Challenges for the Financial Systems of ASEAN Countries and Multilateral and National Policies ―Implications for Japan as It Aims to Enhance Its Status as an International Financial Center―

After the Asian financial crisis of 1997, ASEAN countries worked to improve their financial sectors, resulting in significant development of the sectors. Cooperation and coordination initiatives such as ASEAN+3 regional financial cooperation have played a part in this process. Japan has been making its presence felt in these initiatives since immediately after the Asian financial crisis. In addition to continuing its involvement in these initiatives, Japan should continue to focus on strengthening its relations with ASEAN countries, also in the context of working on its own financial sector policies.

Challenges for the financial sectors in ASEAN countries include 1) financial system development, 2) regional financial integration, 3) financial stability, 4) financial inclusion, 5) infrastructure finance, 6) climate finance, and 7) digitalization of finance. Various organizations are tackling these challenges, including through regional financial cooperation.

Regional financial integration refers chiefly to 1) financial services liberalization (expansion of cross-border activities by banks and other financial institutions), 2) capital market development and integration, 3) integration of payment and settlement systems, 4) significant capital account liberalization, 5) internationalization of regional currencies (cross-border use), and 6) harmonization of regulations and systems within the region. Financial system integration will not be easy, making it necessary to discuss practical measures to promote integration at the level of the real economy.

While Japan has also focused on bilateral financial cooperation, it will be important for it to continue to provide experience, knowledge, and technology to meet the needs of partner countries. In Malaysia, where the population is graying, there seems to be room for Japan, which is ahead of the curve in terms of population aging, to supply know-how in various areas. And in Thailand, too, there is probably potential for cooperation in areas such as sustainability, digitalization, and financial inclusion. In other ASEAN countries (except Singapore), there is still a need for more basic financial system development.

The success of Singapore’s policy of becoming an international financial center is due to 1) a focus on the development of foreign exchange markets and asset management sector, 2) the crafting of a long-term vision, and 3) joint creation of policies by industry, government, and academia. The reputation of Singapore as an international financial center has been improving until today.

Japan must solidify its role in regional financial cooperation frameworks such as ASEAN+ 3, in ASEAN financial integration, and in bilateral financial cooperation. Japan is aiming to elevate its status as an international financial center and beef up its asset management sector (establish itself as a leading asset management center), and in all these policies, it also needs to emphasize the reinforcement of relations with ASEAN countries and to strive for coexistence with them. Strengthening financial ties with ASEAN countries is important in many meanings. The hope is for an expansion of effective initiatives in the future.

PDF link(PDF:406KB)