UN adviser: Asia should tap reserves to ease slump

Asia should tap its $4 trillion in currency reserves to avoid a significant economic downturn through public spending to bolster consumer demand, a U.N. economic adviser said Wednesday.

Jeffrey Sachs, director of Columbia University's The Earth Institute and an adviser to U.N. Secretary-General Ban Ki-moon, said Asia should seize the global financial crisis as an opportunity to invest in housing, environmental cleanup, health and other development needs.

With $1 trillion in reserves, Japan has ample room to open its credit cache to the rest of the region - a move that also would help it deal with the problem of the appreciating yen - Sachs told a public forum and news conference at the Asian Development Bank.

A stronger yen, which erodes the overseas profits of Japanese companies, is a problem for the world's No. 2 economy, which has long relied on exports to drive growth. The Japanese currency appreciated about 20 percent against both the dollar and the euro in 2008.

China, which has $2 trillion in reserves, should undertake huge public investment to keep its economy strong while continuing to buy goods from other countries in the region to prop up those economies, said Sachs, an expert on development economics and author of several books on the subject.

China unveiled a $586 billion economic stimulus plan last November.

Sachs said Asia's reserves and consumer demand should be enough to offset the withdrawal of credit from the abroad and a fall in U.S. and European demand for Asian exports.

"Asia could continue to have robust growth even as export earnings decline," he said.

The global financial crisis has seen a decline in housing values in some parts of Asia but not enough to lead to a region-wide recession, the economist said.

Asia's stock markets have declined sharply since the onset of the crisis, causing a fall in investment and economic growth but not at a level "that would be enough to throw the region into a serious crisis," he said.