Finance ministers of China, Japan and South Korea are mindful of the challenges from inflation, rising commodity prices and the increasing volatility of capital flows to the region, a draft statement seen on Tuesday ahead of a trilateral meeting showed.

In the draft prepared for a meeting set for Wednesday, the ministers said the region has been resilient after weathering the global financial crisis due to robust domestic demand and buoyant exports, but said appropriate policies and better coordination were needed.

There are also uncertainties such as the turmoil in the Middle East and North Africa region, and the aftermath of the earthquake in Japan, it said.

We will continue to implement appropriate macroeconomic policies and strengthen policy cooperation to achieve strong, sustainable and balanced economic growth of the three countries.

The draft statement is subject to final revisions in negotiations among the three countries ahead of the meeting.

The ministers of the three heavyweight Asian economies will also meet on Wednesday with their counterparts from the 10-member Association of Southeast Asian Nations (ASEAN) at the Asian Development Bank's annual meeting in Hanoi.

The draft statement emphasized the importance of improving financial integration and cooperation in the region with the launch of the ASEAN+3 Macroeconomic and Research Office (AMRO).

We shared the view that strengthening AMRO's surveillance function is the most effective tool to prevent a financial crisis in the region and a key element to avoid moral hazard, the draft said.

Chinese media have reported the first head of the new office would be Wei Benhua, a former deputy head of China's foreign exchange regulator.

The three ministers also agreed to enhance financial cooperation in the region by working together to improve the Asian Bond Markets Initiative (ABMI).

Working with ASEAN, the group also wants to strengthen regional financial ties and systems to avert the repeat of the 1997-1998 Asian Financial crisis.

One measure, the Chiang Mai Initiative, a fund that can be used by members to defend their currencies in a crisis, was expanded to $120 billion in 2010 from the initial $80 billion.

(Reporting by Aileen Wang; Editing by John Mair and John Ruwitch)

China South Korea Japan Inflation