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Asia needs its own Group of Seven

Despite deep differences, Abe, Xi and Moon can lead the way

| China

Shinzo Abe finally has Xi Jinping's number -- literally. In the days before Wednesday's trilateral summit, Japan's prime minister got on the phone with China's president for the very first time. "This means Japan-China relations are really improving," Abe told reporters in what may be among the understatements of the year.

Kim Jong Un may or may not meet U.S. President Donald Trump, but the North Korean leader's charm offensive has already achieved something extraordinary: given the leaders of Japan, China and South Korea a reason to join hands. Only time will tell if their talks on May 9 paved the way for denuclearization of the Korean peninsula. And it's important to temper optimism. The odds of Kim's regime abandoning its nuclear arsenal are minuscule.

Even so, Wednesday and the phone chats greatly increase the odds East Asia's three biggest economies will at long last work together.

Reining in North Korea is the immediate focus, as it should be. But Abe hosting Chinese Premier Li Keqiang and South Korean President Moon Jae-in is a big geopolitical step forward -- the first three-way summit since 2015. And Abe's chat with Xi is equally momentous. Xi's direct involvement in this East Asian thaw raises both the stakes and the potential gains. Here are three ways Abe, Xi and Moon could maintain the momentum.

One, hold more summits early and often. All three leaders should commit to meeting at least twice a year, no matter what is afoot. No matter if Tokyo and Beijing are brawling over territory, Tokyo and Seoul are dueling over wartime "comfort women" or Beijing and Seoul are scuffling over missile defense. Regularly scheduled summits should be run on a separate track to ensure progress toward peace and prosperity.

Even better if Xi, the strongest Chinese leader in generations, attends. Standing shoulder-to-shoulder with Xi could rehabilitate Abe's domestic fortunes as cronyism scandals trash his support rates and legislative prospects. Meanwhile, high-profile regional deals could give Moon greater political capital to take on the family-conglomerates hogging South Korea's economic growth. Despite the popularity he has already won with the rapprochement with Kim, the South Korean leader has so far secured little traction at home on economic restructuring.

Two, make things official with an Asian Group of Seven. If Washington seeks to deepen economic or security ties, there are any number of forums at which it can propose ideas or air grievances. They include the Organization of American States, the Summits of the Americas or even the framework built around the North America Free-Trade Agreement with Canada and Mexico. Across the Atlantic, the European Union, for all its flaws, offers an infrastructure to devise strategy, craft codes of conduct and protest actions of member states. Asia lacks any comparable institution.

There was a time when the Asia-Pacific Economic Cooperation forum might have filled the void. APEC has since become too fragmented, too security-focused and too beholden to U.S. interests. The 10-member Association of Southeast Asian Nations is a nice grouping to have, but lacks representational heft or teeth. None of Asia's four-biggest economies are members. And ASEAN's non-interference clauses make its gatherings heavy on photo-ops and light on substance.

An Asian G-4, comprising China, Japan, South Korea and India would not be sufficiently representative of regional concerns and aspirations. A G-7 that adds Indonesia, Thailand and the Philippines makes more sense. Asia would reap big dividends from a mechanism that drives and referees the increased flow of capital, goods, services and people to accelerate growth and raise living standards.

Three, tap growth engines closer to home. While Kim's giant step toward the global community gets the headlines, Trump's erratic behavior also is pushing Japan, China and South Korea closer together. Tokyo is still smarting from Trump reneging on the Trans-Pacific Partnership that predecessor Barack Obama negotiated with 11 other nations. Abe spent considerable political capital joining TPP, a key element of his reflation plan. Moon's nation experienced a similar whiplash after Trump demanded that Seoul revise a free-trade agreement in effect since 2012. Seoul acquiesced, allowing more U.S.-made cars into South Korea. Yet Trump has not signed the revised deal.

Abe, Xi and Moon should empower technocrats to dismantle trade barriers and build linkages between currency, bond and stock markets. Their central banks should devise ways to pool $4.8 trillion of foreign exchange reserves, including a rainy-day fund for the next global crisis. Xi could pledge to add Tokyo and Seoul to the stock-connect scheme that currently links Shanghai, Shenzhen and Hong Kong. Major bourses in Japan and Korea could likewise offer preferential treatment to Chinese punters. Japan should formally sign on to Xi's Belt and Road and Asian Infrastructure Investment Bank initiatives.

Japan, China and South Korea could build out from there. The strategy would be the flipside of the "ASEAN Plus Three" framework whereby Southeast Asia invites Tokyo, Beijing and Seoul to add muscle to a grouping that, frankly, has little potency. Starting from the top down, Franco-German-style, might be worth a try.

Granted, the E.U. is not an ideal model -- that was true long before Brexit. But as Abe, Xi, Moon and other Asian leaders stick to regularly scheduled summitry, finance officials can deepen currency-swap arrangements and, where possible, harmonize tax, customs and regulatory regimes to increase regional commerce. Why not set up a peer-review system to share data, research and efforts to read economic warning signs? Countries that beat the middle-income trap (Japan and South Korea) could offer pointers to those now confronting it (China and Malaysia).

Yes, Asia competes more than it cooperates. But even a limited effort to compare notes on aberrant trends on bond spreads, stock valuations or capital-market stresses could benefit all involved. It is high time for a joint response to climate change and its growing economic fallout.

The particulars, it goes without saying, could be messy. Clearly, the Japanese, Chinese and Korean governments would bristle at affording neighbors opportunities to interfere in domestic affairs. Taiwan also poses prickly problems. Abe and Moon would have to find a workaround for China's contention that Asia's fifth-biggest economy does not really exist. China, meantime, will have to rationalize cozying up to two nations -- Japan and South Korea -- with close military ties to a Washington trying to contain its influence. Of course, strange alliances are no stranger to the G-7, which for a time wooed Russia with the ill-fated Group of Eight.

Lingering World War II dramas and the odd testosterone flash are inevitable. Yet hats off to Kim -- and perhaps Trump -- for inadvertently focusing Asia on the need to work together. And to work the phones for a brighter and more stable future.

William Pesek is a Tokyo-based journalist and author of "Japanization: What the world can learn from Japan`s lost decades." He is a former columnist for Bloomberg and Barron's.

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