A Comprehensive Analysis of Economic Community in East Asia: Japan's Leadership in the Regional Development on both Economic and Financial Sides

East Asian nations are currently undertaking the future development of an economic community by creating a viable framework for closer cooperation and deeper integration. However, the intractable problem is that there are a lot of diversities and heterogeneity that have prevented the East Asian nations from reaching coordinated policies for the promotion of regional cooperation and combining efforts on integrating their economies with each other. This paper thus presents that a successful process of forthcoming regional integration on the economic side would accompany with strenuous efforts to create a common market among ASEAN, China, South Korea, and Japan by establishing a free trade area covering the entire region. As the two major countries in the region, in the arrangement, China and Japan would have centered roles in promoting economic cooperation in East Asia. However, it is practically impossible to decide either China or Japan is capable of taking the initiative in the development without providing various rationales for economic cooperation and examining economic challenges facing the both nations. In the development,, in addition, Japan’s agricultural policy could be defined as the essential part of assessing its regional and bilateral measures consistent with the rules of the WTO, in particular, GATT Article XXIV requirements that raise the problem of the concise interpretation of “substantially all the trade.” East Asian Financial Crisis of 1997-98 also serves as a catalyst in considering the issues of regional integration on the financial side, the principle of which is to sustain an economic recovery and minimize the risk of another crisis. The important point is how the East Asian nations foster a regional financial framework under ASESAN+3 in which there has been ongoing debates on the development. This paper thus discusses possible approaches to enhance regional financial cooperation and provides various rationales for developing regional financial schemes while examining Japan’s assistance measures shortly after the financial crisis, which became a significant step toward attaining the economic recovery of the crisis-affected countries and bringing the financial stability to the region. In order to sustain the economic growth in the region, the East Asian nations are currently considering the issue of monetary integration in the feasibility of introducing a common currency basket regime that is best understood as the willingness of jointly working toward a full currency union. The evidence supports my conclusion, while answering the question of how Japan should exercise its leadership in developing regional integration on both economic and financial sides, that the creation of the economic community resulting from the common market with the full currency union would bring the huge prosperity to the region.