Odaira, Takeshi (i071329@gmail.com)
Research Fellow (RA), GIARI
11 July 2009
Report on:
Dr. Katada, Saori N. (Associate Professor at School of International Relations, University ofSouthern California) “East Asia’s Financial Regionalism and Cooperation Under the Global
Financial Crisis.” Seminar. Graduate School of Asia-Pacifc Studies; Global Institute for
Asian Regional Integration (Waseda University, Tokyo). 10 July 2009.
Number of Participants: 37
Summary of the Presentation
Dr. Katada discussed East Asia’s financial cooperation and the on-going global
financial crisis. Her lecture focused on the origin and development of the regional financial
cooperation in East Asia, impact of the global financial crisis on the region, and the prospects
for the cooperation in the future.
First, Dr. Katada discussed the progress of East Asian financial cooperation including
multilateralization of Chiang Mai Initiative. She argued that such achievement has beensignificant, because of its rapid development after the Asian financial crisis, and exclusion ofthe United States from ASEAN+3.. This regional financial cooperation is also quite different
from that of European integration, because it developed quite independence from regional
trade or investment arrangements.
Second, Dr. Katada discussed the origin and development of financial cooperation in
East Asia. By citing the existing work by other researchers, she listed various perspectives as
to how the region’s leaders became interested in the regional financial cooperation. For
example, at the time of the 1997-98 Asian financial crisis, the leaders in the region felt
threatened by their countries’ excessive dependence on the foreign capital and feared
negative side effects from the IMF involvement, whose policies reflected so-called“Washington Consensus.”East Asian governments came to look for ways in which they cancollectively secure regional financial stability and fair treatment by the international financial
institutions, and prevent prospective financial crises from negatively affecting the region.
After outlining such motivation, Dr. Katada illustrated, with charts, graphs and diagrams,
how East Asian financial cooperation developed, and demonstrated financial significance ofsuch developments.
Dr. Katada then turned her discussion to the current global financial crisis and its
impact on East Asia. She referred to “global imbalance” between East Asia and the UnitedStates as a background of the global financial crisis in question. Massive capital inflow
from high-saving East Asian countries such as China and Japan into the United States
stimulated the US economy leading to reckless financial ventures including securitization ofsubprime mortgages, whose collapse resulted in the global financial crisis. As a consequence,
East Asia suffered significantly. Dr. Katada clearly illustrated with her data and graphs how
the economic downturn in the United States and Europe was transmitted through trade,financial and exchange rate channels.
As for the global and regional reaction to the current financial crisis, Dr. Katadapointed out that East Asian countries resorted to both regional arrangements such as “+3”
meeting (China, Japan and South Korea), the EMEAP and ADB, and to unilateral method
including fiscal stimulus packages. They have also supported emerging new global forum
such as the newly established Financial Stability Board, whose policies reflects theagreements at G20 meetings.
To conclude, Dr. Katada summarized challenges and opportunities for regionalfinancial cooperation in East Asia. According to Dr. Katada, lack of sufficient ties among thecountries in the region imposes challenge to East Asia. Even the most institutionalized CMI
has its challenges: South Korea did not turn to CMI at the time when it faced currency
downturn in October 2008, because it was wary of the CMI’s IMF link. Nevertheless, the factthat East Asia managed to escape the worst of the crisis, and de facto multilateralization atCMI both demonstrate how far East Asia has come, and those illustrate the opportunities thatsuch regional cooperation presents. For further prospects, she pointed out that globally theIMF reform and decentralization of financial policy–making initiatives on the global scale
would give Asia more leverage, and within the region, development of Asian bond market
comprises a key towards further development of financial stability in East Asia.
Summary of the Q&A Session (Questions)
Q.1: Is decoupling, or the combination of less extra-regional economic and financial
dependence and more intra-regional economic and financial integration, an important policy
goal for East Asian countries right now?
A.1: Decoupling solely should not be the goal, since that could lead to East Asia’s position infavor of regional protectionism. Furthermore, it is very hard to accomplish the complete
decoupling in the first place.
-----Q.2: How should East Asian countries respond to the global financial crisis through fiscal
imbalance? Should the government rely on issuing bonds or raising certain kinds of taxes?
A.2: It depends on the magnitude of policy implementation, but taxation is generally morerisky and can even worsen domestic economic crisis. Bond is often safer than taxation.
-----Q.3: How do you evaluate the sovereign bond as a method to finance government
expenditures?
A.3: Resorting to the sovereign bond is indeed a risky way to raise revenue, but it is aquestion of magnitude of dependence on it and its sustainability. Nevertheless, bond isgenerally less risky than sovereign borrowing through syndicate loans.
Q.4: Did the “global imbalance” that Prof. Katada mentioned in the presentation really thecause of the global financial crisis?
A.4: The global imbalance is not the immediate cause but rather a background of the crisis.
However, it is true that East Asia mostly benefited from the US role as a large buyer, which
led to the global imbalance in question