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Japanese policy and the East Asian currency crisis

‘Japanese policy and the East Asian currency crisis: abject defeat or quiet victory?’, Review of International Political Economy, vol. 7, no. 2, 2000, pp. 219 253.

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Abstract

Japan stands accused of purveying a defective developmental state model of growth to the East Asian states which was responsible for the onset of the currency crises from 1997 onwards, and then of failing to provide the necessary leadership for the stabilization and recovery of the region. Japan’s position of economic dominance and its nascent political leadership role in East Asia are now seen to be under attack. However, this article argues that over the longer term Japan is continuing to exercise considerable covert economic and political leadership in the region. Examination of Japanese policy makers’ perceptions of the East Asian crisis reveals that they see the region as hit above all by currency crises which have transmuted into economic ones, but that the model of export and DFI-powered growth in the region is still fundamentally sound. Japanese policy makers contend that Japan is not responsible for the occurrence of the crises, nor are the USA- and IMF-prescribed solutions likely to hold the key to the restoration of growth in East Asia. Instead, they quietly lay the blame for the crises upon China for undercutting the competitiveness of East Asian exports and moving ahead of the ASEAN-4 in the regional production cycle. Hence, Japanese policy, as manifested in the New Miyazawa Initiative, has concentrated upon regearing existing developmental models, and has gradually begun to restore a measure of confidence in Japanese economic leadership and to set the agendas of both the USA and multilateral institutions towards the crises.