Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101163
Authors: 
Subacchi, Paola
Year of Publication: 
2013
Series/Report no.: 
ADBI Working Paper Series 450
Abstract: 
As all eyes are on the strategy and policy measures of the People's Republic of China (PRC) to push the international use of the yuan, this paper turns to the internationalization of the Japanese yen and compares it with what the PRC is doing. There are some fundamental differences in the regional context and in the pattern of regional integration, and these distinguish the PRC's current strategy from the Japanese experience in the 1980s. The yen's development as an international currency, and the comparison with the PRC's strategy, highlight the importance of regional integration as a way to overcome network externalities and market inertia. Using an analytical framework that assesses both the range of different roles (the scope) and geographical scale (the domain) of a currency in the global market, the paper suggests that economic fundamentals alone, albeit essential, are not sufficient to warrant a fully fledged scope and global domain of the currency. The paper concludes by suggesting that in the next decade the PRC yuan will become Asia's leading currency due to the PRC's deep economic integration in the region, and that the Japanese yen's function as an international asset and store of value can be further enhanced if Tokyo's competitiveness as a leading international financial center is improved.
Subjects: 
yuan
japanese yen
internationalization
network externalities
regional integration
JEL: 
E42
E44
F33
Document Type: 
Working Paper

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