Destined to Fail? The History of the Yen Bloc before the Second World War

Abstract

The formation of yen bloc did not result in the economic and monetary integration of

East Asian economies. Rather it led to the increasing disintegration of East Asian

economies. Compared to Japan, Asian regions and countries had to suffer from higher

inflation. In fact, the farther the countries were away from Japan, the more their central

banks had to print the money and the higher their inflations were. Moreover, the income

gap between Japan and other Asian countries widened. It means that the regionalization

centered on Japanese yen was destined to fail, suggesting that the Co-prosperity Area was

nothing but a strategy of regional dominance, not of regional cooperation. The impact was

quite long lasting because it still haunts East Asian countries, contributing to the

nourishment of their distrust vis-à-vis Japan, and throws a shadow on the recent monetary

and financial cooperation movements in East Asia. This experience highlights the

importance of responsible actions on the part of leading countries to boost regional

solidarity and cohesion for the viability and sustainability of regional monetary system.