Global finance chiefs may have denounced it, but that has not stopped Japan joining other central banks in driving its exchange rate lower. With Australia and South Korea forced to respond, will the Asia-Pacific region be the main battleground in a global currency war?
In debasing its currency, Tokyo is following the well-trodden path of central banks in Britain, the United States and the eurozone. Yet the zero-sum game of devaluation has already forced countermeasures by Australia and South Korea.
The real targets for Japan may be South Korea and China, which have long benefitted from favorable exchange rates.
However, noted China economist Andy Xie has warned of the yen collapsing “like the Russian rouble in 1998. What the central bank is doing is they can’t see the end game, but the end game is chaos.”
But with governments seeing in their exchange rates an easy means of spurring export-led growth, there are few signs of an early end to the “currency corruption.”
Full article: Asia’s Currency War (The Diplomat)