Chapter 40 2. Reasons and countermeasures for the depreciation of the yen

In the first year of the 21st century, the exchange rate of the yen continued to flow like a river that broke its embankment. On December 20, 2000, the exchange rate of the yen against the U.S. dollar in the Tokyo foreign exchange market was still 113 to 1. However, on December 25, 2000, the exchange rate of the yen against the U.S. dollar in the Tokyo foreign exchange market had fallen to 130.77 yen by 5 p.m. Against the dollar, it is at a three-year low. In January 2001, the exchange rate of the yen against the US dollar was lower than the level of 130 to 1 in October 1998.The sharp depreciation of the yen will have a huge impact on the Asian economy.

As an island country, Japan's economy naturally has the characteristics of relying on the international market, and imports and exports have always occupied an important position in Japan's GNP (Gross National Product).Therefore, the yen exchange rate that affects imports and exports has always been the focus of international financial markets.According to the famous Mandel-Fleming model, under Japan's floating exchange rate system, monetary policy is effective, but fiscal policy is ineffective.Because the loose monetary policy can promote capital outflow through the decline of domestic interest rates, depreciate the currency and stimulate exports.On the contrary, an expansionary fiscal policy will produce a crowding-out effect, raise domestic interest rates, promote capital inflows, lead to appreciation of the local currency, and restrain exports.Therefore, the loose monetary policy is the main means for Japan to maintain the internal balance of the economy under the floating exchange rate system. After 1991, Japan's economic growth stagnated. Since the beginning of 2001, the Japanese economy has continued to decline, with consecutive negative growth in the second and third quarters.The Japanese government predicts that the real growth rate of GDP in 2001 will be negative 1%, and the real growth rate in 2002 will be zero at most.In order to change the long-term economic downturn, Japan has adopted many measures after expanding public investment, but none of these measures have worked.The International Monetary Fund published the 2001 World Economic Forecast Report. The International Monetary Fund pessimistically pointed out that if the world economy enters negative growth due to the delay in the recovery of the US economy, then Japan will fall into the abyss of negative growth for three consecutive years.

In this case, loose monetary policy is an inevitable choice for Japan to meet its domestic goals.The Central Bank of Japan implements a loose monetary policy, focusing on expanding the money supply. There are three specific measures: 1. Expand the 6 trillion yen in cash account deposits of the Bank of Japan to 10 trillion to 15 trillion yen, that is, to expand the currency Increase the supply by 1 to 1.5 times; 2. Increase the amount of long-term bond purchases from 600 billion yen per month to 800 billion yen; 3. Actively purchase corporate financing bonds to guarantee bank bond issuance. However, under the floating exchange rate system, Japan's internal economic goal of opposing economic recession with a loose monetary policy contradicts the goal of Asian countries to stabilize the yen exchange rate.Because the Japanese central bank implements a loose monetary policy, and at the same time, the main cause of the long-term economic downturn is structural problems, which will inevitably lead to the outflow of international capital, which will cause the depreciation of the yen exchange rate, which is a long-term depreciation trend.At present, people in the financial market believe that since the International Monetary Fund and the United States agree to depreciate the yen, the yen may drop to 160-170 yen per dollar in 2002.If the Central Bank of Japan attaches great importance to the importance of exchange rate stability to the Asian and even world economies, then loose monetary policy will be limited in regulating Japan's domestic economy.

The key question now is the extent to which the Bank of Japan cares about the impact of the yen's depreciation on the Asian economy.The depreciation of the yen is the result of Japan's pursuit of an active monetary policy.Active monetary policy, especially increasing the money supply, is of great significance to the Japanese economy and is an option without options. In 1971, the United States announced the decoupling of the U.S. dollar from gold based on the consideration of its own economic interests, which led to the collapse of the international monetary system after World War II.

Can the depreciation of the yen stimulate Japan's exports and thus drive economic recovery?Let's go back to history first.Japan's economic growth miracle after World War II led to a long-term appreciation of the yen.In the mid-1980s, the world economy, especially the United States, experienced an information technology revolution. American interest rates rose, the dollar appreciated sharply, and the yen depreciated relatively, resulting in a large trade surplus between Japan and the United States. Japan-US trade frictions became increasingly intensified. In September 1985, The finance ministers of five countries including the United States and Japan signed the "Plaza Agreement" with the governor of the central bank, aiming to lower the exchange rate of the dollar against the yen and other currencies, which led to a sharp appreciation of the yen, from 1:240 to 1:200 and then broke through 1 to 150.The appreciation of the yen led to a brief recession in the Japanese economy in the fall of 1986.However, the export effect of yen depreciation is uncertain.

In the long run, the recovery and growth of the Japanese economy is in the fundamental interests of China, Asia and the world economy. The world economic downturn of 2001 was the most synchronized in history, a result of globalization and the information technology revolution.Japan still maintains its status as a major economic power in the world. The International Monetary Fund pointed out that the biggest negative impact of the world economic recession comes from Japan.In my opinion, building a "learning economy" system is the fundamental solution to the Japanese economy.But in the short term, the possible sharp depreciation of the yen is not in the overall interests of the Asian economy.In addition to China's rapid and healthy economic growth, the situation in East Asia in 2001 was worrying.If Japan simply indulges the depreciation of its own currency, the export-dependent East Asian economy will be severely impacted, and the currencies of Asian countries may compete to depreciate, thus triggering new financial turmoil in Asia.

To sum up, the long-term depreciation of the yen is inevitable and determined by Japan's own economic interests. Its real purpose is to implement a positive monetary policy rather than stimulate exports.However, the timing and extent of the depreciation of the yen must take into account the tolerance of the Asian economy, and must not be suddenly and sharply depreciated, making Asian countries worse in the world economic downturn.It is not enough for the Japanese government and the central bank to consult with the United States and the International Monetary Fund on the depreciation of the yen. It has the responsibility and obligation to consult with Asian countries.

China's lofty ideal is to realize the third-step economic development strategic goal in 2050. In 2001, my country's economic aggregate was about 1/40 of the world's economy. It needs long-term and sustained economic growth. On the international economic stage, we should keep a low profile and bide our time. make a difference. After joining the WTO in 2001, my country needs at least 10 years of economic restructuring.In the next 10 years, China should concentrate on the adjustment of economic structure after joining the WTO.At present, our country cannot "fight on both ends, and suffer from the enemy on both sides", and should first internally and externally.For this reason, my country cannot easily liberalize its capital account within 10 years, and disperse energy to prevent excessive international capital flows and financial crises. Facing the depreciation of the yen, the RMB exchange rate should continue to maintain long-term stability under a managed floating exchange rate system. International negotiations and consultations on the depreciation of the yen.The managed floating exchange rate system has provided my country with a system guarantee to flexibly cope with the worst situation; the Chinese government's commitment to maintaining the long-term stability of the RMB is a great contribution to the Asian economy, including the Japanese economy.

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