Toyoo Gyohten, former vice finance minister for international affairs, says Prime Minister Yukio Hatoyama’s proposals to create a unified Asian currency and build an East Asia Community are “meaningful” because the region needs to be more independent on financial matters.
The proposals have created momentum “toward an agreement as a policy goal in the region,” said Gyohten, who will shortly become special adviser on currency policy to the Finance Ministry.
By using the proposals as a driving force, the region should strive to become less dependent on the U.S. and European economies in terms of financial matters, he said.
“Asia has developed as the world’s manufacturing factory, but in terms of investment and trade, the region is still dependent on the U.S. dollar and the euro,” Gyohten said, advocating the creation of a unified Asian currency.
“It is quite natural to hope to correct (such a situation),” Gyohten said, adding that there would be considerable difficulty realizing such a plan since the region’s political regimes and cultural backgrounds are very diverse.
As for the emerging view that the world needs to overhaul the U.S. dollar-based financial system and find a new reserve currency, Gyohten said, “At the moment, there is no other currency that can take over the dollar’s reserve currency status.
“Countries like China and Japan, which hold large amounts of dollar-denominated assets, have to move in coordination to stabilize the dollar,” he said.
Gyohten was involved in Japanese currency policy as director of the Finance Ministry’s International Bureau when the Group of Five industrial countries struck the 1985 Plaza Accord. Under the accord, the finance ministers of Britain, West Germany, France, Japan and the United States agreed to coordinate their currency interventions with the aim of strengthening the yen to help stem the U.S. external imbalance.
In his position as the Finance Ministry’s special adviser, Gyohten is expected to cooperate with Finance Minister Hirohisa Fujii and work on such issues as reducing global imbalances and bringing stability to the currency market with a more stable dollar.
As for reducing global imbalances, Gyohten said the only way to accomplish that is to get countries with economic surpluses to stimulate domestic demand.
To achieve modest but balanced growth, the world needs to create new industries to find fresh demand and reduce concerns in the future, Gyohten added.
Gyohten is scheduled to attend a meeting of financial leaders from the Group of Seven major industrialized nations to be held Oct. 3 in Istanbul.