The Japanese, Chinese and South Korean officials affirmed their commitment to using support measures, which they did not specify, for maintaining financial market stability and long-term fiscal sustainability.

“We must remain on guard against heightening risks to which the regional economic recovery is being exposed … on top of the ongoing Russia-Ukraine conflict and earlier-than-expected monetary policy normalisation in some advanced nations,” it said.

“These factors could become downside risks to the regional economic outlook, causing volatility to financial markets and capital flows.”

The statement made no mention of specific countries, but US interest rate rises and related reduction in central bank assets have driven up the US dollar.

This has raised the prospect of capital flight from some emerging markets and a rising burden of dollar-denominated debt in the developing world.

What can China do to mitigate impact of US Fed interest rate hike?

The officials also steered clear of references to currency market moves, notably rises in the US dollar and falls in the yen, or sanctions against Russia’s invasion of Ukraine, which Moscow calls a “special operation.”

Instead, the officials underscored progress in regional initiatives, including a mechanism aimed at helping countries in times of financial distress, the Chiang Mai Initiative Multilateralisation currency swaps deal.

A deep divide has emerged within the Group of 20 (G20) major economies, which includes Western nations that have accused Moscow of war crimes in Ukraine.

Other members – China, Indonesia, India and South Africa – have not joined Western-led sanctions against Russia over the conflict.

The 10-member Asean is chaired by Cambodia this year and includes Indonesia, which currently chairs the G20.

Also on Thursday, China’s central bank made stabilising economic growth a top priority and said that it will step up support for weak sectors, according to deputy governor Chen Yulu.

“The PBOC will make stabilising growth a more prominent priority, strengthen cross-cyclical policy adjustment, and accelerate to implement policy measures already announced, especially to actively plan new policy tools,” said Chen.

The decline came even after the central bank set a stronger-than-expected fixing for a eighth straight session on Thursday. The yield on 10-year government bonds was little changed at 2.82 per cent.

“We think the market is taking the PBOC’s remark on guiding interest rates lower, to mean monetary easing will continue,” said Irene Cheung, senior foreign exchange strategist at Australia & New Zealand Banking Group in Singapore.

“By allowing the yuan to weaken since late April, we think the central bank may have included the currency as an easing tool.”

The central bank has taken relatively modest easing action in recent months despite the sharp slump in activity as the government locked down cities like Shanghai to contain virus outbreaks.

Is China using a ‘shadow stimulus’ to shore up economic growth?

Even so, lending rates in the economy have come down. The weighted average interest rate for corporate loans was 4.4 per cent in the first quarter, down 0.21 percentage point from the end of 2021, the PBOC said in the monetary policy report published Monday.

“The PBOC has stepped up the implementation of prudent monetary policy to help the macro economy stay stable,” Chen said.

“First, the pre-emptive RRR cut has kept liquidity reasonably ample. Second, we have guided interest rates in the loan markets to decline from an already low level, to reduce market entities’ borrowing costs and stimulate financing demand.”

Chen said China will continue to work to resolve financial risks and avoid systemic financial risks.