Integration in the Global Economy
New Horizons in Money and Finance series
Edited by Suthiphand Chirathivat, Emil-Maria Claassen and Jürgen Schroeder
Chapter 4: The role of the yen in East Asia
Takatoshi Ito 4.1 INTRODUCTION The impact of the new currency, the euro, has been assessed by East Asia as a symbol of new Europe as a second-largest economy, the place Japan had maintained for more than a decade. The euro is expected to become, if not already, a key currency in the global currency market, rivaling the US dollar. Although the Japanese yen had been the currency of the second largest country, the use of the yen was not as widespread as one could expect. An interesting question is whether the Japanese yen is being adversely affected by the emergence of the euro or not, as the euro is becoming an alternative to the US dollar, or is it helped by it as a part of the alternatives to the US dollar together with euro. This remains to be seen. The interest of this chapter is more narrowly focused on the use of the yen in East Asia, since the influence of the yen is expected to be stronger in neighboring regions. The objective of this chapter is, however, twofold. First, the international use of the yen as a currency is reviewed. The so-called internationalization of the yen will be discussed. Second, the exchange rate policy of East Asian countries will be discussed. The role of the yen in their exchange rate movements, or so-called basket currency regimes, will also be examined. A currency is said to be used internationally when large shares of trades are denominated and settled in...
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