The role of regional financial arrangements and monetary integration in East Asia and Europe in relations with the United States

Abstract

Regional financial arrangements and monetary integration in East Asia and Europe have made considerable progress in recent years. This paper discusses whether governments in both regions, Japan and Germany as the most advanced regional economies in particular, can use the new dynamics as levers to raise their status vis-à-vis the United States. It will be argued that activities are defensive rather than offensive, aiming at protecting the respective region from financial risk. Japan, in particular, would find it difficult to raise its status vis-à-vis the United States significantly by promoting regional financial and monetary integration, principal reasons being actor heterogeneity, the role of China, hesitation to bear burden and risk, and the historical legacy of a bank-oriented system.

China's Policymaking for Regional Economic Cooperation

“…Although many of them are economists who hope for progress in regional financial cooperation, Chinese scholars hold that the ultimate motivation behind Japan's various proposals for regional monetary cooperation was to promote the internationalisation of the yen in order to enjoy several benefits as the seigniorage countryto hedge domestic traders and investors against exchange rate risk, to diversify portfolio risk and to enhance Japan's international political status. 99 In their view, becoming the seigniorage country would help Japan to institutionalise its current financial predominance in the region in view of its decline in the future.…”

“…In a facesaving move, the ASEAN+3 finance ministers' meeting asked a Japanese research institute to explore steps to create further regional monetary units. 109 No real progress has been made on creating an ACU since Kawai left the position at the ADB. It is said that even Japanese scholars are no longer enthusiastic about radical procedures because they have realised the practical obstacles in the region (interview with a CASS scholar, Beijing, May 2007).…”

A Political Economic Critique on the Theory of Optimum Currency Areas, and the Implications for East Asia

“…38 38 For an analysis of East Asian regionalism during the post‐crisis period, see, for example, Bowles (2002), McDougall (2002), Dieter and Higgott (2003), Hamilton‐Hart (2003), Hund (2003) and Pascha (2007). …”