No 'Asian Century' Without an Asian Currency

As Forbes recently editorialized :

"With 90% of the world's reserve assets in euros and dollars, it is the monetary policy of a handful of central bankers in Europe and America that will ultimately matter most to the economy, despite the pledges of the (G20) leaders in Pittsburgh."

In the battle of global elites, Asia will remain second fiddle as long as the region is unable to mount a common currency. It already starts in a weak position due to the Western domination of world gold reserves; G7 lightweight Italy has 2.5 times the amount of gold reserves as China.

Incoming Japanese prime minister Yukio Hatoyama has recognized this, as well. In a recent magazine article, he wrote : "We should aim to unify currencies in the region and realise an Asian common currency".

The problem is, there are good reasons there is no common Asian currency. Income and development differences that exist and cause disruptions in Europe are much greater in Asia. Nearly every economy is still export-oriented, and manipulates their own currency in relation to the dollar. And there are unresolved nationalistic antagonisms in the region. Europe more or less blew itself up in World War 2, and the nationalistic impulses that fostered centuries of warfare were catastrophically discredited. This is less the case in Asia; a good portion of the Japanese population still thinks positively of the World War 2 leadership, for instance. No German leader could go to a shrine of Goebbels the way Japanese politicians visit the shrines of their war criminals. These visits inflame relations with the two other major economic powers in the region, China and South Korea.

It is much more likely that the yuan becomes the dominant currency within a Chinese sphere of influence, or trading bloc. This would leave Japan and Korea on the outside looking in, and it is perhaps to counter this possibility that sections of the Japanese elite are pushing for a pan-Asian currency.

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1 "G-20's Wishful Thinking" - Forbes
2 "Japan PM frontrunner calls for single Asian currency" - AFP
3 Related Post: "Asian Exporters Turf Battles"