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G-20 meeting discusses exchange rates but concludes nothing
By Robin Elsham
AFX Press / Agence-France Press
Friday, November 12, 2004
http://www.fxstreet.com/nou/noticies/afx/noticia.asp?
pv_noticia=1100254316-9e32d306-16911
TOKYO -- Bank of Japan Governor Toshihiko Fukui said it
would have a stablizing effect on the global financial
system if a clear rival to the U.S. dollar as a key global
currency were to emerge
Speaking at a symposium in Tokyo on the theme "The
Euro: Five Years On -- Implication for Asia," the Japan
central bank chief cited data showing the common
currency of the 12-nation European currency bloc is
emerging as a serious rival to the dollar as a key
currency for conducting global trade and investment.
"In the past five years (since its launch in 1999), the
importance of the euro has increased considerably,"
Fukui told the seminar, which featured such other
speakers as European Central Bank vice-president
Lucas Papademos, and Toyoo Gyohten, the highly
respected former Japanese vice-minister for
international affairs. Fukui said more than 50 countries
link their currencies to the euro, while the proportion of
foreign exchange reserves held in euros has risen to 20
percent and nearly a third of the cross-border-issued
bonds are now denominated in euros.
Fukui seemed to welcome the growing prominence of
the euro by referring to the dangers associated with
allowing any single currency to dominate global
commerce.
"In such a situation, the economy of the key currency
is easily tempted to focus its economic policy on
domestic considerations," an apparent thinly veiled
rebuke to the economic policies followed by the U.S.
adminstration of President George W. Bush.
"In today's globalized economy, this could lead to
undesirable ripple effects on the rest of the world,
through the fluctuations of the external value of the
key currency," Fukui said.
He said if there were two competing key global
currencies, "competition between them could lead
to more attention to the external value of key
currencies. This could have a positive effect on the
stability of the global financial system."
The BoJ chief briefly indicated that the Japanese
yen also had a role to play in that regard
"I believe that the yen can and should play a larger
role in the global market," Fukui said, citing trends
that could make that a certainty.
"Considering the deepening economic relations
between Japan and the rest of Asia, Asia should
benefit if the use of the yen could be facilitated,"
Fukui told his high-powered audience.
In 2003, nearly half of Japan's foreign trade was with
Asia, up a third over the past decade.
Fukui said the yen could play a larger role in both fund
management and fund-raising, especially in light of
Asia's strong demand for capital and Japan's vast pool
of savings.
But the Japanese central bank chief dismissed the
notion that an Asian equivalent to the euro -- an Asian
common currency -- would emerge within the lifetime
of any of his gray-haired listeners.
"Could we see a common currency area in Asia? For
the near future, you would agree that this is quite
unlikely," Fukui said
He subsequently indicated it could be 50 years before
Asia has a common currency -- the time it took a
handful of Europe's nations to embrace the concept.
Great changes would need to occur, such as the
development of vibrant regional financial markets, made
possible by liberalized cross-border capital flows.
Fukui said there is encouraging evidence that that is
already happening, beyond merely the tremendous
increase in inter-Asian trade.
He cited in particular the example of the Asian Bond
Fund II project, promoted by the 11 central banks of
the EMEAP economies. EMEAP stands for the
Executives' Meeting of East Asia-Pacific Central
Banks, an organization founded in 1991 by the
central banks of Australia, China, Hong Kong,
Indonesia, Japan, Korea, Malaysia, New Zealand,
the Philippines, Singapore. and Thailand.
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