Stabilizing Asia's currencies

Over the weekend, finance ministers participating in the Asia- Europe Meeting in Kobe reached an agreement to study exchange rate regimes for emerging markets and developing countries. Japan intends to promote the Asian currency basket system, which would link the currencies of emerging economies to the U.S. dollar, the yen, and the euro.

Three and a half years have passed since the delinking of the Thai baht and the U.S. dollar triggered the Asian currency and financial crisis, and Asian economies are now on the road to recovery. However, a downturn in the U.S. economy could once again trigger a sell-off of Asia's currencies. One of the urgent tasks confronting Asia is to build an international framework that can respond to, and perhaps even prevent the recurrence of a currency crisis.

Japan is promoting a plan to link the dollar, euro and yen with the currencies of emerging economies. France has already praised the plan. The actual weighting of the three currencies in the basket would be based on trade volume within the region, and other indicators. This approach would help to prevent wild currency fluctuations, and hamper attempts to speculate in the currency of a particular country.

-- The Mainichi Shimbun, Tokyo