A yen bloc in Pacific Asia: natural economic symbiosis or overblown rhetorics?

Abstract

Unlike earlier studies, this paper argues that the relevant determinants of East Asian integration ought to be gravity (proximity and size of the regional economics). Using a gravity model of 1975–95 merchandise trade flows, strong evidence was found by East Asian economies integrating and interacting like never before. Interestingly, the most recent evidence also suggests that Japan is in danger of losing its place at the centre of this potentially self-sustaining economic system. In other words, the East Asian situation is still unfolding as the regional economies experience a dynamic process of changing comparative advantage which is enhancing their competitiveness against one another, as well as against other developed economies, including Japan.