Japan should actively participate in designing new foreign exchange systems for crisis-hit Asian countries, an advisory panel to the finance minister said Tuesday.
A possible option for Asian economies is a currency basket, in which local currencies would be linked to a “basket” of currencies including the yen, dollar and euro, according to a set of recommendations made by a subcommittee of the Committee on Foreign Exchange and Other Transactions.
The report says a basket peg could help strengthen links between the yen and other Asian currencies, which in turn could stabilize Asian currency markets and thus the global economy.
The report, finalized by the subcommittee on promotion of international use of the yen, urges Japanese businesses to review their international transaction practices to increase settlements in yen.
It also suggests that the government improve the financial and capital markets so that more foreign investors use yen. For instance, the government should introduce five-year fixed-rate government bonds — a prospective benchmark for mid-term bonds — to enable more flexible, efficient investment, it says.
Finance Minister Kiichi Miyazawa had earlier indicated that the time is not yet right to introduce five-year bonds.
The report also says financial system stabilization and economic recovery in Japan is a prerequisite if the yen is to be widely accepted as an international currency.
The internationalization of the yen has become a pressing agenda for Japan in the wake of Asian currency crises, the launch of the euro and ongoing “Big Bang” financial deregulation, the report says.
“It only brings benefits and no harm,” said Takatoshi Ito, a professor at Hitotsubashi University and the head of the subcommittee. Ito is expected to be appointed this summer as deputy vice finance minister for international affairs.