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The Bank of Japan (BOJ) officials believe that expectations of higher US interest rates amid post-pandemic rapid recovery and covid vaccine bottlenecks could lead to growing headwinds for fragile emerging economies, MNI reports, citing people familiar with the central bank’s thinking.

Additional takeaways

“While the advanced economies are picking up, bank officials are of the view that there is limited room for emerging economies to implement accommodative monetary and fiscal policies. Such countries also don’t benefit from the US recovery and are more dependent on tourism revenue.”

“Although the recent spike in the 10-year US Treasury yield didn’t cause any capital outflows from emerging economies, bank officials think evidence of a stronger and faster US recovery will lead to a sustained increase in longer-term US interest rates and raise the financial burden for emerging economies while destabilising global financial markets.”

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