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ADB flags danger of Asia 'asset bubbles'

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(Globalpost/GlobalPost)

Emerging Asia needs to be on guard against "asset bubbles" as central banks globally loosen monetary policy, the Asia Development Bank's managing director warned on Friday.

Last month Japan's central bank announced it would pump $1.4 trillion into the economy over the next two years, administering unprecedented financial shock treatment to end two decades of growth stagnation through bold monetary expansion.

The US Federal Reserve and the Bank of England have also embarked on more limited forms of "quantitative easing" or increasing the money supply to revive their economies.

"The positive thing of quantitative easing out of Japan and other economies is that they will start to grow, but we have to be wary of building asset bubbles" and economic overheating, said ADB Managing Director Rajat Nag.

Nag noted inflationary pressures are already "on the uptick" in many countries in Asia as economies reach full manufacturing capacity.

"The robust growth that we have seen in Asia so far has eliminated slack productive capacity, so price pressures will begin to mount," Nag told reporters ahead of the formal start of ADB's two-day meeting of the board of governors in New Delhi on Saturday.

Nag said a currency war was unlikely in Asia as a result of the fall of the Japanese yen due to the easing.

The emerging Asian economies, such as India, China, Indonesia, and Thailand -- but not Japan --- were on track for solid growth of around 6.6 percent this year driven by domestic and regional demand, he said.

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http://www.globalpost.com/dispatch/news/afp/130503/adb-flags-danger-asia-asset-bubbles