China to closely watch spillover effects of Japan's ultra-loose monetary policy

DAVOS, Switzerland, Jan. 27 (Xinhua) -- China will have to watch closely the spillover effects of Japan's newly adopted ultra-loose monetary policy, Yi Gang, a vice governor of China's central bank, told Xinhua in an interview.

"We will closely watch the spillover effects of the new Japanese policy on the world economy, the emerging market in particular," Yi said on the sidelines of the annual meeting of the World Economic Forum (WEF).

Yi's comments came days after Japan announced its move to an ultra-loose monetary policy, which has set off a debate on whether monetary policy could do more to boost growth or whether further action would have negative side effects.

"Japan aside, the United States and the European Central Bank have also adopted policies of quantitative easing, which would drastically increase global liquidity and cross-border capital flow, either inflow or outflow, which is unstable," said Yi.

The new policy of Japan would also "have the risk of triggering a race among countries to devaluate their currencies," he said.

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