Prominent economist Koichi Hamada advises Japan “not to join China’s new investment bank”

Koichi Hamada speakerWriting in Project Syndicate, Koichi Hamada, Special Economic Adviser to Japanese Prime Minister Shinzo Abe, has advised Japan “not to join China’s new investment bank until its structure and rules are clearer.”

Professor Hamanda notes that economic integration is currently a hot topic in the region, as Asia becomes more interconnected than ever. He sees why some observers may find the notion of increased monetary integration – even the establishment of a fixed exchange-rate regime – highly appealing, but argues “that the flexible exchange rates that prevail today remain Asia’s best bet for boosting prosperity and protecting it from shocks.”

“Another strong reason why Japan should wait,” Professor Hamanda writes, “is for macroeconomic stability.” He demonstrates how misallocation of capital and poor investment decisions in China can raise serious risks, which may spread to China’s neighbours and raise the danger of another large-scale international crisis.

He warns that “beyond the fact that China will be in charge, almost nothing is known about the bank or its financing rules. Given this, it seems logical for countries like Japan to wait and see before deciding whether to join the AIIB.”

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