Japan should take political initiatives to achieve an Asian monetary unification in the 2030s that supplements, if not replaces, the current fragile international economic and financial system, a semigovernmental think tank said in a report released Monday.
The U.S. alone can no longer resolve the current global economic crisis. Creation of an open, multilayered international economic and financial system is vital to ensure stable, sustainable development of the world economy, the report by the Institute for International Policy Studies says.
Several former ranking officials of the Finance Ministry and the Bank of Japan took part in the newly created IIPS policy study group’s discussions in their personal capacities and issued a plan for reconstructing the Bretton-Woods system, the U.S.-led postwar international financial and currency setup.
“In order for the entire Asian region to keep growing, we must create the third-polar regime in Asia by introducing the Asian common currency, which stands on par with the U.S. dollar and the euro,” the report says.
It concedes, however, that the dollar will retain its status as the world’s key currency despite the continued erosion in the relative strength of the U.S. economy.
“The proposed common Asian currency aims to supplement the present dollar regime, along with the euro, not to replace it,” it notes.
In the short term, international efforts should be concentrated on the disposal by the mid-2010s of massive bad debt while achieving a full-fledged economic pickup and working out a new international mechanism to oversee financial transactions within the framework of the current international system, the report says.
In the medium- and longer terms, however, Japan should be prepared to take a leading role in building a new international system via a unified Asian currency as its principal component, it proposes.
According to the plan, an intraregional collaboration mechanism in Asia should be operating in the 2010s with Japan and China as Asia’s two largest economies reaching a consensus on the institution of the Asian currency unit. The ACU is the unit based on a “basket,” or the weighted average of currencies used in the 10-member Association of Southeast Asia Countries plus Japan, China and South Korea.
It also envisaged establishment of a conference of central bank chiefs and finance ministers from the ASEAN-plus-three countries, and even China’s decision to float the yuan, during this first-stage decade.