Study on the Path Selection of Yen Re-internationalization After Asian Financial Crisis and Its Enlightenment

Abstract

After Asian financial crisis, the Japanese government quickly adjusted its foreign economic policy and, unlike their traditional image of inaction, actively carried out and led the crisis rescue work through separate policies. The introduction and implementation of the “New Miyazawa Initiative” represented that the focus of the Japanese government has shifted to the preparation for and construction of the regional local currency bond market. This was backed by the strategic consideration to restart yen internationalization (or yen re-internationalization). It reflects the Japanese government’s reflection and adjustment on the path selection of promoting the internationalization of yen in the early stage. Relying on such change, The Japanese government intended to foster regional yen bond market to build yen backflow mechanism in East Asia and to realize the long-term objective of yen internationalization through “regionalization.” On the twentieth anniversary of Asian financial crisis, this paper re-examines the change to yen internationalization strategy, which is of practical significance for other cases’ attempt to internationalize local currencies as RMB internationalization at present. With reference to the strategic change in yen Re-internationalization, RMB internationalization shall shift the focus from “trade settlement” in the past to “capital outflow” through fostering the regional RMB bond market, expand RMB backflow mechanism. China shall focus on Asian Infrastructure Investment Bank (AIIB) and other new regional financial cooperation platforms to promote RMB regionalization, thus finally realizing the strategic objective of RMB internationalization. Nevertheless, this path selection is inseparable from China’s positive attitude toward financial and capital liberalization.