The Global Economy in Turbulent Times

CHAPTER 71 Why Tokyo Failed to Be Top-Tier IFC¹

Asian Economic Panel (AEP), the premier economic forum dedicated to promote high-quality analysis on key economic issues and formulate the best practical solutions, came to Penang this third week of March 2013. AEP was first convened by Professor Jeff Sachs in April 2001 at Harvard’s Center for International Development (now at the Earth Institute, Columbia University) in conjunction with Keio University and Korea Institute for International Economic Policy. This time, the 26th AEP brought together about 50 scholars from ASEAN, China, Japan, South Korea, Europe, and Australia.

As is traditional, thoughtful papers covering a wide range of topics ranging from innovation and knowledge to debt and budgets, from water and sustainable development to trade integration and financial centers, were presented and discussed. The discourse was highly technical and most stimulating. It was Australian Huw McKay’s² presentation on why Tokyo failed to become a top-tier international financial center (IFC) that attracted much attention. To me, it offers many lessons for China on its arduous journey of discovery to transform the renminbi (RMB) or yuan in the markets into a global reserve currency and promote Shanghai as a top-flight IFC.

Tokyo Didn’t Make It

According to McKay, Tokyo’s bid to become a first-tier IFC was not successful because it was (1) never a superordinate goal of national policy; (2) unable to establish the yen as a competitive ...