Resolving problems in the current international monetary system

The current international monetary system, characterized by floating rates among major currencies and by the US dollar's de facto role as the most important asset and transaction currency, exhibits several problems, says Nobuyuki Ichikawa of the Bank of Japan and a senior research fellow at IIPS. Under this system, resolving current account imbalances is difficult and exchange rates tend to fluctuate widely, harming economies, says Ichikawa. The dollar's de facto role, he argues, spares the US the incentive to coordinate its policies. He proposes that the yen and the mark supplement the dollar's role and analyzes the policies that Japan must adopt to achieve an ideal monetary system.