"Dollar Hegemony System Faces Widespread Changes... Korea and Japan Must Strengthen Financial Safety Nets" [2026 Financial Forum]

Hiroshi Nakaso, Chairman of Daiwa Institute of Research
Keynote Speech at the 2026 Asia Financial Forum

Decline of U.S. Free Trade... Financial Order Becomes Multipolar and Fragmented
Dollar Hegemony Remains, but Alternative Payment Networks

"The global financial order is facing gradual yet far-reaching changes. The U.S.-centered free trade and dollar hegemony system is undergoing multipolarization and fragmentation."

Hiroshi Nakaso, Chairman of Daiwa Institute of Research, delivered a keynote speech on the theme of "Changing Global Financial Order" at the "2026 Asia Financial Forum" hosted by The Asia Business Daily, held on the 21st at the Westin Chosun Hotel in Jung-gu, Seoul.

Hiroshi Nakaso, Chairman of Daiwa Institute of Research and former Deputy Governor of the Bank of Japan, attended the 2026 Asia Financial Forum (Asian Financial Forum 2026) hosted by The Asia Business Daily at the Westin Josun Seoul in Jung-gu, Seoul, on the 21st, and in his keynote speech titled "The Changing Global Financial Order," he emphasized that "the protectionism of Trump 2.0, the energy shock caused by the Middle East war, the expansion of China's yuan settlement network, the emergence of stablecoins and central bank digital currencies (CBDC), and the surge in gold prices all indicate that the existing order is being shaken," he stressed.

However, he said, "The dollar system is still supported by the overwhelmingly large financial market, the share of foreign exchange transactions, the U.S. Treasury market, and the liquidity supply network of the U.S. Federal Reserve," and added, "Therefore, rather than the collapse of dollar hegemony in the short term, the dollar-centered system is likely to be maintained, but with parallel structures of alternative payment networks, digital currencies, and regional financial safety nets emerging alongside it."

Hiroshi Nakaso, Chairman of Daiwa Institute of Research, attended the '2026 Asia Finance Forum' hosted by The Asia Business Daily on the 21st at the Westin Chosun Hotel in Jung-gu, Seoul, and delivered the keynote speech on the theme of 'Changing Global Financial Order'.

Trump 2.0 Accelerates Changes in Global Trade Order and Dollar Hegemony

Nakaso diagnosed that the security umbrella and the dollar’s status as the key currency, which the United States has provided since World War II, are now being shaken, and that the international order surrounding energy, trade, currency, and financial safety nets is being rapidly reorganized. He stated, "The 'peace dividend' that the world has enjoyed has continued since the end of the Cold War, but is gradually disappearing as geopolitical tensions intensify," and analyzed, "This has deepened even further as the U.S. itself has moved away from the traditional global order it had built."

He went on to say, "The Trump administration perceives that the two public goods—the security umbrella and the dollar as the key currency—have imposed a unilateral cost burden on the United States," and explained, "From the Trump perspective, these public goods have been provided at the cost of American lives and the sacrifices of U.S. taxpayers." He added that dollar hegemony has caused a strong dollar, which in turn led to the hollowing out of U.S. manufacturing and entrenched trade deficits. Accordingly, Trump 2.0 policies prioritize resolving unfair cost burdens, reviving domestic manufacturing, restoring the working class and local communities, and emphasizing short-term energy security over decarbonization.

Within this trend, he pointed out, reciprocal tariffs and the global trade order have also been rapidly reorganized around the principle of reciprocity. Nakaso explained, "In the case of Japan and the European Union (EU), if the most-favored-nation (MFN) tariff rate exceeds 15%, reciprocal tariffs are set at 0%, and if it is below 15%, the reciprocal tariff is calculated as 15% minus the MFN rate," adding, "This is evidence that the United States has completely shifted away from its role as a defender of the free trade order and is moving toward reciprocity, protectionism, and a return to manufacturing."

He also mentioned changes in China's export bypass routes. Nakaso noted, "China's exports to the U.S. decreased from $525.2 billion in 2024 to $421 billion in 2025, but exports to ASEAN, Mexico, and Canada increased significantly," and said, "This suggests that as the U.S.-China conflict and tariff barriers intensify, China's exports are increasingly being rerouted through alternative channels such as ASEAN and Mexico, rather than heading directly to the United States."

He especially pointed out that the Middle East war is not simply a geopolitical risk, but a global financial risk that simultaneously shakes oil prices, inflation, interest rates, and growth rates. He warned, "Although the financial market has not yet fully reflected the most serious risk scenarios in asset prices, persistent pressure on energy prices could ultimately stimulate inflation expectations and drive the inflation rate much higher than anticipated."

Hiroshi Nakaso, Chairman of Daiwa Institute of Research, delivered the keynote speech on the topic of "Changing Global Financial Order" on the 21st at the Westin Chosun Hotel in Jung-gu, Seoul, at the "2026 Asia Finance Forum" hosted by The Asia Business Daily.

Korea and Japan Must Strengthen Regional Financial Safety Nets to Prepare for Dollar Liquidity Crises

Nakaso pointed out that while dollar hegemony can be a burden for U.S. manufacturing, it still brings enormous benefits to the United States in terms of finance, strategy, and diplomacy. He emphasized, "Dollar hegemony is sustained not merely by the economic power of the United States, but by a combination of its military strength, financial market size, institutional credibility, and inertia."

He particularly noted that the United States is making very strategic use of the introduction of "dollar stablecoins" in order to defend the dollar’s value and maintain control over payment infrastructure. He stated, "The strategic importance of dollar stablecoins lies not only in technological efficiency but also in their potential to cement the role of the dollar at the payment infrastructure level," adding, "Control over blockchain-based infrastructure could actually reinforce the United States’ economic influence."

He also offered specific suggestions for managing risk in the Korean economy amid these circumstances. Korea faces growing risks of supply chain reorganization in exports due to the U.S.-China conflict and changes in U.S. tariff policy, and is particularly vulnerable to simultaneous shocks in oil prices and interest rates because of its energy structure that relies heavily on the Middle East. Nakaso diagnosed, "To proactively prepare for a potential dollar liquidity crisis in the future, it is necessary to further strengthen regional financial safety nets, including Korea-U.S. and Korea-Japan currency swaps."

Finally, Nakaso stated, "Korea and Japan share the common challenge of having to address labor force constraints amid declining potential growth rates, while also enhancing productivity in promising industries," and suggested, "There is a need for policy efforts to promote innovative finance and connect finance to productive investment." He also added that the two countries should actively cooperate in the area of transition finance for achieving carbon neutrality goals in response to climate change.

This content was produced with the assistance of AI translation services.