The Japanese yen was once a dominant international reserve currency, peaking at 8.7% of global foreign-exchange reserves in 1991. However, its influence waned due to Japan's economic decline and banking sector fragility following the 1990s real-estate bubble. Despite this, the yen remains the third most-traded currency, with 17% of all foreign-exchange transactions.
China has taken a different approach to internationalizing the renminbi, focusing on trade settlement, lending, and central-bank swap lines rather than full capital-account convertibility. The renminbi's share of global goods-trade settlement rose from 1.7% in 2010 to 28.7% in 2025. However, this does not necessarily mean the renminbi is widely used as a unit of account, as many contracts remain priced in dollars.
In funding, 31% of Chinese banks' cross-border claims are now in renminbi, creating an alternative monetary system. The renminbi has also drawn level with the yen in global SWIFT payments, accounting for 3.3% of transactions in September 2026. However, foreign holdings of the renminbi have stalled, with its share of world FX reserves slipping back to 2% in the first quarter of 2026.
China's strategy differs from Japan's in its controlled opening and geopolitical considerations. While Japan liberalized its capital account under US pressure in the 1980s, China has maintained a cautious approach, aiming for 'managed convertibility.' The renminbi's internationalization may be designed to position it between the yen and the euro, rather than as a direct alternative to the dollar.