An export-dependent nation typically benefits from a declining currency because it makes products relatively cheaper on global markets. Still, Asian countries have experienced steep moves in their currencies over the past year, undermining the region’s financial stability, as fallout from the global credit crisis roils their economies and prompts offshore investors to dump emerging-market assets.

South Korea’s won has tumbled 37 percent against the dollar the past year and Indonesia’s rupiah has dropped 23 percent. In contrast, Japan’s yen has risen 14 percent.

“While we understand how sensitive this is, helping stabilize currency movements between trading partners in our region can fortify the accelerating trend of intraregional trade and investment flows. We should avoid competing against each others’ currency depreciations,” said Kuroda.

Many Asian nations previously experienced large currency declines during the financial crisis in 1997- 1998, when Indonesia, Thailand and South Korea spent much of their foreign reserves attempting to prop up their exchange rates. The three countries were forced to turn to the IMF for more than US$100 billion of loans to help repay offshore debt.

Source: Bloomberg