'Mr. Yen' stresses need for Asian currency regime

'Mr. Yen' stresses need for Asian currency regime

KUALA LUMPUR (AFP): Eisuke Sakakibara, the man once known as "Mr. Yen" for his sway over financial markets, has called for an Asian currency regime to be developed to stabilize exchange rates in the region.

Sakakibara, Japanese vice finance minister until September last year and now a professor at Keio University, said in remarks published on Wednesday that Asian countries were currently operating based on the U.S. dollar.

"We need a cooperative regime among Asian currencies -- ringgit/yen, won/yen and yen/baht and so on," he said in an interview with the New Straits Times daily newspaper.

"It may take time but it is absolutely necessary at least in the medium term. Some sort of a unification of currencies might be difficult but we could start with something like an Asian currency unit."

Sakakibara said Japan was slowly recovering after the economy hit bottom in the first quarter of 1998 but it needed to stabilize the yen/dollar rate.

"There is need for joint intervention by the U.S. and Japan to stabilize the currencies. Further appreciation of the yen, seen from the reverse side, is a weakening of the dollar," he said.

"I don't think (a weak dollar) is desirable for the U.S. because it is receiving a huge amount of money from the rest of the world. It needs US$1 billion a day in order to compensate for its current account deficit."

He said that there were already "some bubble elements" in the U.S. stock market.

"If the bubble bursts, that would really affect the world economy negatively and we have to avoid that. There is a need for a stable exchange rate," he added.

Sakakibara, who is being backed in Japan as a candidate to succeed current IMF managing-director Michel Camdessus who steps down in February, also called for a regional defense mechanism to cope with future crises.

He said the IMF had made several crucial mistakes in early stages of the Asian economic turmoil, which began in mid-1997, and "in some cases, precipitated the crisis rather than halting the crisis."

"I don't think it is possible to really stop the occurrence of future crises," he said.

But a strong national supervisory authority, high foreign reserves, and contingent arrangements with the private sector and across the region would forestall any crisis, he added.

The retired bureaucrat said he expected China, South Korea, Malaysia, Indonesia and eventually India to play a key role in the region in the new century.

He said China's entry into the World Trade Organization was a sign that the country was "deregulating its market in a cautious way" with a gradual transformation of its economy.