Jun 28, 2017 (Japan Times) - The yen may face a test of confidence as Tokyo aims to boost the currency’s presence abroad at a time when China has been eclipsing Japan’s clout on the world stage.
Japan's gradual economic recovery and deeper ties with the rest of Asia could add some impetus, but there are still challenges for the yen to improve its status as a settlement and reserve currency.
In the past decade, China has taken steps to internationalize its own currency, the yuan.
The European Central Bank has shifted some of its foreign exchange reserves from the U.S. dollar to the yuan, a development some currency analysts view as giving a nod to the Chinese currency's increased role.
"What we've seen is increased demand for the Chinese renminbi instead of the yen, which is a natural turn of events because China's economic power is getting stronger," said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute, referring to China's currency by its official name.
"It all comes down to whether Japan's economy can fully recover. Without recovery, it's hard to expect yen demand to increase," Nishihama added.
As part of a broader vision to bolster ties with other Asian countries, the government is hoping to promote greater use of the yen by its Asian counterparts, a process that would reduce dependence on the U.S. dollar.
The Finance Ministry envisages a market where the yen and the Thai baht will be exchanged directly.
