The moderate easing policy adopted by the ROC Central Bank is helping sustain Taiwan’s macro economic development and will remain in place going forward.
“Such a policy has been maintained since the onset of the global financial crisis in 2008, helping dampen consumer prices and stabilize the economy,” the central bank said Jan. 16 in a statement.
“Given Taiwan’s economic structure and conditions, there is no need to implement aggressive measures like quantitative easing policies,” the central bank said, adding that its monetary policies have received recognition from major agencies like Fitch Ratings Inc., Moody’s Investors Service Inc. and Standard & Poor’s Financial Services LLC.
The central bank statement came in response to recent calls from Taiwan’s private sector to adopt similar measures introduced by Japanese Prime Minister Shinzo Abe aimed at reviving the country’s stagnant economy, including depreciating the yen to spur exports.
“Despite mixed appraisals on the quantitative easing monetary policies adopted by Japan, the U.K. and U.S. in recent years, many believe that these measures prevented the global recession from developing into a depression,” the central bank said.
“But the spillover effect of these measures is causing great challenges to emerging markets in the form of asset bubbles, currency appreciation and inflationary pressure.”
According to the central bank, Taiwan—unlike Japan—has never experienced a credit crunch, with the private sector encountering no difficulties when it comes to financing.
“Steady growth in monetary supply continues to support Taiwan’s business activities, and the banking sector as a whole also maintains a moderate reserve position.”
The central bank said quantitative easing policies will not trigger a depreciation of the New Taiwan dollar because the country’s economy is small in size and the local unit is not an international currency. “The recent depreciation of the yen is merely a correction of a currency that has been long overvalued due to its role as a hedge currency.”
According to a central bank study, the effective exchange rate index of the NT dollar is still lower than the currencies of South Korea and mainland China, with Taiwan’s export prices maintaining competitive levels. (SFC-JSM)
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