Changes in the Global Financial Environment Surrounding Japan in the 21st Century: Foreign Exchange Policy and International Financial Coordination

The two decades since 1990 have been a major turning point for Japan’s economic and financial system. This chapter provides an overview of the evolution of its policy and position, focusing on changes in the international financial environment surrounding Japan. Three major shocks triggered the transition: (1) the “Bubble” brought about by the Plaza AccordPlaza Accord and its collapse, (2) financial liberalizationFinancial liberalization and the financial crisisFinancial crisis that followed the burst of the bubble economyBubble (bubble economy), and (3) the Asian currency crisisAsian currency crisis. Partly due to the appreciation of the yen after the Plaza AccordPlaza Accord, Japanese companies relocated their production bases overseas and global supply chains developed. Japanese economic structure has become more committed to various regions of the world, especially in Asia. After the 1997–98 Asian currency crisisAsian currency crisis, financial cooperation among East Asian countries was established, in which Japan played a leading role. In 1999, the international financial coordination system was expanded from G7G7 to G20G20, and G20 began to discuss not only international financial crises but also a wide range of issues such as sustainable growth of the world economy. Japan’s role was also increasing in this context.