TOKYO: Asian finance leaders gathering in South Korea this week will likely debate ways to beef up safeguards against market turbulence, as global banking sector woes and fears of recession in advanced economies cloud the economic outlook.

The impact of US interest rate hikes on the region’s capital flows may also be discussed when finance ministers and central bank chiefs of ASEAN+3 - which groups the Association of Southeast Asian Nations (ASEAN) plus Japan, China and South Korea - meet on Tuesday.

Japan, which co-chairs with Indonesia this year’s meeting of ASEAN+3 nations, hopes to discuss the idea of strengthening currency swap lines known as Chiang Mai Initiative Multilateralisation (CMIM), Finance Minister Shunichi Suzuki told a news conference on Friday.

“It’s not as if we’re heading into a major crisis now,” Suzuki said. “Even so, we must prepare for the worst.” Japan is keen to propose a facility that enhances usage of existing currency swap lines, and allows members to tap funds in times of emergencies such as pandemics and natural disasters, said three sources with direct knowledge of the matter.

Suzuki said he plans to attend the ASEAN+3 meeting on Tuesday, to be held on the sidelines of the Asian Development Bank’s (ADB) annual meeting in Incheon in South Korea this week.

The recent failures of two US banks have heightened alarm among policymakers about vulnerabilities in the global banking system and potential market turbulence that could re-emerge from aggressive US interest rate hikes.

While Asian policymakers stress their countries have sufficient foreign reserves and buffers to fend of another crises, they may see scope to make enhancements to existing arrangements to combat potential market upheaval, analysts say.

In a report released earlier this month, the ADB projected developing Asia to achieve economic growth of 4.8% in 2023, more than its pervious estimate of 4.6% in December and faster than a 4.2% growth in 2022, thanks to China’s projected rebound.

But some central banks in the region, such as Australia, have begun pausing interest rate hikes as they saw their economies and jobs growth moderate from the impact of global headwinds and past monetary tightening.

The International Monetary Fund has urged Asian central banks to keep monetary policy “tighter for longer” to combat still substantial inflation risks.