Abstract:
This paper focuses on the yen's role as a currency of invoice and financial
asset. Further aspects of the internationalisation of the yen (e.g.
non-resident borrowing in yen) are not dealt with directly. The relatively
small importance of the yen in trade invoicing suggests that the
"transaction balance" portion of yen holdings has been small. This
argument is further reinforced by the fact that the growth of non-resident
holdings of yen assets has been closely related to the development of the
exchange rate, coupled with the low level of yen sight accounts with Japanese
banks. This implies that the advantage that the Japanese economy would enjoy
from internationalisation is small, since the major advantage to the home
country of an international currency is that it can fund part of its imports
with non- or low-interest bearing liabilities. Furthermore, the
exchange rate has been made more vulnerable to external shocks, although direct
disturbance on of the domestic financial market has so far not been too
serious.