Analysts: Devaluation of Japanese Yen Aims to Deal with China's WTO Entry

Home>>Business

Last updated at: (Beijing Time) Monday, February 04, 2002

Analysts: Devaluation of Japanese Yen Aims to Deal with China's WTO Entry

Along with China's entry into the WTO, a great change has taken place in Japan's currency policy. The Japanese Yen has continued devaluing. The depreciation of the Yen represents a basic measure of Japan to deal with China's accession to the WTO. First, it makes the RMB overestimated and thus weakens China's competitiveness; second, it prevents Japan's enterprises from shifting high-tech industries to China.

DISCUSSION

CHINESE

SEND TO FRIEND

Japanese Yen keeps falling

Along with China's entry into the WTO, a great change has taken place in Japan's currency policy. The Japanese Yen has continued devaluing. The exchange rate of Japanese Yen to US Dollar was down from 125:1 to 130:1, and all the way down to 130:1 and 140:1. It's said the yen may even hit the mark of 145:1 or even 150:1. The depreciation of the Yen represents a basic measure of Japan to deal with China's accession to the WTO. First, it makes the RMB overestimated and thus weakens China's competitiveness; second, it prevents Japan's enterprises from shifting high-tech industries to China. Its fundamental aim is to maintain Japan's international status and competitiveness after China's entry into the WTO.

Measures to deal with China's entry into WTO

Analysts of the Research Headquarters in Hong Kong Anbound Co. noted that after China's accession to the WTO, along with the advancement of trade liberalization and the resultant increase in foreign investment, China will obtain a good opportunity to develop its hi-tech industries and its overall economic environment will get close to the international standard, which would, of course, threaten Japan's international status. Under this circumstance, the Japanese authorities have chosen the way of devaluing the Yen to inflict a "soft casualty" upon China.

Weaken China's competitiveness

Firstly, Japan intends to weaken China's competitiveness. In the face of a country's currency that may possibly devalue at any time, foreign capital will not immediately go to invest there. In view of this, China must keep the RMB stable so as to stimulate the inflow of foreign investment after its entry into the WTO. On one hand, the RMB exchange rate remains basically stable, on the other hand, the Japanese Yen keeps falling. Under such circumstance, an overestimated situation of the RMB will quickly take shape and China will have to bear all the effects arising therefrom.

Prevent hi-tech industry from shifting to China

Secondly, Japan can't sit by in the face of the transfer of hi-tech industries. After its WTO entry, China will focus on the development of hi-tech industries, and many foreign investors, who likely include Japanese, are keen on Chinese high-tech industries and markets. Japan has always styled itself as a high-tech country, so if high-tech industries is shifted to China, it would be a grave problem for Japan, so the Japanese government must try to prevent the occurrence of this situation.

Experts Criticize Yen Policy

Chinese and foreign economists have said that the Japanese Government has deliberately driven down the yen to benefit its own economy.

They also dismissed the excuses made by Japanese officials for defending their seemingly nonchalant attitude over yen's slide as unconvincing.

"Despite the official rhetoric that Japan does not want to artificially make the yen weaker, the reality is that Japan now acts as if it has a weak yen policy and has successfully pushed it weaker," said Stephen Jen, a London-based analyst with Morgan Stanley.

The Japanese Government appears to use a depreciating yen to expand exports and overcome chronic deflation with rising import prices, said Zhao Jinping, a senior fellow with the Development Research Centre under the State Council. >>details

by PD Online Staff Yang Ruoqian

Questions?Comments? Click here

Yen's Continuous Depreciation Will Trigger off New Asian Financial Crisis: Econo

Central Bank Top Governor Urges Japan to Stabilize Yen

Analysis: Who Reaps Most from Debased Yen?