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Capital Flow Dynamics and Central Banks -- Lessons from the Asian Financial Crisis and Challenges Ahead --

July 26, 2017
Sohei Iwai*1, Shingo Konaka*2, Marcel Hisamitsu*3, Hideki Nonoguchi
International Department

  1. *1Currently at the Representative Office in Paris
  2. *2Currently at the Personnel and Corporate Affairs Department
  3. *3Currently at the Financial System and Bank Examination Department

Asian capital flow dynamics which had been on an inflow trend that started in the early 2000s, has shown signs of change against a background of the normalization of U.S. monetary policy. This is drawing attention towards the resilience of emerging economies against capital outflows. While various initiatives drawn from the lessons learned in the Asian financial crisis have enhanced the resilence of Asian countries against capital outflows, there are new concerns, such as the increase in foreign currency-denominated bonds and domestic bonds held by foreign investors. In addition, the change in capital flows presents Asian central banks with the challenge of firmly establishing a transmission mechanism for monetary policy by controlling domestic interest rates. Specifically, money markets need to be developed further by enhancing central banks' funds-providing operations and by stimulating transactions between market participants. The Bank of Japan has been providing international financial cooperation to support such efforts in Asia.


Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2017-E-5, is a translation of the original Japanese version, 2017-J-13, published in June 2017. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

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