SINGAPORE, Jan 7 – Asia should consider a common currency and push for a regional monetary fund as economic integration picks up speed, a former top Japanese finance official said Thursday.
Eisuke Sakakibara, who served as Japan\’s vice finance minister for international affairs during the Asian financial crisis, admitted that a common currency may be some time off but argued it was time to think about the idea.
"It may be several decades to create an Asian currency, but it may be the time to start thinking about it because Asian economic integration is gradually approaching the level of Europe," he told a regional forum in Singapore.
His comments come as the global economy slowly moves out of its worst crisis in more than 70 years, with most analysts acknowledging Asian nations were leading the way.
Key Asian states have been moving to tear down trade barriers and streamline disparate trading rules and procedures in a bid to better link their economies.
A network of free trade agreements have already been signed and more are under negotiation. And on January 1, a giant free trade zone covering 1.7 billion consumers in China and 10 Southeast Asian nations went into effect.
Sakakibara, now a university professor in Tokyo, also said an Asian version of the International Monetary Fund (IMF) has become more relevant given the region\’s deepening economic linkages.
Such a fund will help ensure that central banks have enough to shield their currencies from speculative attacks like those during the 1997-1998 Asian crisis.
"East Asian countries together now own close to five trillion dollars of foreign reserves… If we could use about five percent of those foreign reserves, it would be around 250 billion dollars which is enough to create the common fund," he said.
"I think it is about time that we start to… try to coordinate our foreign exchange policies and eventually try to coordinate our monetary policies."
He added that a regional monetary fund "today is possible and probably desirable."
Japan proposed the creation of an Asian Monetary Fund during the 1997 meltdown after the IMF came under heavy fire for the way it handled the crisis.
Sakakibara, who was Japan\’s top currency official at the time, had said the United States opposed the idea, fearing an Asian fund could dilute the influence of the Washington-based IMF.
He told the forum on Thursday that a 120 billion dollar currency swap fund to be launched by East Asian economies in March could be developed to become an Asian Monetary Fund, adding it could be "supplementary" to the IMF and not replace it.