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Bank of Japan officials see growing headwinds for fragile emerging economies due to their difficulty in securing sufficient vaccine supplies and the rapid recovery in the U.S., which could propel long-term U.S. interest rates higher and trigger capital outflows, MNI understands.

While the advanced economies are picking up, bank officials are of the view that there is limited room for emerging economies to implement accommodative monetary and fiscal policies. Such countries also don't benefit from the U.S. recovery and are more dependent on tourism revenue.

Although the recent spike in the 10-year U.S. Treasury yield didn't cause any capital outflows from emerging economies, bank officials think evidence of a stronger and faster U.S. recovery will lead to a sustained increase in longer-term U.S. interest rates and raise the financial burden for emerging economies while destabilising global financial markets.