Jonathan Manthorpe: Fears grow of Japan’s stimulus provoking a currency war

As Japan sets out to double its money supply to $2.71 trillion in order to propel its economy out of two decades of stagnation there are growing concerns the program will ignite a currency war in Asia.

Among Asian manufacturers such as South Korea, China and the countries of Southeast Asia concern is building to alarm. The Japanese currency, the yen, has dropped by 25 per cent in value since the election of Prime Minister Shinzo Abe and the Liberal Democratic Party last November with a pledge to kickstart the economy.

This has already given a major boost to Japanese goods and services.

And there is little confidence the yen will stop there as the Abe government pursues an inflation rate of about two per cent a year in order to end deflation and stimulate consumer spending.

Gao Xiqing, who runs China’s major sovereign-wealth fund, China Investment Corp., was quoted last week as saying Japan’s devaluation policy is tantamount to

treating its neighbours like a “garbage bin.”

Liu Ligang, of the ANZ Bank, called the Japanese program “monetary blackmail” targeting export-driven Asian countries. He called on Beijing to counterattack by devaluing the yuan.

Full article: Jonathan Manthorpe: Fears grow of Japan’s stimulus provoking a currency war (Vancouver Sun)

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