Review:
In our GLOCOM Platform discussion on the Asian financial crisis, C. H. Kwan took a position of emphasizing the shortcomings of the International monetary system as the main cause for the crisis, rather than blaming idiosyncratic politico-economic problems within each country in Asia (See: http://www.glocom.org/opinions/essays/200005_kwan_dollar_peg/). In this book, he fully explains about his position regarding the Asian crisis as well as his proposal for building a yen bloc.
Kwan advocates the formation of a yen bloc, since he thinks that its benefits outweigh its costs from four perspectives, namely, Japanese, Asian, Regional, and Global perspectives. (1) From a Japanese perspective, a yen bloc would given Japan a stable currency environment, leading to more active trading and investment relations with Asian countries. (2) From an Asian perspective, it might be advantageous for Asian economies to peg their currencies closer to the yen, rather than the U.S. dollar, in view of the financial crisis in 1977. (3) From a regional perspective, the potential benefit of monetary integration in Asia seems great, as intra-regional trade and investment have been increasing rapidly in recent years. (4) From a global perspective, according to Kwan, "together with the euro, the emergence of the yen as an international currency that competes with the dollar, by imposing discipline on U.S. economic policy, should enhance the stability of the system."
His argument for a yen bloc seemed quite persuasive, when we discussed the Asian financial crisis a couple of years ago. Since then, however, Japan itself has been moving away from a stable currency arrangement due to the deterioration of its economy and the resultant depreciation of the yen. It would be interesting to see if and how the author continues to argue for a yen bloc under the present condition in Japan.
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