From a supporter to a challenger? Japan's currency leadership in dollar-dominated East Asia

ABSTRACT The dollar dominance in East Asia has depended on its regional support. Japan's supportive policy toward the dollar, however, shifted in the late 1990s as the Japanese government began to address the region's heavy dependence on the dollar, which was regarded as one (but an important one) of the causes of the 1997 Asian Financial Crisis (AFC), by promoting the use of the yen in the region and regional monetary initiatives. Despite emerging signs of those challenges, Japan's domestic resistance and the region's power rivalry between Japan and China still makes the dollar the currency of choice in the medium term future.