The formation of the yen bloc did not result in the economic and monetary integration of East Asian economies. Rather, it led to the increasing disintegration of East Asian economies. Compared to Japan, Asian regions and countries had to suffer from higher inflation. In fact, the farther the countries were away from Japan, the more their central banks had to print money and the higher their inflation was. Moreover, the income gap between Japan and other Asian countries widened. This means that the regionalization centered on the Japanese yen was destined to fail, suggesting that the Co-prosperity Area was nothing but a strategy of regional dominance, not of regional cooperation. The impact was quite long lasting, and it still haunts East Asian countries, contributing to the nourishment of their distrust vis-à-vis Japan, and throws a shadow on recent monetary and financial cooperation movements in East Asia. This experience highlights the importance of responsible actions on the part of leading countries to boost regional solidarity and cohesion for the viability and sustainability of a regional monetary system. (The rest is omitted.)

Executive Summary

I. Introduction

II. The Formation of Yen Bloc
1. First Step
2. Manchuria and China
3. Currency War between China and Japan

III. Yen Bloc under the Greater East Asia Co-Prosperity Sphere
1. Establishment of the Great East Asia Financial Sphere
2. Features of Great East Asia Financial Sphere

IV. Consequences of the Yen Bloc: Increasing Divergence
1. Inflation Gap
2. Growth Gap

V. Conclusion

References