcomed Yellen’s nomination, saying that her experience and expertise made her the best person for the job.

Bloomberg

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