Nov. 17 – Japan and China, wary of the U.S. Federal Reserve’s low interest rate policy, have warned that the central bank risks spurring speculative capital which may inflate asset prices and derail the global economic recovery.

According Bank of Japan governor Masaaki Shirakawa, emerging economies “might overheat and experience financial turmoil.” While China’s banking regulator Liu Mingkang said on Sunday that low rates and the dollar’s depreciation present “new, real and insurmountable risks to the recovery of the global economy.”

There is concern in Asia that the Fed’s pledge to keep rates near zero for an “extended period” may lead to a repeat of the financial crisis.

“The continuous depreciation in the dollar, and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” Liu said in Beijing.

While lower interest rates will help Americans pare debt, “there are also risks involved in continued low rates,” Bloomberg reported Shirakawa as saying on Monday at a Paris Europlace Financial Forum in Tokyo. Having borrowing costs near zero may strain government finances if it spurs speculation that the dollar will continue to slide, he said.